Candlestick probability

[easymon1]

What you guys focus more on, a wick with 2 time of the length of the body or a body itself?

Got an example image that illustrates your conundrum?

 

[murray t turtle]

Is there probability in..... the formation of the next candlestick given the formation of previous candlesticks. For example, if the candlestick closes long and green wouldn't it slightly shift market sentiment causing the next candlestick to likely form green?

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SORT of .
Business illustration follows ;an auto dealer is concerned with one sale but more volume is more important. The best ones are concerned about one sale + much more.
NO such thing as random walk, but anybody may get helped reading even a gooooooffy false book title/maybe. Maybe not; if it hinders a good mindset or battle tested plan
Topping tail [candlestick]may mean something on QQQ in week of 5-21-2001.
BUT a good trend will ignore a topping tail week like has happened this year sometimes.
SO its not a random walk+ no need for stops IF some can predict; but thats why stops are used.
Good question, Amatrue . Notice it's called weather forecasting, not weather prediction??

 

[scottedwards2000]

I interpreted "Is there a probability..." as a statement looking for evidence or a refutation. This sentence is borderline meaningless.



To me, it's incredible people attribute some sort of actual probability to trading noise.Maybe if you're sitting on top of the exchange server it'd be possible. Even if you had an edge in the 5min or 10min I doubt your fills are good enough to capture significant edge.

To OP - You can test this relatively trivially. OHLC data is candlestick data. You can create a label "Up" or "Down" and run a logistic regression it with your predictors being N candle labels and the response being the label of the next candle. Be sure to use proper data processing and splits for out of sample testing. A confusion matrix is probably all you would need to at least sanity test your hypothesis.

You may find it works with some degree of edge (I'd consider anything better than buy and hold, even 0.5% better, an edge). I don't personally have the numbers for you but the system you are describing, "does a previous high predict a second high", has been debated ad nauseum with very little evidence either way. It comes up in TA of Stocks & Commodities probably twice a year. It's probably highly market dependent.

would log regression be right technique to use here?

 

[murray t turtle]

What you guys focus more on, a wick with 2 time of the length of the body or a body itself?

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MAINLY, the close= by then all have voted.
upside down T= topping tail[aka grave stone dogi]. tends to be a good reversal signal \ even though a very strong uptrend trend or downtrend will occasionally ignore that topping tail/LOL