do candle sticks really work?

[ronblack]

Quote from rcanfiel:

People tend to bet more after an adverse run, and less after a favorable run. Let's say your first three $100 bets are losers. Already you're down to $700. You think, "Since I've had three losses in a row, the odds are 60 percent in my favor, I'm sure it's time for a win." So you raise your bet to $400, and suffer and even bigger loss.

Gambler's fallacy is tarders worse enemy.

Ron

 

[JaiSreeram]

What about Steve Nison's books? Are they good ? i.e; Can they provide useful information about candlesticks and their use?

 

[carcanaques]

Quote from intradaybill:

But you implied that a trader with a winning system can lose money because of other factors.

I tell you then that most traders, like the people at ET, are not stupid and know the factors. The problem is that they do not have or seem not able to get a winning system.

This makes up 95% of the reasons 95% of traders lose money. Everything else can fit in a seminar because some can convince the losers that it is not their system but their physchology, money management, etc that is the problem. They of course avoid dealing with the hard issue which is developing a winning methodology for entry and exit points on a chart.

The things you say carry some value for rookies but for experienced traders, like the majority of people in ET are, what is missing is a dynamic and robust system that makes consistent profits, whether that is mechanical or simply a heuristic approach.

Bill

Nicely stated.

It's interesting that you say "experienced" traders like those on ET are still struggling to find a viable method to extract consistent profits from the markets. What does that say about experience? The longer you stay in the game looking for an edge, the more money you will lose.

 

[carcanaques]

Quote from JaiSreeram:

What about Steve Nison's books? Are they good ? i.e; Can they provide useful information about candlesticks and their use?

Sure they can, but they won't make you successful.

 

[mu200411]

Trendline and Moving average are good at identifying trend.
Candle sticks and indicators are good for signaling trend change.
When trend goes on for a long time, candle sticks is usually the first signal for trend change. Sometimes it requires only one stick.
Let's see if candle sticks really work or not!

 

[humblepie]

I lost faith in candlesticks one day when I decided to do a simple study that almost anyone could do on their own.

I downloaded a large amount of historical daily data for various equities from Yahoo! Finance for the purpose of examining the Bullish Engulfing Pattern, specifically. I wrote a program to run through the data. It extracted all bullish engulfing patterns that were preceded by 3 days that closed at lower lows (a downtrend, albeit brief). The program wrote the data into a spreadsheet, including OHLC data for the day that immediately followed the engulfing pattern. That day would be more likely to demonstrate a turnaround, so I thought.

In the spreadsheet, I selected my data range and eagerly drew my chart. I expected that I would certainly see that the day immediately following the bullish engulfing pattern would show a tendency to close higher. I was breathing heavily as I dragged my cursor across the screen--the excitement was palpable. Finally my chart plotted itself.

Never in my life have I seen a more perfectly drawn bell curve, centered precisely at 0. The closing price of the day following the bullish engulfing pattern appeared to follow a perfectly random distribution, not showing any bias one way or the other.

I suppose one could argue with my methods, specifically the way I defined a downtrend. But the disappointment at that point was great enough that I never repeated the experiment.

Humbly yours,

 

[cashmoney69]

I'd like to know how p-a-o (price action only) traders detect over-bought/sold levels

without indicators.

 

[o10maximus]

Quote from cashmoney69:

I'd like to know how p-a-o (price action only) traders detect over-bought/sold levels

without indicators.

I'm sure you would

 

[brownsfan019]

Quote from humblepie:

I lost faith in candlesticks one day when I decided to do a simple study that almost anyone could do on their own.

I downloaded a large amount of historical daily data for various equities from Yahoo! Finance for the purpose of examining the Bullish Engulfing Pattern, specifically. I wrote a program to run through the data. It extracted all bullish engulfing patterns that were preceded by 3 days that closed at lower lows (a downtrend, albeit brief). The program wrote the data into a spreadsheet, including OHLC data for the day that immediately followed the engulfing pattern. That day would be more likely to demonstrate a turnaround, so I thought.

In the spreadsheet, I selected my data range and eagerly drew my chart. I expected that I would certainly see that the day immediately following the bullish engulfing pattern would show a tendency to close higher. I was breathing heavily as I dragged my cursor across the screen--the excitement was palpable. Finally my chart plotted itself.

Never in my life have I seen a more perfectly drawn bell curve, centered precisely at 0. The closing price of the day following the bullish engulfing pattern appeared to follow a perfectly random distribution, not showing any bias one way or the other.

I suppose one could argue with my methods, specifically the way I defined a downtrend. But the disappointment at that point was great enough that I never repeated the experiment.

Humbly yours,

There are so many holes with your little 'experiment' I wouldn't even know where to begin.

This experiment did not prove or disprove anything about candlestick trading.

 

[humblepie]

Quote from brownsfan019:

There are so many holes with your little 'experiment' I wouldn't even know where to begin.

This experiment did not prove or disprove anything about candlestick trading.

There just can't be that many holes in it--it was just too straightforward. You can keep your religion or magical dojis and dark clouds or you can repeat the experiment yourself, if you have the skills.