Success of Japanese Candlestick Patterns?

proftradingjourney said:
I am very intrigued by Japanese candlestick patterns. I read a study from back in 1998 which conducted tests on the predictive power and profitability of candlestick patterns on all S&P 500 stocks from 1992 to 1996, and buy-side returns after adjusting for transaction costs were huge at between 0.56 and 0.76 percent on a 100k trade (trades entered near close and sold in 1/3rds for the following 3 days fyi) resulting in an annually compounded return of between 202 to 259%.

In particular 2 patterns were found to predict future price action correctly 75 percent of the time, the patterns were the three white soldiers and three inside up patterns.

For those of you with experience trading with these patterns as part of your strategy, are they as predictive and profitable as this study suggests?
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Candlestick patterns are the most reliable and useful when showing "reversal"... morning star, evening star, shooting star, hammer, dark cloud cover, piercing line, engulfing, etc. Nothing all that special as the same info can be found elsewhere.

Being sharp on "reversals" is one of the most important issues for traders. Also, "breakouts". All big moves (up and down) include multiple breakouts.
 
trismes said:
Candlesticks were never meant to be used as Nison presented them. Whether by design or not, he didn't translate any of the original texts. Just picked up the patterns and delivered them without any context. He added in some baloney about S/R later, congestion zones, the kind of woolly technical analysis the industry thrives on, but the guy knows nothing about trading and if you want any value out of them you need to dig deep.
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There is a lot of baloney actually.

You have great potential !!!!
 
proftradingjourney said:
I am very intrigued by Japanese candlestick patterns. I read a study from back in 1998 which conducted tests on the predictive power and profitability of candlestick patterns on all S&P 500 stocks from 1992 to 1996, and buy-side returns after adjusting for transaction costs were huge at between 0.56 and 0.76 percent on a 100k trade (trades entered near close and sold in 1/3rds for the following 3 days fyi) resulting in an annually compounded return of between 202 to 259%.

In particular 2 patterns were found to predict future price action correctly 75 percent of the time, the patterns were the three white soldiers and three inside up patterns.

For those of you with experience trading with these patterns as part of your strategy, are they as predictive and profitable as this study suggests?
More...
%%
Its possible;
maybe a bit optomistic
not likely 75% for lifetime, even though as long as settlement = 3 days, any midpoint of weekor year is important. IBD use$ red ,white + blue barcharts= same thing .
CANT really predict markets much + candlecharts or any price data will not change that;
thats why stops + money management is used. Wisdom is profitable to direct
 
trismes said:
Candlesticks were never meant to be used as Nison presented them. Whether by design or not, he didn't translate any of the original texts. Just picked up the patterns and delivered them without any context. He added in some baloney about S/R later, congestion zones, the kind of woolly technical analysis the industry thrives on, but the guy knows nothing about trading and if you want any value out of them you need to dig deep.
More...

Do you know where I can find good translations of the original texts? I find candlesticks fascinating even with all the caveats in using them so I would like to learn more about them and reading some good translations of the original texts would be a good start.

Thanks
 
Is it always this quite ?

I sometimes post on my fx book -----there is a 2 day delay between messages takes ages to hold a conversation.
 
TheDawn said:
Do you know where I can find good translations of the original texts? I find candlesticks fascinating even with all the caveats in using them so I would like to learn more about them and reading some good translations of the original texts would be a good start.

Thanks
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Sprouts link to FoG is a great start. There's more than this though, bits and pieces of other texts all published in Japanese but not English afaik, so get onto google.jp with autotranslate... like I say, you need to dig deep and read slow.
 
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