Can confirm this more or less but you need additional filters I would say. The overall trend is also important. So if you look for a sellshort then the uptrend should be broken cleary on your smaller timeframe chart too. Also looking for additional resistance from prior toppish candles could confirm a shortsell setup here. Just look for additional confirmations then I would say it is good daytrading setup. But of course you need to backtest a lot on prior charts with playback to be sure that you have a valid discretionary setup. It CAN work, but you need to put in more efforts I would say.
Entering on large impulsive candles preceded by a pullback with smaller candles
- Thread starter Velden
- Start date
Thats good to know. I am fairly comfortable with the overall context but from my experience trading just the context with no specific entry setups gives little (if any) edge. Unless you have a very smooth trend which don't happen often, in forex at least.
Based on the visual you posted, that would've been a late entry. Context matters because you can't trade everything as a successful breakout/trend. We can't see to the left and only have the slope of the ema, but if it was trending before that consolidation odds were higher that bear move was a climax. If instead it was a trading range...most breakouts fail and it looks like "traders" that sold the close of each bear bar in the BO covered on the doji after the bull bar or at the close of the bar you outlined going short at.
Pullback trading in trend behavior. Buy low/sell high in range behavior. Don't trade with trend if flat at a potential climax unless you know how to manage it. There are a lot of available published resources outlining why you won't get an easy absolute answer to your question.
I am with you on what you are saying, context matters, i am not denying it, and I totally agree that what could look like a good entry could be a climax (to a newbie trader that is).
In terms of the second paragraph, "pullback trading in trend behaviour" is that just your preference or is there any proof that it is more profitable to trade pullbacks? For a very long time I was obsessed with pullbacks thinking it's the only right way, partially because every guru would tell you to do it (i am not saying you are one of them of course) which raises suspicion, partially because why should i wait for a pullback when the trend is happening and the opportunity to enter may already be there without the presence of the pullback.
In terms of the second paragraph, "pullback trading in trend behaviour" is that just your preference or is there any proof that it is more profitable to trade pullbacks? For a very long time I was obsessed with pullbacks thinking it's the only right way, partially because every guru would tell you to do it (i am not saying you are one of them of course) which raises suspicion, partially because why should i wait for a pullback when the trend is happening and the opportunity to enter may already be there without the presence of the pullback.
There is some work on candlesticks probabilities already done. You might have a look into the following sources as your special candlestick pattern might be already backtested too here:
https://www.quantifiedstrategies.com/do-candlesticks-work-a-quantitative-test/
https://www.quantifiedstrategies.com/candlestick-pattern-doji/
https://www.quantifiedstrategies.com/success-rate-candlestick-patterns/
https://www.quantifiedstrategies.com/3-bullish-candlestick-patterns-that-work/
https://www.quantifiedstrategies.com/what-is-the-best-time-frame-for-candlesticks/
https://www.quantifiedstrategies.com/the-complete-backtest-of-all-75-candlestick-patterns/
https://www.quantifiedstrategies.com/how-many-candlestick-patterns-are-there/
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I prefer to look for any good rational reason to enter with the current trend and chase strong breakouts/fade weak ones. My definitions are loose and subjective. I'm still guilty of trying to scalp countertrend too much and get burned for it (working on it).
Agreed, that's why I tend to buy/sell the close during spikes if context supports it.
This is complete nonsense and statistical abuse.
Even if you were to generate all the candles possible on all instruments and all time frames for the last 100 years, the statistics would be meaningless.
The law of large numbers doesn't apply in time if the process is non-ergodic.
Those links are really just a way to fool people with a type of pseudo quantitative varnish. "quantitative" at this point is more of a marketing term when it comes to trading. As if something with a meaningless probability assigned to it has more meaning than noise or a random number generator.
The zeitgeist of our entire age though is the pseudo quantitative varnish of meaningless floating point numbers and then using those numbers as a marketing tactic to put a pseudo scientific gloss to the bullshit being sold.
Those links are even more useless than taking the height of all bugs, humans, fish, birds, etc and concluding the median height of an animal is 8.909 inches or something like that and then believing that result has any meaning in the context of the height of the gorilla. At least the height of an animal is pretty much ergodic , not hugely changing over time and not path dependent unlike financial markets.
Even if you were to generate all the candles possible on all instruments and all time frames for the last 100 years, the statistics would be meaningless.
The law of large numbers doesn't apply in time if the process is non-ergodic.
Those links are really just a way to fool people with a type of pseudo quantitative varnish. "quantitative" at this point is more of a marketing term when it comes to trading. As if something with a meaningless probability assigned to it has more meaning than noise or a random number generator.
The zeitgeist of our entire age though is the pseudo quantitative varnish of meaningless floating point numbers and then using those numbers as a marketing tactic to put a pseudo scientific gloss to the bullshit being sold.
Those links are even more useless than taking the height of all bugs, humans, fish, birds, etc and concluding the median height of an animal is 8.909 inches or something like that and then believing that result has any meaning in the context of the height of the gorilla. At least the height of an animal is pretty much ergodic , not hugely changing over time and not path dependent unlike financial markets.
I did not say I am using any candlesticks. He was asking about candlesticks and I showed him some research before he is spending his valuable time doing the same again. If someone believes in candlesticks for his discretionay daytrading, you just then makes critics on it that all is just Bulls..t or what ? There are different types of traders you cannot expect that everyone uses the same methods and strategies. And I know very successful trader who is using candlesticks in daytrading. If you knew his trading statistics I bet for sure you would fall off your chair (by the way).
Thanks for those who helped, provided links, etc. The thing is, this is not a candlestick pattern. It is a characteristic of 3 moves (with trend, counter trend, with trend) relative to each other. I will backtest it.
Is anyone able to suggest other tried and tested fotmations for entry? I have been observing the so called pre breakout squeeze followed by a large with trend candle, but not enough experience with it. I am assuming quite a few people use that for entries? Any other formations? I could probably get enough frewuency using these 2 (provided they work and have an edge), but if anyone is willing to share other entry techniques please let me know. Just entries please guys, I do not have any questions about overall price action context, i have enough experience with it.
Is anyone able to suggest other tried and tested fotmations for entry? I have been observing the so called pre breakout squeeze followed by a large with trend candle, but not enough experience with it. I am assuming quite a few people use that for entries? Any other formations? I could probably get enough frewuency using these 2 (provided they work and have an edge), but if anyone is willing to share other entry techniques please let me know. Just entries please guys, I do not have any questions about overall price action context, i have enough experience with it.
You could double check with volume. I know it is not complete in Forex, but usually you get an idea how much gain in extra volume relatively on a large candle was made. That could be kind of confirmation. I backtested it price extensions (so on large candles) with much extended volume recently and it is profitable. So that I would suggest you can try in your backtests in addition.