Most using candlestick charts are not using Japanese Candlestick analysis...they just like the way the charts look (visually) in comparison to something like bar charts or line charts.
What exactly is in a candlestick graph that makes traders use it
- Thread starter sab1234
- Start date
Most using candlestick charts are not using Japanese Candlestick analysis...they just like the way the charts look (visually) in comparison to something like bar charts or line charts.
Why do your methods have an earn given that smart people and incredibly fast computers go to bed thinking of ways to beat you and Xela out of your money?
Well... maybe not both of you in particular, but I am asking a serrious question.
I would have incorrectly guessed the markets you trade would be too efficient; especially after spread, fees, sometimes an informational disadvantage.
This is a question I will also ask Xela.
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These types of question are often framed in terms of competing against HFT's, algo's, firms with rooms full of PhD's etc. We retail traders are not competing against anyone. We have learned how to harvest pieces of moves by developing methodology(ies) which gives us a favorable risk/reward edge across a series of trades given the disciplines to adhere to said methodology.
A good question deserving of a serious answer. Please do not feel insulted if my answer seems to simplistic at times. I am trying to offer thoughts for a novice trader to consider, I am not being condescending towards you.
EQUITIES
I am a long term trader or investor depending how you define those terms.
For me a short hold on an equity is 3 months, typically a couple years. But as I mentioned before I do not walk away and ignore them. I carefully consider my positions everyday. At present I do believe that equities are high and subject to a strong pullback (well D’uh, who doesn’t) so I am sitting on a significant amount of cash and waiting.
Of course that day might not be for another year or two, so I remain in the market with the typical buy the dips attitude. But I do sell off that extra on the rebound to maintain a consistent ratio of cash to equities. And by buying in I am talking about adding something in the region of 1% to 5% of the total cash available, not a 70% swing for the fences.
The amount of my stack in the market is relatively low on a percentage basis. That has reduced my total equities upside this year. As a percentage of what was available my total profit is around 26%, it could have been closer to 80%+ had I taken the extra risk and piled on.
So a really boring conservative strategy, nothing special at all. Anyone could do it.
SPOT FOREX
This is where I have my fun. And it really is more about what you are asking.
Especially since the level of retail roadkill is so huge.
After my first attempts at fx I quickly saw I was deficient in this arena. So I created a plan to learn; books and all that stuff so many on this forum view with disdain. As though education were some scarlet letter indicating a moral deficiency. I have posted about this elsewhere in the forum.
I am patient. I will wait until I have a profitable strategy before trading large sums. I will wait for the position I want to take shape for both entry and exit.
I am disciplined in my approach. Particularly in the amount that I trade. I have a calculated amount to place on a trade. Frequently it is scaled in with a large initial position then a few minor additions if there are pullbacks.
Every trade is planned out before I enter it. While I have computers to calculate the the details of the trade, I still write it out by hand. I use a small piece of bright yellow card about 2” x 5” and write down something like “B 5 USDCAD at SD3 + 3 BST”. The decoding of my shorthand does not matter, it is that I write the trade in advance(in ink LOL). I have predetermined and written that that maximum size for that trade is 8 lots. I no longer think about the trade size, it has been worked out. Clever people may notice the absence of either a SL or a TP, but that’s another story. I got the idea from the pit traders in Chicago (they were noting completed trades, a whole different thing) but I like the idea of a small simple paper card with my simple trade reference data. No need to look at a computer and mess about with screens. Glance at the card, glance at the price, no need to re-calculate, reconsider, or refute.
I am willing to take a loss. Once I see that the stastical boundaries of my trade have been broken, I AM OUT. That price movement is a complete proof that there is something that I missed, some new event occurred, etc. and I get out. It is like being in a car skidding out of control at high speed about to hit a concrete pole, but I have the ability to use my Star Trek transporter beam and get out of the car before impact. Once I see the trade is out of control I get out then and there.
Long term spot forex pricing is a function of some overwhelming players. The dollar volume that gets pushed through is staggering. Consider the GDP for the United States, for 2017 it is 19 trillion dollars.
see page 25
https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/budget.pdf
The spot forex market handles that in about a week. A cash equivalent of the U.S. GDP in a week. Yes, that is a turn over amount being rotated through and not an actual single trade in the trillions. Yes, this and that, it is just to get a sense of scale not draw conclusions. Drawing any correlations in that would be wrong.
That size means that the significant players are governments and a few select banks. Everyone else is just surfing that wave or drowning. An individual putting $10 million in the market is nothing of consequence. At best a price spike.
Incidentally I make price spikes my friend not something to be feared. Retail traders complain about the price spikes, thinking it is stop hunting by their broker (there are stop hunts, it is not your broker, but again another story). I’ll look for the obvious levels where people would place stops and place another buy order at that level. If the stop hunting occurs I benefit (goes back to those notes on the card).
Consider water flowing over a dam. Lets take the Hoover dam as an example.
The stored energy in that amount of water is incredible. Compare it to a central bank. The FOMC, BOE BOJ, ECB that control the flow of monetary energy. They control what is going out of the reservoir through interest rates, quantitative easing, etc. No single player is going to fight that.
BUT WAIT WHAT ABOUT GEORGE SOROS AND THE BANK OF ENGLAND.
A short explanation can be found here as a reference for those not familiar. It is worth reading. It is commonly stated that Soros made a billion dollars in a single day. The headline often used is that he “Broke the Bank of England”. But as with most sound bites and 140 character tweets, there is a lot more to the story.
http://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp
more detailed here
https://priceonomics.com/the-trade-of-the-century-when-george-soros-broke/
Soros did not fight the BOE. What he did was understand that the macro-economic policies of the U.K. government could not be sustained in the long term. With that understanding, and seeing the confluence of events with the Europe creating a common currency, and with a supreme confidence in his analysis (truly extraordinary) he was able to front-run (yes, I am misusing the common trading parlance of that word) the inevitable decision the BOE had to make. He was able to predict their movement, not fight them.
It was a unique event, a Black Swan, albeit with a positive outcome for Mr. Soros. I do not possess that ability (or capital) to consider such trades, so I don’t waste time debating such politics and economics. I can however see the obvious flows of money, and slide along with them. Those money flows take months to accomplish.
Consider the January 2015 EURCHF disaster. It was predictable. The Swiss National Bank could not keep spending money to support the peg with the Euro. The peg had to go. But no one knew when. And rather than announce a policy statement and period of transition, SNB chairman Thomas Jordan just pulled the peg without warning. The result was market chaos and bankruptcies. Beware trading any pegged currency.
Central bankers from Japan, U.K., U.S. and Europe understand that if they did such a thing the results would be dire for their countries. The “easing” in “quantitative easing” is that idea of a balanced methodical approach over time, not a sudden tidal wave that destroys. No doubt many people will disagree with a particular central bank policy and think they should do this or that instead. That is not the point. The point is that they enact their policies over time. There are discreet announcements over time to make the larger policy concept a reality.
Consider interest rate increases. They are done typically as 1/4 point at a time, over many months to allow the markets to adjust. The results of a sudden 8% increase in U.S. rates would be unfathomable.
It’s like deep sea divers. They need to rise slowly over time lest they get the bends. The longer and deeper they have been down, the slower the process to rise.
As other posters have pointed out I am not that bright, so rather than argue I just agree, they are right, and I am deficient in my mental abilities. Being on the downside of a 58 IQ I can only look at the overall market sentiment of the major players.
You see what I did there, I invoked that other form of analysis that cannot be named on retail trading forums.
Part of my forex learning was to see that in the short term various other players in the market will jerk the price this way and that. They shake out the retail player the way a dogs shakes water off itself {not one of mine} while running for a ball.
Despite the shake, and the flying water (a.k.a retail traders) the dog (major money) still heads for the ball. Despite the market shake-ups, the price still heads with major sentiment.
So in answer to the question,
I am not trying to be fast, I am not trying to be smart in terms of daily trading. Although it was a good line for Jeremy Irons (be first, be smarter or cheat). It is not about the markets being efficient, it is that the volume of dollars that need to shift in spot fx takes time. That time allows me to sit on the coat tails of the major players. Like a pilot fish following a shark.
If there is a major news announcement (and they are all scheduled and easily available) I’ll sit on the sideline (sometimes I’ll place pending buy /sell stop order above and below, but that is not common, it can easily backfire into a double loss, I want a huge announcement and subsequent move to do that trade). First thing I do when I sit at my trading desk, what are the upcoming major announcements.
I am detailed and not looking for shortcuts. As you may have noticed from my posting style, they tend to be longer than most. The devil is well and truly in the details and I want to know where he is hiding.
Spot fx is like a daily chess game with the best in the world. There is something deeply satisfying in taking their money and using it to buy 100 pounds of dog food (which is about a 1 month supply around here).
I do have PTSD, so I shun people, and live in a somewhat remote area. It allows me to focus on what I want, trading, rather than social obligation and appearance. I find trading very calming.
I do need to adjust things and not look at this forum during the day. Distractions cost. I was about to comment on @Xela and her focus, but that is not my place, she certainly can speak for herself. I find a great many people on this board to be distasteful, and some to be outright liars and frauds who have not done what they claim.
Trading is not based on personalities, and my losses are always contained so I can play another match. The various analogies that get used by some alluding to war, conquest, sexual prowess and other similes for their trading are ridiculous. It is a calm calculated game, the emotional outburst does nothing to move the price and only serves to cloud the thinking and be a distraction.
A final thought. There was a recent thread wherein disparaging comments were made about people who served in the military. The day after tomorrow (28 October) is the ninth anniversary of the death of a great friend. One of the few I ever had. There are few people in this world, outside your parents, that are willing to die for you. Col. John Ripley USMC received exactly such an order from his command; “Hold and Die”. He was willing to do that for you, and in a miracle lived through it. He has a rather long list of well known exploits and is an icon in the USMC.
He, and countless others across the ages, held their ground, so that fools can post their ignorance without fear of consequence. Perhaps a quiet thank-you would be in order rather than, well rather than anything else.
"people sleep peacefully in their beds at night only because rough men stand ready to do violence on their behalf"
I am starting to cry like a little girl so best to stop. Please do not think that I had anything to do with such events. I am no one special and have no connection to any such events. But I am grateful and indebted.
A good question deserving of a serious answer. Please do not feel insulted if my answer seems to simplistic at times. I am trying to offer thoughts for a novice trader to consider, I am not being condescending towards you.
EQUITIES
I am a long term trader or investor depending how you define those terms.
For me a short hold on an equity is 3 months, typically a couple years. But as I mentioned before I do not walk away and ignore them. I carefully consider my positions everyday. At present I do believe that equities are high and subject to a strong pullback (well D’uh, who doesn’t) so I am sitting on a significant amount of cash and waiting.
Of course that day might not be for another year or two, so I remain in the market with the typical buy the dips attitude. But I do sell off that extra on the rebound to maintain a consistent ratio of cash to equities. And by buying in I am talking about adding something in the region of 1% to 5% of the total cash available, not a 70% swing for the fences.
The amount of my stack in the market is relatively low on a percentage basis. That has reduced my total equities upside this year. As a percentage of what was available my total profit is around 26%, it could have been closer to 80%+ had I taken the extra risk and piled on.
So a really boring conservative strategy, nothing special at all. Anyone could do it.
SPOT FOREX
This is where I have my fun. And it really is more about what you are asking.
Especially since the level of retail roadkill is so huge.
After my first attempts at fx I quickly saw I was deficient in this arena. So I created a plan to learn; books and all that stuff so many on this forum view with disdain. As though education were some scarlet letter indicating a moral deficiency. I have posted about this elsewhere in the forum.
I am patient. I will wait until I have a profitable strategy before trading large sums. I will wait for the position I want to take shape for both entry and exit.
I am disciplined in my approach. Particularly in the amount that I trade. I have a calculated amount to place on a trade. Frequently it is scaled in with a large initial position then a few minor additions if there are pullbacks.
Every trade is planned out before I enter it. While I have computers to calculate the the details of the trade, I still write it out by hand. I use a small piece of bright yellow card about 2” x 5” and write down something like “B 5 USDCAD at SD3 + 3 BST”. The decoding of my shorthand does not matter, it is that I write the trade in advance(in ink LOL). I have predetermined and written that that maximum size for that trade is 8 lots. I no longer think about the trade size, it has been worked out. Clever people may notice the absence of either a SL or a TP, but that’s another story. I got the idea from the pit traders in Chicago (they were noting completed trades, a whole different thing) but I like the idea of a small simple paper card with my simple trade reference data. No need to look at a computer and mess about with screens. Glance at the card, glance at the price, no need to re-calculate, reconsider, or refute.
I am willing to take a loss. Once I see that the stastical boundaries of my trade have been broken, I AM OUT. That price movement is a complete proof that there is something that I missed, some new event occurred, etc. and I get out. It is like being in a car skidding out of control at high speed about to hit a concrete pole, but I have the ability to use my Star Trek transporter beam and get out of the car before impact. Once I see the trade is out of control I get out then and there.
Long term spot forex pricing is a function of some overwhelming players. The dollar volume that gets pushed through is staggering. Consider the GDP for the United States, for 2017 it is 19 trillion dollars.
see page 25
https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/budget.pdf
The spot forex market handles that in about a week. A cash equivalent of the U.S. GDP in a week. Yes, that is a turn over amount being rotated through and not an actual single trade in the trillions. Yes, this and that, it is just to get a sense of scale not draw conclusions. Drawing any correlations in that would be wrong.
That size means that the significant players are governments and a few select banks. Everyone else is just surfing that wave or drowning. An individual putting $10 million in the market is nothing of consequence. At best a price spike.
Incidentally I make price spikes my friend not something to be feared. Retail traders complain about the price spikes, thinking it is stop hunting by their broker (there are stop hunts, it is not your broker, but again another story). I’ll look for the obvious levels where people would place stops and place another buy order at that level. If the stop hunting occurs I benefit (goes back to those notes on the card).
Consider water flowing over a dam. Lets take the Hoover dam as an example.
The stored energy in that amount of water is incredible. Compare it to a central bank. The FOMC, BOE BOJ, ECB that control the flow of monetary energy. They control what is going out of the reservoir through interest rates, quantitative easing, etc. No single player is going to fight that.
BUT WAIT WHAT ABOUT GEORGE SOROS AND THE BANK OF ENGLAND.
A short explanation can be found here as a reference for those not familiar. It is worth reading. It is commonly stated that Soros made a billion dollars in a single day. The headline often used is that he “Broke the Bank of England”. But as with most sound bites and 140 character tweets, there is a lot more to the story.
http://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp
more detailed here
https://priceonomics.com/the-trade-of-the-century-when-george-soros-broke/
Soros did not fight the BOE. What he did was understand that the macro-economic policies of the U.K. government could not be sustained in the long term. With that understanding, and seeing the confluence of events with the Europe creating a common currency, and with a supreme confidence in his analysis (truly extraordinary) he was able to front-run (yes, I am misusing the common trading parlance of that word) the inevitable decision the BOE had to make. He was able to predict their movement, not fight them.
It was a unique event, a Black Swan, albeit with a positive outcome for Mr. Soros. I do not possess that ability (or capital) to consider such trades, so I don’t waste time debating such politics and economics. I can however see the obvious flows of money, and slide along with them. Those money flows take months to accomplish.
Consider the January 2015 EURCHF disaster. It was predictable. The Swiss National Bank could not keep spending money to support the peg with the Euro. The peg had to go. But no one knew when. And rather than announce a policy statement and period of transition, SNB chairman Thomas Jordan just pulled the peg without warning. The result was market chaos and bankruptcies. Beware trading any pegged currency.
Central bankers from Japan, U.K., U.S. and Europe understand that if they did such a thing the results would be dire for their countries. The “easing” in “quantitative easing” is that idea of a balanced methodical approach over time, not a sudden tidal wave that destroys. No doubt many people will disagree with a particular central bank policy and think they should do this or that instead. That is not the point. The point is that they enact their policies over time. There are discreet announcements over time to make the larger policy concept a reality.
Consider interest rate increases. They are done typically as 1/4 point at a time, over many months to allow the markets to adjust. The results of a sudden 8% increase in U.S. rates would be unfathomable.
It’s like deep sea divers. They need to rise slowly over time lest they get the bends. The longer and deeper they have been down, the slower the process to rise.
As other posters have pointed out I am not that bright, so rather than argue I just agree, they are right, and I am deficient in my mental abilities. Being on the downside of a 58 IQ I can only look at the overall market sentiment of the major players.
You see what I did there, I invoked that other form of analysis that cannot be named on retail trading forums.
Part of my forex learning was to see that in the short term various other players in the market will jerk the price this way and that. They shake out the retail player the way a dogs shakes water off itself {not one of mine} while running for a ball.
Despite the shake, and the flying water (a.k.a retail traders) the dog (major money) still heads for the ball. Despite the market shake-ups, the price still heads with major sentiment.
So in answer to the question,
I am not trying to be fast, I am not trying to be smart in terms of daily trading. Although it was a good line for Jeremy Irons (be first, be smarter or cheat). It is not about the markets being efficient, it is that the volume of dollars that need to shift in spot fx takes time. That time allows me to sit on the coat tails of the major players. Like a pilot fish following a shark.
If there is a major news announcement (and they are all scheduled and easily available) I’ll sit on the sideline (sometimes I’ll place pending buy /sell stop order above and below, but that is not common, it can easily backfire into a double loss, I want a huge announcement and subsequent move to do that trade). First thing I do when I sit at my trading desk, what are the upcoming major announcements.
I am detailed and not looking for shortcuts. As you may have noticed from my posting style, they tend to be longer than most. The devil is well and truly in the details and I want to know where he is hiding.
Spot fx is like a daily chess game with the best in the world. There is something deeply satisfying in taking their money and using it to buy 100 pounds of dog food (which is about a 1 month supply around here).
I do have PTSD, so I shun people, and live in a somewhat remote area. It allows me to focus on what I want, trading, rather than social obligation and appearance. I find trading very calming.
I do need to adjust things and not look at this forum during the day. Distractions cost. I was about to comment on @Xela and her focus, but that is not my place, she certainly can speak for herself. I find a great many people on this board to be distasteful, and some to be outright liars and frauds who have not done what they claim.
Trading is not based on personalities, and my losses are always contained so I can play another match. The various analogies that get used by some alluding to war, conquest, sexual prowess and other similes for their trading are ridiculous. It is a calm calculated game, the emotional outburst does nothing to move the price and only serves to cloud the thinking and be a distraction.
A final thought. There was a recent thread wherein disparaging comments were made about people who served in the military. The day after tomorrow (28 October) is the ninth anniversary of the death of a great friend. One of the few I ever had. There are few people in this world, outside your parents, that are willing to die for you. Col. John Ripley USMC received exactly such an order from his command; “Hold and Die”. He was willing to do that for you, and in a miracle lived through it. He has a rather long list of well known exploits and is an icon in the USMC.
He, and countless others across the ages, held their ground, so that fools can post their ignorance without fear of consequence. Perhaps a quiet thank-you would be in order rather than, well rather than anything else.
"people sleep peacefully in their beds at night only because rough men stand ready to do violence on their behalf"
I am starting to cry like a little girl so best to stop. Please do not think that I had anything to do with such events. I am no one special and have no connection to any such events. But I am grateful and indebted.
Thank you for your incredibly detailed reply and illustrative pictures.
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Candle sticks give a better visual interpretation on charts - Steve Nison introduced thi s"candles" to the west BUT in Japan Rice farmers etc had been suing that concept for donkeys years.
May be good to Look in some Nice books on candle sticks by steve nison ( or even you tube etc) in cyberspace
ALso Candle sticks al not equal as it were - one can go look at Ichimoku Kenko ryu etc
May be good to Look in some Nice books on candle sticks by steve nison ( or even you tube etc) in cyberspace
ALso Candle sticks al not equal as it were - one can go look at Ichimoku Kenko ryu etc
Even Forex has a point in time when a day ends and a new one begins. I am not sure but I think it is 5 pm new york time. So if you look at a spot forex daily candlestick chart you will see a candle close at 5 pm and a new one begin at 5:01 pm.