Hi WmWaster,
First, I just wanted to say that your thread is a fresh breadth of air and the route you've choosen to advance your knowledge is a route I think most candlestick pattern traders needs to travel.
I own a copy of Gregory Morris - Candlestick Charting Explained.
It's one of those candlestick books I've classified as a Candlestick Dictionary in that he covered the basics of a lot of different areas of candlestick pattern recognition.
Although the book lacks an actual candlestick pattern strategy trading plan...it gives enough generic info to give you a few ideas to start your own personal research.
In the back of the book (appendix) is an interview he had with Mr. Takehiro Hikita and till this day I remember a statement by Hikita...
...candlestick pattern analysis is another subject, rather than the charting itself..
That told me that there are traders using candlestick charts eventhough these traders are not doing any specific candlestick pattern analysis as part of their trading plan.
However, his Chapter 7 about the Reialibility of specific generic patterns is what caught my attention.
Also, I already had a strong interest in Hammer patterns prior to getting the book and his research sampling that deals with Futures (pg. 234-236) showed that Engulfing and Haramis had a much larger signal production.
I begin thinking what if I combined the Engulfing/Hammer or the Harami/Hammer as one pattern to see if my own personal testing of their reliability improved as a combo (multiple pattern).
It did and that in itself made my cost of purchasing the book worthwhile because it spark an ideal that later became very useful in my trading eventhough the book did not specifically discussed such a topic (combining patterns).
Further, I remember writing him at the time about the specifics of the actual trading plan for the Hammer pattern, Engulfing pattern and Harami pattern (initial stop method, trailing stop method, profit targets, contingency plans et cetera).
I got no reply.
What I do remember is that my reliability results would change dramatically with changes as the trade management after entry changed.
This quickly told me that if you give a group of traders the exact same pattern signal and allow them to interpret the trade management on their own...
They all will have different results.
Main reason why we see some traders say a particular pattern signal doesn't work and other traders say the same pattern does work.
Difference is the trade management.
That caused me to get into areas of candlestick pattern analysis that have not been discussed in any candlestick book nor articles...
The actual application of how to trade these patterns.
Looking back...I'm glad he never responded to my letter about his actual trading plan that produced his statistical results because it forced me to develop my own trade management rules that were suitable for my own personality.
Don't misunderstand...its an excellent dictionary (explanation) about candlestick patterns to help you understand the difference for example between a Bullish Hammer pattern and a Bullish Harami pattern.
Yet, it does not tell you how to apply nor how to trade candlestick patterns.
(I knew that before I purchased the book)
That's where the problem is for most is that many traders assume these types of books being discussed is telling them how to apply and trade.
His book has no holy grail statements and no statements saying it was going to make us great traders.
Therefore, the author as many other candlestick authors...
Focuses on mere explanation and not application.
In fact, I don't think any source (books, seminars, website et cetera) if its not talking specifically about your trading instrument, providing daily instructions and talks about all aspects of trade management (initial stops, trailing stops, profit targets, contingency plans et cetera)...
Explaining what caused the pattern in the first place...
The info needs to be taken with a grain of salt.
Yet, Morris book gives an excellent explanation of the generic patterns to prompt us to discover our own application information...
Worth the $35 dollars I had spent on it back in the 90's.
Not worth a penny if your looking for info on how to apply or how to trade these patterns.
Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
