The Perpetuated Fraud of Candle Charting

Daal · Dec 9, 2009

Quote from JSSPMK:

Daal, I have a question for you. If Blackjack paid 10:1 could you beat it a casino?

Yes. But its funny you mention that, after Beat the Dealer came out over the years I'm told by vegas people it has become harder and harder to count cards and the beat the casino. Markets change and edges get closed out not matter what the TA selling gurus try to tell you

TraderZones · Dec 9, 2009

Quote from Daal:

Agreed. The majority of trading books try to give the impression that getting an edge is easy, some of them go as far as saying one can make money with random entries(van tharp).
Please, if it were that easy capitalism would be broken, you see that all the time in the business world, a new type of business earn above average returns for a while, all the idiots flock there and returns do down. The same thing should happen with 'easy' trading returns, there is little reason why it would be different, specially after the internet and the faster dissemination of information

many "traders" write books, do trading advisories and "mentor", often because that is the only way they can make $$$.

And they often just regurgitate candlestick, TA and a lot of other stuff, but try to claim they have a different way to spin it.

TraderZones · Dec 9, 2009

Quote from Daal:

Yes. But its funny you mention that, after Beat the Dealer came out over the years I'm told by vegas people it has become harder and harder to count cards and the beat the casino. Markets change and edges get closed out not matter what the TA selling gurus try to tell you

one thing was, the casinos greatly increased the number of decks in play at once, making things like card counting a lot less useful.

Daal · Dec 9, 2009

Quote from NihabaAshi:

You guys are funny, you use charts as part of your trade decision but YELL you don't use TA. You preach that other things are more important (money management, credit crisis) but can imagine how others using the same with candlesticks, TA or whatever is able to make a profit.

I dont preach that money management or 'credit crisis' is more important. I'm debating whether there are edges in TA as typically taught in popular books. As far as my own approach goes, you seem confused, I do fundamental global macro trading. But also ES swing trading based on quantifiable edges derived from historical studies not tales about japanese rice traders who are supposed to be so wise, nor 1950's books that are supposed to be timeless

JSSPMK · Dec 9, 2009

Quote from Daal:

Yes. But its funny you mention that, after Beat the Dealer came out over the years I'm told by vegas people it has become harder and harder to count cards and the beat the casino. Markets change and edges get closed out not matter what the TA selling gurus try to tell you

Markets do change, we can't alter that. We can adjust our money/trade management strategies though. Recently we see a lot of stop hunting going on, we can't change that, but we can adjust. If I see a bullish signal that can give me around 50 pts, then I can afford to lose 9 x 5 pts & get a win on 10th r/t to breakeven, I can up the size on 5th r/t, I can widen the stop a bit. Adjust to a changing ebb & flow. It's not about any given entry signal, it's about management.

R. Raskolnikov · Dec 9, 2009

I think we can agree that, ALONE, trading stuff taught in books will NOT produce consistent results. Then again, if someone is dumb enough to believe that all they have to do is look for a few specific candle patterns to form and then buy or sell without doing any kind of mkt study, then they DESERVE to get burned.

Quote from Daal:

I'm debating whether there are edges in TA as typically taught in popular books.

wcmckee87 · Dec 9, 2009

IMHO If you do not believe that cadle charts are usefull than you do not believe that price action is usefull, they are one in the same.

As I said before, a candle is a visual representation of raw (not derived data) of an event that ACTUALLY OCCURED. It can not be said that candles have no value unless you believe that price (and price action) has no value.

If you believe that, thats totally legitimate, but thats a whole nother can of worms

increasenow · Dec 9, 2009

Quote from Fleming Snopes:

The original text on candlestick charting was Seiki Shimizu's "The Japanese Chart of Charts," translated to English by Gregory Nicholson. Therein it is clear that the original and still then current application of candlestick charting and theory was to the daily chart. Subsequent supposed applications of them to any other time frame are in my opinion simply fraudulent, a bald attempt to extract money from unwary traders for books, consulting and web memberships. This fraud is clear because only the daily chart can be said to have a clearly significant high, low, open and close. Ascribing any such significance to one hour or fifteen minute or five minute charts is ludicrous. But traders do it anyway because it is so easy to click on the time scale for the desired chart. I propose that with today's fast data providers like ESignal there is an alternative to slavish adherence to the practice of the herd: chart in a much faster time frame and compress it to appear like the timeframe you want. For example, I am viscerally comfortable with one minute charts. So to get the full shape of price history without the irrelevant distortion of candlesticks, I chart in one second and compress it, adding one minute time ticks for reference. Attached is an example of ten minutes from this morning. You will note that this inaugural post does not contain the text h.e.r.s.h.e.y, so it is unlikely that the ego-driven perpetually roving bots trying to extract significance from insignificance will disturb us here.

hey Sir...so then, what do you now use a 1 minute bar chart?

TraderZones · Dec 9, 2009

Quote from wcmckee87:

IMHO If you do not believe that cadle charts are usefull than you do not believe that price action is usefull, they are one in the same.

that is not what is being discussed here, however. people try to READ candlestick patterns that are previously defined and widely followed, and assume they are useful, that is very different than pure price action.

Candlesticks WITHOUT patterns is pure data, just like OHLC bars.

JSSPMK · Dec 9, 2009

Quote from TraderZones:

that is not what is being discussed here, however. people try to READ candlestick patterns that are previously defined and widely followed, and assume they are useful, that is very different than pure price action.

Candlesticks WITHOUT patterns is pure data, just like OHLC bars.

So candlesticks without patterns aren't TA, whereas candlesticks with patterns are?