So just look at the trend and highs and lows. The candles themselves dont mean much on a market that never closes?
What exactly is in a candlestick graph that makes traders use it
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So just look at the trend and highs and lows. The candles themselves dont mean much on a market that never closes?
I don't trade FX, but don't they have a "new day beginning" at some time? New daily chart candle/bar with that?
High/Low points on the chart can be important.... stuff between has a high enough noise component that there is no sense in trying to analyze it. A big part of trading is about "where to take a risk", "where to stop out", and "how much noise to accept with a grain of salt". Not all science, much is art.
Don’t over complicate something that is really simple.
The time for the open and close of a bar is whatever you set it to be depending on the charting software are data feed you are using. That being said there are certain conventions that are used. You could plot a 41 minute bar, but what would be the mathematical underpinning for such an esoteric choice, maybe you have a fetish for prime numbers?
Forex trades 24/5 not 24/7 and during those hours various major markets open and close so there are large changes in liquidity. The 24 hour market can be a bit of a fallacy depending upon your expectations. I typically start looking that the FX market after Tokyo has opened (tonight will be an exception since the Japanese elections were held yesterday and I want to catch the opening), Frankfurt opens and the market gyrations increase, London opens and we are off to the races, New York opens at 8:00 a.m. EST and now there is maximum market liquidity with the major players doing their thing. Often by 11:00 a.m. EST I am looking to exit for the day during that last hour of high liquidity. London closes at 12:00 p.m. EST.
For the start and end of a daily candle there are two popular choices. The first is 5:00 p.m. GMT, the London FX Market close (Greenwich Mean Time, which will alter, relative to my location, next Saturday with the day light savings time change) and 5:00 p.m. EST, the New York FX Market close (Eastern Standard Time, which will alter on 7 November with the day light savings time change).
In terms of trading I need to be aware of when is the market liquid, and when is it not. The Sydney Australia open (5:00 p.m. EST) is typically very light trading, so I avoid it. But if there has been a geopolitical event over the weekend I might enter or exit a position at 5:00 p.m. on Sunday evening EST. Again the Japanese elections this past weekend will have me take a peek at the JPY crosses on the Sydney open, but I will be very wary of a gap and large move since the chance of a subsequent fade of price is high.
I also must be alert to major news events scheduled for that day. For example on the first Friday of the month the U.S. Bureau of Labor and Statistics issues Non-Farm Payroll data. A news event that can cause a large and sudden change in price.
WAIT I JUST ASKED ABOUT THE CANDLES, WTF IS ALL THIS OTHER NONSENSE?
Sorry, I do tend to ramble a bit. But like a well crafted legal decision often the obiter dictum has some wisdom.
So an FX daily bar gives you a 24 period in a single bar. I set mine to open and close at 5:00 p.m. in New York. Pick what you want, but I find the large drop in activity once New York closes to be a rational point to call the day at an end.
On a 15 minute chart the bar starts at say 11:00 a.m. and closes at 11:15 a.m., and every quarter hour there after. I suppose I could get the bar to open at 11:07 and close at 11:22, but have never bothered.
HOW DO I MAKE MONEY FROM THAT?
From that alone, you can’t. But it is a component in the toolbox of a skilled trader. The same way spanners (wrenches), pliers, screwdrivers are all tools for a skilled mechanic. The same tools in the hands of an idiot results in an even more expensive car repair.
The pattern of bars gives some indication of what the next bar in the future might be. That really is what you are after. Not a representation of what price did in the past, but what is the price going to be (You need a lot of other elements to actually get a profit in your pocket, but we can start with this one).
The problem is there is nothing in trading that is absolute. There is never a set of circumstances you know 100% without doubt what will happen next. The pattern of price movement as represented in candles or bars, gives you an indication of probability. The very best set-ups I trade are 80%, frequently they are 70%; at 60% or lower I’ll pass. Others do not and are happy to take 60% probabilities. Yet others do none of this and trade in a completely different way and they claim to be profitable.
I’ll give an example. On a 15 minute chart of the USDJPY the last 4 bars have had very large bodies, all moving up, the current bar that is about to close has the open and close prices nearly identical and the high and low wicks have also had only minor movement (some refer to this as a “doji” candle). This indicates a probability that there is about to be a pullback in the price. But I cannot look at just that piece of data alone. I need it in context of support and resistance levels, deviations as shown in Bollinger Bands, price placement in the longer term trend, or is it a range, and was there a news event that drove the initial upward spike. When I look at all those factors together, and some others, I create a probability estimate of what will happen next and trade accordingly.
The exact same candle formation, but placed differently relative to support and resistance levels, and with or without a news event, means the probabilities are different. One might start a downward fade in price, the other is just a pause and will likely resume the upward move.
If you reads texts by Al Brooks he ascribes great significance to the closing price, and trades the 5 minute bar. I do not trade in exactly the same manner, but I learned the principles of what he was suggesting and applied them to my own methodology. (his books are mind numbing, not page turners, and need to be read in small doses to avoid frustration)
I look at the importance of high, low, open and close as all being relative. They all give me information. A high spike with a large fall back to below the open givens me an indication of a possible peak in price. That top spike will be a significant level to watch in the future. A tiny bar with the open and close close together gives me a hint (just a hint) of market indecision. Take every piece of information and use it.
I could go on about how each individual candle forms a trend or a range within its time frame. Consider a monthly bar when you trade on a 1 hour time frame, what does it tell you?
As @Xela stated earlier she prefers bars; I prefer candles. She is an experienced professional trader, I have great respect for her, and read her posts carefully, yet I chose to do something slightly different.
Sometimes I will turn the charting of past prices off; I only see a chart with the bid and ask compared to levels of support and resistance with nothing else. I'm sure some others do this but have not come across it in a forum.
Other traders approach this completely differently. The problem of the internet is we just do not know who is long term profitable and who is just posting a delusion on the internet. Another thread recently had a blatant lie about an historic event so that poster has now defined himself as a fantasist and needs to be avoided.
Final comment since you appear to be a new trader. If you get all this perfect there is still a very good chance you will lose all your money until you master how to size trades and the risk of ruin. If I trade an 80% probability with my full account, then after 5 trades or so (subject to variance), I will lose everything. It gets much more complicated than this simple example.
= = =
DISCLAIMER
Please adjust the first sentence.
This post only relates to the following: SPOT FOREX
https://www.elitetrader.com/et/threads/who-is-your-favorite-fx-broker.301046/page-10#post-4530735
= = =
The time for the open and close of a bar is whatever you set it to be depending on the charting software are data feed you are using. That being said there are certain conventions that are used. You could plot a 41 minute bar, but what would be the mathematical underpinning for such an esoteric choice, maybe you have a fetish for prime numbers?
Forex trades 24/5 not 24/7 and during those hours various major markets open and close so there are large changes in liquidity. The 24 hour market can be a bit of a fallacy depending upon your expectations. I typically start looking that the FX market after Tokyo has opened (tonight will be an exception since the Japanese elections were held yesterday and I want to catch the opening), Frankfurt opens and the market gyrations increase, London opens and we are off to the races, New York opens at 8:00 a.m. EST and now there is maximum market liquidity with the major players doing their thing. Often by 11:00 a.m. EST I am looking to exit for the day during that last hour of high liquidity. London closes at 12:00 p.m. EST.
For the start and end of a daily candle there are two popular choices. The first is 5:00 p.m. GMT, the London FX Market close (Greenwich Mean Time, which will alter, relative to my location, next Saturday with the day light savings time change) and 5:00 p.m. EST, the New York FX Market close (Eastern Standard Time, which will alter on 7 November with the day light savings time change).
In terms of trading I need to be aware of when is the market liquid, and when is it not. The Sydney Australia open (5:00 p.m. EST) is typically very light trading, so I avoid it. But if there has been a geopolitical event over the weekend I might enter or exit a position at 5:00 p.m. on Sunday evening EST. Again the Japanese elections this past weekend will have me take a peek at the JPY crosses on the Sydney open, but I will be very wary of a gap and large move since the chance of a subsequent fade of price is high.
I also must be alert to major news events scheduled for that day. For example on the first Friday of the month the U.S. Bureau of Labor and Statistics issues Non-Farm Payroll data. A news event that can cause a large and sudden change in price.
WAIT I JUST ASKED ABOUT THE CANDLES, WTF IS ALL THIS OTHER NONSENSE?
Sorry, I do tend to ramble a bit. But like a well crafted legal decision often the obiter dictum has some wisdom.
So an FX daily bar gives you a 24 period in a single bar. I set mine to open and close at 5:00 p.m. in New York. Pick what you want, but I find the large drop in activity once New York closes to be a rational point to call the day at an end.
On a 15 minute chart the bar starts at say 11:00 a.m. and closes at 11:15 a.m., and every quarter hour there after. I suppose I could get the bar to open at 11:07 and close at 11:22, but have never bothered.
HOW DO I MAKE MONEY FROM THAT?
From that alone, you can’t. But it is a component in the toolbox of a skilled trader. The same way spanners (wrenches), pliers, screwdrivers are all tools for a skilled mechanic. The same tools in the hands of an idiot results in an even more expensive car repair.
The pattern of bars gives some indication of what the next bar in the future might be. That really is what you are after. Not a representation of what price did in the past, but what is the price going to be (You need a lot of other elements to actually get a profit in your pocket, but we can start with this one).
The problem is there is nothing in trading that is absolute. There is never a set of circumstances you know 100% without doubt what will happen next. The pattern of price movement as represented in candles or bars, gives you an indication of probability. The very best set-ups I trade are 80%, frequently they are 70%; at 60% or lower I’ll pass. Others do not and are happy to take 60% probabilities. Yet others do none of this and trade in a completely different way and they claim to be profitable.
I’ll give an example. On a 15 minute chart of the USDJPY the last 4 bars have had very large bodies, all moving up, the current bar that is about to close has the open and close prices nearly identical and the high and low wicks have also had only minor movement (some refer to this as a “doji” candle). This indicates a probability that there is about to be a pullback in the price. But I cannot look at just that piece of data alone. I need it in context of support and resistance levels, deviations as shown in Bollinger Bands, price placement in the longer term trend, or is it a range, and was there a news event that drove the initial upward spike. When I look at all those factors together, and some others, I create a probability estimate of what will happen next and trade accordingly.
The exact same candle formation, but placed differently relative to support and resistance levels, and with or without a news event, means the probabilities are different. One might start a downward fade in price, the other is just a pause and will likely resume the upward move.
If you reads texts by Al Brooks he ascribes great significance to the closing price, and trades the 5 minute bar. I do not trade in exactly the same manner, but I learned the principles of what he was suggesting and applied them to my own methodology. (his books are mind numbing, not page turners, and need to be read in small doses to avoid frustration)
I look at the importance of high, low, open and close as all being relative. They all give me information. A high spike with a large fall back to below the open givens me an indication of a possible peak in price. That top spike will be a significant level to watch in the future. A tiny bar with the open and close close together gives me a hint (just a hint) of market indecision. Take every piece of information and use it.
I could go on about how each individual candle forms a trend or a range within its time frame. Consider a monthly bar when you trade on a 1 hour time frame, what does it tell you?
As @Xela stated earlier she prefers bars; I prefer candles. She is an experienced professional trader, I have great respect for her, and read her posts carefully, yet I chose to do something slightly different.
Sometimes I will turn the charting of past prices off; I only see a chart with the bid and ask compared to levels of support and resistance with nothing else. I'm sure some others do this but have not come across it in a forum.
Other traders approach this completely differently. The problem of the internet is we just do not know who is long term profitable and who is just posting a delusion on the internet. Another thread recently had a blatant lie about an historic event so that poster has now defined himself as a fantasist and needs to be avoided.
Final comment since you appear to be a new trader. If you get all this perfect there is still a very good chance you will lose all your money until you master how to size trades and the risk of ruin. If I trade an 80% probability with my full account, then after 5 trades or so (subject to variance), I will lose everything. It gets much more complicated than this simple example.
= = =
DISCLAIMER
Please adjust the first sentence.
This post only relates to the following: SPOT FOREX
https://www.elitetrader.com/et/threads/who-is-your-favorite-fx-broker.301046/page-10#post-4530735
= = =
Oh my .... we did not even talk about the other bars some traders use: Range, Renko, Kase, Heikin Ashi, Kagi, point & figure, etc. In fact of some these non main-stream bar types are being used more & more by seasoned traders for certain things.
In the ETH for example I do not want to have the length of time take priority over the # of trades in plotting bars on the chart.
In the ETH for example I do not want to have the length of time take priority over the # of trades in plotting bars on the chart.
You have to use those variations which help you to best to see price action as it develops. A candlestick and a line bar give the same information, high, low, open and close. For some a candlestick may help to see high-low range or have studied Japanese candlestick patterns and want to see patterns they have studied as it forms. Personally, I find candlesticks "noisy" but that's me, we all see things differently. If you are going to succeed as a trader, you are going to have to spend many hours watching price develop. Experiment with both and once you understand the dynamics of price discovery, you might try the variations comangum alluded to.
Basically the open and close are different from the rest of the fluctuations as they determine or show graphicallywho owned the bar for the time period under consideration, the bears or the bull, or if a doji then a range bar with bearish an bullish pressures being about equal.
Candlestick charts allow a trader to visually process that info quicker. If a trader is using say black for bear candles and white for bull a quick glance shows who controlled that bar over that time period. The bulls or the bears. That is a tad bit harder to see quickly from a bar chart. Discerning who is in control within a timeframe and setting is a key to making successful entries i.e. entries in the right direction or even exits.
So, basically the open and close are going to determine if the candle is a bull candle or bear candle. Regardless of the time frame e.g. 5 min...30 min...1 hour...etc
Candlestick charts allow a trader to visually process that info quicker. If a trader is using say black for bear candles and white for bull a quick glance shows who controlled that bar over that time period. The bulls or the bears. That is a tad bit harder to see quickly from a bar chart. Discerning who is in control within a timeframe and setting is a key to making successful entries i.e. entries in the right direction or even exits.
So, basically the open and close are going to determine if the candle is a bull candle or bear candle. Regardless of the time frame e.g. 5 min...30 min...1 hour...etc
How do they analyse charts in Japan?
visuality
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As candlestick analysis is no longer the fad, what they use is much of the same as in the west. Old school western TA, MA's, indicators such as RSI, MACD, Stochastic, Momentum,Parabolic etc. Also Bollinger Bands and Ichimokukinkouhyou.
Excellent post. I will save it.