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  1. #1
    Specialist Member Million Dollar Baby's Avatar

    Candle Pattern Strategy (Perfect for BO Traders) !!!

    After noticing many such patterns in past, I am now posting it as a separate strategy because I think it has high success rates. There will obviously be limitations and "may not work" conditions to this strategy but, as with every strategy, success comes with practice.

    Why is it perfect for BO traders?
    Because you can get an estimate of expiry time

    Note:-I have noticed this strategy for bullish patterns only but it may work (needs checking) for bearish patterns as well.

    Bull Signal Rules.

    1- Green Candle Followed by Red Candle
    2- Both candles must have upside tails. I am still not sure if Longer tail = stronger signal.
    3- There must not be (or almost invisible) bottom tail for green candle.
    4- If above conditions met, enter into a Call as soon as green candle ends (so your entry point will be in the candle next to green).
    5- Expiry time, that I think is best from my current experience, would be candle time * 3. So if each candle means 4 hours then expiry would be 12 hours. If each candle is 5 minutes, then expiry would be 15 minutes.



  2. Thanks Ronnel, Martin Kay thanked this post
  3. #2
    Veteran Member Ronnel's Avatar
    Hello Million Dollar Baby!

    I'm also using the same strategy when I'm doing naked candlestick charting. I read some Japanese candlestick charting books and also I'm very lucky to have a Japanese senior who is a retired pro trader who taught me some candlestick analysis. Based on the books and from my senior, the longer the upward tails of the bullish candle, the more chance that bearish trend may have a stronger bearish force which may also lead to a longer bearish trend especially when the divergence happened near S/R. One thing he really put emphasis on is when the candle has fully engulfed the last candle in size, The bigger the engulfment the better especially when the engulfment angle is towards the present's candle's trend direction. The strongest signal is when a doji candle has been fully engulfed. My senior also told me to look at the patterns and angles made by the candles behind, their lengths, size of their wicks, etc. About expiry time estimate, I was instructed to count candles from it's present location to the target S/R. The longer the candle, the faster it will reach my target so visual adjustments when doing my calculation must also be considered.

    I'm just a newbie so what I know doesn't have much weight but these past week I have been playing around with other chart setups like Ichimoku with Heikin Ashi and got bad trades. Today I went back to demo and back testing using naked candlestick chart and I'm getting better results. I think that your strategy is really good because I'm finally seeing good results with mine.

    Many thanks for sharing.

  4. #3
    Specialist Member Million Dollar Baby's Avatar
    Quote Originally Posted by Ronnel View Post
    Hello Million Dollar Baby!

    I'm also using the same strategy when I'm doing naked candlestick charting. I read some Japanese candlestick charting books and also I'm very lucky to have a Japanese senior who is a retired pro trader who taught me some candlestick analysis. Based on the books and from my senior, the longer the upward tails of the bullish candle, the more chance that bearish trend may have a stronger bearish force which may also lead to a longer bearish trend especially when the divergence happened near S/R. One thing he really put emphasis on is when the candle has fully engulfed the last candle in size, The bigger the engulfment the better especially when the engulfment angle is towards the present's candle's trend direction. The strongest signal is when a doji candle has been fully engulfed. My senior also told me to look at the patterns and angles made by the candles behind, their lengths, size of their wicks, etc. About expiry time estimate, I was instructed to count candles from it's present location to the target S/R. The longer the candle, the faster it will reach my target so visual adjustments when doing my calculation must also be considered.

    I'm just a newbie so what I know doesn't have much weight but these past week I have been playing around with other chart setups like Ichimoku with Heikin Ashi and got bad trades. Today I went back to demo and back testing using naked candlestick chart and I'm getting better results. I think that your strategy is really good because I'm finally seeing good results with mine.

    Many thanks for sharing.

    That's great... It means I am in the right direction.. I always consider naked chart analysis to be better (but that may be because I am not good at TA ).

    Thanks for sharing your view on calculation of expiry time.... It is completely logical.

  5. Thanks Ronnel thanked this post
  6. #4
    Legendry Member Michael Hodges's Avatar
    Quote Originally Posted by Million Dollar Baby View Post
    After noticing many such patterns in past, I am now posting it as a separate strategy because I think it has high success rates. There will obviously be limitations and "may not work" conditions to this strategy but, as with every strategy, success comes with practice.

    Why is it perfect for BO traders?
    Because you can get an estimate of expiry time

    Note:-I have noticed this strategy for bullish patterns only but it may work (needs checking) for bearish patterns as well.

    Bull Signal Rules.

    1- Green Candle Followed by Red Candle
    2- Both candles must have upside tails. I am still not sure if Longer tail = stronger signal.
    3- There must not be (or almost invisible) bottom tail for green candle.
    4- If above conditions met, enter into a Call as soon as green candle ends (so your entry point will be in the candle next to green).
    5- Expiry time, that I think is best from my current experience, would be candle time * 3. So if each candle means 4 hours then expiry would be 12 hours. If each candle is 5 minutes, then expiry would be 15 minutes.


    Interesting but I have some questions. First, when both of the candles, in the bullish scenario, have upside tails that is usually an indication of some resistance.... does that have any bearing on your strategy? I don't like to enter calls when there are indications of resistance.

    Second, I think the set up relies on two candles, the first is green and then the second is red... but later you say enter after the green candle closes so that your entry is inside the second candle. If you do that how do you know the second candle has an upper shadow, or that it is red, if you are entering before it is closed? Maybe I misread the rules?

    It looks to me like you are using a rise from support (green candle with no lower wick, rising from a drawn support line)as a signal, and then waiting for a pullback for an entry?

  7. Thanks Ronnel thanked this post
  8. #5
    Specialist Member Million Dollar Baby's Avatar
    First- Yes that is very correct. Long tails on the upside is an indication of resistive force. But at the same time if there are no bottom tail green candle (which is one of major points to consider when entring into a trade), it means price is resisting resistance and is supported. It may also mean that price is going to break above resistance. The case where price bows down to resistance, next candle, after red candle, is usually downside-ish (or at least have long downward tails). In this strategy, green candles have no (or almost invisible) bottom tail which shows that price may not be ready to bounce back from resistance.

    Second - Setup relies on two candles. First red and then green. so when green closes, we would already know from the red and green candle if setup is complete.

    Third - Yes that is correct.

  9. #6
    Legendry Member Michael Hodges's Avatar
    Quote Originally Posted by Bradhaddin View Post
    In finance, a binary option is a type of option in which the payoff can take only two possible outcomes, either some fixed monetary amount (or a precise . So are you ready
    newbie says what?!?

  10. Thanks Ronnel thanked this post
  11. #7
    Legendry Member willyw's Avatar
    Quote Originally Posted by Bradhaddin View Post
    In finance, a binary option is a type of option in which the payoff can take only two possible outcomes, either some fixed monetary amount (or a precise . So are you ready
    What are you talking about?

  12. Thanks Ronnel thanked this post
  13. #8
    Specialist Member Million Dollar Baby's Avatar
    Quote Originally Posted by Bradhaddin View Post
    In finance, a binary option is a type of option in which the payoff can take only two possible outcomes, either some fixed monetary amount (or a precise . So are you ready
    uhm... What !!!..

  14. #9
    Veteran Member randy1953's Avatar
    Has anyone made a simple indicator with a alert for this. I would think it would not be that hard given the simple rules. then you don't need to be watching your charts all day?

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