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

    Guess the next Candlestick vs Predicting Pattern !!!

    Hello fellow BOTSians

    I have already started a couple of strategy threads based on my observations and trading experience. Here is another one. It is not exactly a strategy but you may apply it to see if you get better results or not.


    The topic is "Guess the next Candlestick". Price Action trading, for most of the time, is about zoom in/out of charts. We look at different timeframes and then decide to enter in a trade. So for example we enter in a 1-hour call. This trade will always be based on lower than 1 hour timeframes. It is because predicting a pattern has more logic than predicting next candlestick. That is why most Pro traders choose to open a trade with Monthly, or even higher timeframe, expiry. Because it not only gives them a better view of market but many timeframes to analyze market. Again it is not only due to "lot of timeframes" but also due to "bigger timeframes". Analyzing 1 min candle stick pattern vs 1-hr candle stick pattern is different. I have heard at some places that if you remove timeframe, all charts will look same. If we are talking about "looks" then the statement is true but difference is in "Level of Unpredictability".

    Lower the timeframe, higher the unpredictability.

    With 60 second trades you are actually guessing the next candlestick because the only lower timeframe is 1 second chart which makes almost no sense when we start analysing it. Do you really think S/R levels on a 1 second timeframe charts are anywhere near to "strong"? Probability of winning becomes very low (even though some traders claim that they have very good win percentage with 60 sec trades).

    So my idea is to just increase Timeframe by keeping the strategy same to see if we can get better results. (In my opinion it will yield better results.)

  2. Thanks Ronnel thanked this post
  3. #2
    Legendry Member Michael Hodges's Avatar
    you have hit the nail on the head. squarely.

  4. #3
    Active Member random's Avatar
    Quote Originally Posted by Million Dollar Baby View Post
    With 60 second trades you are actually guessing the next candlestick because the only lower timeframe is 1 second chart which makes almost no sense when we start analysing it.
    The only lower timeframe than 1 minute is 1 second? That makes no sense. Also, what about tick-based or range-based charts?

    I would actually say the opposite of what you said. The longer the time frame, the harder it is to predict what is going to happen as, during that time, the amount of things that potentially could happen also increases.

    Quote Originally Posted by Million Dollar Baby View Post
    Do you really think S/R levels on a 1 second timeframe charts are anywhere near to "strong"?
    Do you think that limit orders statically sit in a market?
    Last edited by random; 08-18-2015 at 01:56 PM.

  5. #4
    Specialist Member Million Dollar Baby's Avatar
    Quote Originally Posted by Michael Hodges View Post
    you have hit the nail on the head. squarely.


    Quote Originally Posted by random View Post
    The only lower timeframe than 1 minute is 1 second? That makes no sense. Also, what about tick-based or range-based charts?
    It means that Binary Option traders going for 60 sec trades analyse their strategy based on tickbased (1 second TF) charts. Is there any other timeframe for 60 sec traders?


    Quote Originally Posted by random View Post
    I would actually say the opposite of what you said. The longer the time frame, the harder it is to predict what is going to happen as, during that time, the amount of things that potentially could happen also increases.
    All future results are predicted based on historical results.
    Whether you do statistical technical analysis, fundamental analysis, PA or whatever. There is no way of predicting future without looking at patterns in past.

    So what I am saying is that if we have longer timeframe (more data) to analyse, we can predict future with higher probability. If we have lower timeframe (less data) to analyse, we have lower chance of success.

    Now what you are saying is predicting "short term" future will yield better results because long term future means more uncertainties. If I look at longterm charts, they are more smooth than short term charts. "Noise" word is for short term charts. What is more unpredictable than "Noise"?

    Quote Originally Posted by random View Post
    Do you think that limit orders statically sit in a market?
    ?? I dont understand the point.

  6. #5
    Veteran Member randy1953's Avatar
    I don't know about this. I am getting amazing results with a ben60 strategy for 60 second trades. I have almost a 90% win rate.

    Almost every time it tells me if the next candle is a bull or bear. I use a real time candle timer so I know exactly when the next candle will open. It may not be the holy grail but by far it's more successful than long term trades. Also the volume can build fast you don't have to wait there for 15 mins or a hour to see if you won the trade. It works by O/B OS when the price is maxed out I put my trade in on the next candle.
    It's very accurate so far. It can be a little stressful waiting for everything to line up and for the next candle to open. There are times when I' just a hair away and I don't trade and sure enough the trade would be a winner. But better safe than sorry. I'm also playing with the time if the price is very close to where I need it but just a hair off I wait for the next candle to open but now allow 2 mins not 1 min for the price to come back it works almost every time but it's not exactly following the rules so I'm not sure if I want to cheat like that.

  7. #6
    Active Member random's Avatar
    Quote Originally Posted by Million Dollar Baby View Post
    It means that Binary Option traders going for 60 sec trades analyse their strategy based on tickbased (1 second TF) charts. Is there any other timeframe for 60 sec traders?
    Yes. 5, 10, 30 seconds. cTrader has 1 - 10 and 13, 21 and 34 ticks. Ninjatrader has range bars. Futures scalpers are unlikely to be using MT4, so why should a BO trader?

    Quote Originally Posted by Million Dollar Baby View Post
    All future results are predicted based on historical results.
    That's not strictly true. What if I take a position based on what is happening now? For instance, front running a large order is not really trading on historical results.

    Quote Originally Posted by Million Dollar Baby View Post
    Whether you do statistical technical analysis, fundamental analysis, PA or whatever. There is no way of predicting future without looking at patterns in past.
    There is NO way of predicting the future. Patterns in the past may only help to a certain extent if you understand how your chosen market works (depending on a probabilistic analysis and an understanding of value).

    Quote Originally Posted by Million Dollar Baby View Post
    So what I am saying is that if we have longer timeframe (more data) to analyse, we can predict future with higher probability. If we have lower timeframe (less data) to analyse, we have lower chance of success.
    What I'm saying is when you increase the time frame, you increase the potential impact of both known unknowns and unknown unknowns.

    I'm not sure success rates are proportional to size of data sets.

    Quote Originally Posted by Million Dollar Baby View Post
    Now what you are saying is predicting "short term" future will yield better results because long term future means more uncertainties. If I look at longterm charts, they are more smooth than short term charts. "Noise" word is for short term charts. What is more unpredictable than "Noise"?
    I wouldn't really say 'noise' is a word for short term charts. You can if you want to . Also the smoothness of the chart is subjective and depends on the chart.

    Quote Originally Posted by Million Dollar Baby View Post
    ?? I dont understand the point.
    The point is that a lot of support and resistance analysis seems to make the assumption that the orders that moved the market at a historical point are still going to be there. Support and resistance analysis is often done with hindsight bias. Often there's no particular reason why it would hold. Greater emphasis should be put on how it got to that point rather than the fact that it did, which can be meaningless.

  8. #7
    Veteran Member randy1953's Avatar
    Quote Originally Posted by random View Post


    The point is that a lot of support and resistance analysis seems to make the assumption that the orders that moved the market at a historical point are still going to be there. Support and resistance analysis is often done with hindsight bias. Often there's no particular reason why it would hold. Greater emphasis should be put on how it got to that point rather than the fact that it did, which can be meaningless.
    Makes a lot of sense but the fact is for whatever reason price does seem to stop more often than not at historical S & R levels.
    Maybe the candles get lonely and want to huddle up lol

  9. #8
    Specialist Member Million Dollar Baby's Avatar
    Quote Originally Posted by randy1953 View Post
    I don't know about this. I am getting amazing results with a ben60 strategy for 60 second trades. I have almost a 90% win rate.

    Almost every time it tells me if the next candle is a bull or bear. I use a real time candle timer so I know exactly when the next candle will open. It may not be the holy grail but by far it's more successful than long term trades. Also the volume can build fast you don't have to wait there for 15 mins or a hour to see if you won the trade. It works by O/B OS when the price is maxed out I put my trade in on the next candle.
    It's very accurate so far. It can be a little stressful waiting for everything to line up and for the next candle to open. There are times when I' just a hair away and I don't trade and sure enough the trade would be a winner. But better safe than sorry. I'm also playing with the time if the price is very close to where I need it but just a hair off I wait for the next candle to open but now allow 2 mins not 1 min for the price to come back it works almost every time but it's not exactly following the rules so I'm not sure if I want to cheat like that.
    I have already included exceptions by saying that some traders are getting very good results with 60 second trades.

  10. #9
    Veteran Member randy1953's Avatar
    Yup I think they are 2 very different worlds. On longer term trades one can take the time to compare all the charts etc get some very good set ups and go for it. In 60 seconds you might have to wait just a few mins till your set up comes and then you trade and wait a min.
    the thing is for me is how much to risk on each trade. If I risk $100 on a long term trade and I lose for whatever reason it will take me 2 more trades to recover which means a lot more time spent on doing TA etc. On 60 seconds I risk $50 if I lose it will take 2 more trades to recover but those 2 trades can happen in mins not hours so you make money faster, you lose money faster and you can recover faster.

    the other main thing I see is the emotional make up of the trader. If you are a serious trader 60 seconds might put you into a whirl wind and make you make bad choices. In 60 second trading especially you have to put the emotions away or you will be in trouble quick.
    On longer term trades you can sit back with a lot less stress telling yourself you have done your best while awaiting your result. It helps immensely when you have a strategy that works well and this is most true on short term trades.

    I began doing 60 second trading when I began trading BO. I did very well not using any indicators at all. honestly I should have stayed that way but the broker I had was beginning to give me a difficult time in taking my money out. My broker did not like that I opened a account with $300 and took out $2k in a months time. I finally managed to get almost all my money out from this broker and call it quits.
    However this started the journey to find another broker where I could do 60 second trading in my way. so I went with Empire Options which I thought wa sOk because they also use SpotOption platform but I was way wrong. the performance of their SpotOption platform was much slower than the other broker and it was impossible for me to trade 60 second with them. I'm from the US and we simply do not have many choices at all for BO brokers. So now I'm with Empire which forced me to learn longer term trading. I did for a while but was only holding my head above water.
    Now I found a system that has worked well so far that does not need a fast platform for 60 second trades and I am back to 60 second trading.
    However I really had a knack of trading 60 second trading with not even a chart just by watching the rise and fall of the price I could enter and most times win as long as the platform was quick enough. This was my first love so if this new system keeps preforming well I will stay with Empire but if not once again I will search for a broker that takes US trader and has a quick platform. It seems that is where my gift is ..time will tell

  11. #10
    Specialist Member Million Dollar Baby's Avatar
    Quote Originally Posted by random View Post
    Yes. 5, 10, 30 seconds. cTrader has 1 - 10 and 13, 21 and 34 ticks. Ninjatrader has range bars. Futures scalpers are unlikely to be using MT4, so why should a BO trader?


    That's not strictly true. What if I take a position based on what is happening now? For instance, front running a large order is not really trading on historical results.


    There is NO way of predicting the future. Patterns in the past may only help to a certain extent if you understand how your chosen market works (depending on a probabilistic analysis and an understanding of value).


    What I'm saying is when you increase the time frame, you increase the potential impact of both known unknowns and unknown unknowns.

    I'm not sure success rates are proportional to size of data sets.



    I wouldn't really say 'noise' is a word for short term charts. You can if you want to . Also the smoothness of the chart is subjective and depends on the chart.



    The point is that a lot of support and resistance analysis seems to make the assumption that the orders that moved the market at a historical point are still going to be there. Support and resistance analysis is often done with hindsight bias. Often there's no particular reason why it would hold. Greater emphasis should be put on how it got to that point rather than the fact that it did, which can be meaningless.
    1- Wow.. Very true.. Amazing to see how many timeframes are there. So why exactly are there more timeframes? Any benefit? Do you think more timeframes mean better analysis? That is why alternative to MT4 thought of creating additional timeframes? or do you think they are useless timeframes?

    2- There is really NO way of predicting future. I was not careful in my first statement but in second I have mentioned "predicting future with higher probability". That is what we do in trading. We try to predict future with higher probability to get better results.

    3- It is correct that historical results help to a certain extent. That "help to a certain extent" = "Total help a trader can get".
    You gave an example here
    "Trade based on what is happening now. for instance, front running a large order." What is "happening now"??? Front running is also based on past experience/information. If you do not agree, please give an example of "front running a large order based on happening now" or "future".

    4- Success rates are not proportional to size of data sets. Success rate depends on your analysis plus size of data sets. Size of data set matters a lot. Lets take a simple example of series.
    I write 1, 3, 5, 7 and ask you to predict the next 3 numbers, correct analysis would lead to 7, 9, 11 (historical pattern is odd numbers)
    I write 1, 3, 5, 7, 11 (source data set increased) and ask you to predict the next 3 numbers, correct analysis would lead to 13, 17, 19 (historical pattern is prime numbers)

    Same is the case with trading. With limited dataset, even if you do the correct analysis, outcome will be based on that limited dataset which may or may not be . With bigger data set, analysis may yield better results. Now if someone here predicts 13, 15, 17 from the second data set then obviously it is wrong analysis. Success rate does not depend on size of data sets alone but on quality of analysis where size of data sets plays significant role.

    5- Investopedia explains 'Noise' -> In general, the shorter the time frame, the more difficult it is to separate the meaningful market movements from the noise.

    6- How it got to that point?? You mean economic factors? An example would be great.

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