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Candle pattern reliability

 
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drunnels
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PostPosted: Sat Mar 19, 2005 3:50 pm    Post subject: Candle pattern reliability Reply with quote

I am not finding any research regarding the reliability of candle patterns during a sideways market, or during a downtrending market while you are looking for long positions. Has anyone done any personal research in this area or know of any online? Or just what is your gut feeling? Did you do better with morning stars in February than you did in Jan or March? Or is the signal just as reliable, but the term of your position can be shorter depending on market direction? Thanks.
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Owl
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PostPosted: Sat Mar 19, 2005 4:01 pm    Post subject: student of the market Reply with quote

drunnels ... I don't have any research regarding the reliability of candle patterns but I do have an opinion. My view on candle patterns starts with the trend. In order for a reversal candle pattern or continuation candle pattern to work the pattern must have something to reverse or continue. That something is a trend and without a trend there is nothing to reverse or continue. So my opinion is that the stonger the trend the better the candlestick patterns work and in a sideways trend I prefer to "sit this one out".
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tab321



Joined: 22 Jan 2005
Posts: 368
Location: Texas

PostPosted: Sat Mar 19, 2005 8:10 pm    Post subject: The Research Reply with quote

drunnels

I do not know of any research that could build a solid case for candles and their reliability either. I would say that you could probably benefit from signing up as a member - watching Steve's Picks each day. There are times when it is best to use the bullish signals - other times when it is best to use the bearish signals - and when the market is not trending well....Steve may have on Long and Short positions at the same time.

Sign up in the member area and look over his shoulder for a couple of months or so.

AND - as Owl said (I think it was Owl) "There is ALWAYS a Bull Market somewhere"
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drunnels
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PostPosted: Sun Mar 20, 2005 9:39 am    Post subject: reliability Reply with quote

Thanks for your replies. I suspect I could use some further understanding from Steve's lessons and will sign up soon.

In my research last week, during a struggling market, I only found 25% of the bullish signals worthwhile, i.e. about half were accurate and only half of those would have returned a profit to me. IOW I would have been better off shorting all the bullish signals. Soooo, there IS more to this than "the signal is the main thing."

What are your most reliable or favorite candlestick signals and does it vary based on market conditions?
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candlestick1
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Joined: 27 Jun 2004
Posts: 503
Location: Houston, Texas

PostPosted: Sun Mar 20, 2005 10:41 am    Post subject: the signal Reply with quote

The signal is the main thing, it is what brings attention to the possibility of a trade. However, analyzing the signals also includes the other elements that make for a positive trade. Such as what is the direction of the market, where are the stochastics, is money coming into that sector, is there are important resistance or support levels, confirmation of the buy signal etc.

That is why the daily members comments emphasized trading with a downward bias for the last two weeks until Friday.
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PostPosted: Sun Mar 20, 2005 11:38 am    Post subject: Reply with quote

OK Thanks for your comments! That's what I needed somebody to say.

In another forum they talked about white hammers and prioritizing hammers into high-medium-low probabilities.

Anybody have any favorite signals?
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candlestick1
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Joined: 27 Jun 2004
Posts: 503
Location: Houston, Texas

PostPosted: Sun Mar 20, 2005 8:28 pm    Post subject: favorite signals Reply with quote

The kicker signal is the strongest, when ever you see one forming, get in asap.

The gap up from a candlestick signal while stochastics are in the oversold area is a very strong signal formation. A bullish or bearish engulfing signal is good.

An inverted hammer , followed by a positive open the next day, is a very high probability trade.
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tab321



Joined: 22 Jan 2005
Posts: 368
Location: Texas

PostPosted: Mon Mar 21, 2005 12:48 am    Post subject: 825 Kickers Reply with quote

Steve:

I would love to apply the rule: "Whenever you see a Kicker.....Just Buy It" - but that is hard to do.

I have personally tracked 20 kickers since January 1st. Some of them were identified by you and others by me. About half have lost money and about half have made money. It is strange that that is about the same ratio with the IBD 100 that I track and with the New America Stocks that I track: about half make money and about half lose money. And...you better have enough "cents" to figure out which ones are going to make and which ones will lose.

Moreover, on March 1st, I could produce a scan of over 400 Kickers that had happened since the first of the year - 2005 Alone. As of today, I can run scans that produce over 800 Kickers in 2005 Alone. And - these are just the kickers that close above the 50 Day MA.

In other words, there are hundreds of Kickers that happen each month. The old saying....."If you see a Kicker....Just Buy It" sounds great but to put it into practice would be impossible unless you could buy hundreds of stocks each month.

At the same time, if a person can pick the good ones...they really do well. CHS, WAG, RIMM, etc are great examples. Even KMRT started its 300% run with a Kicker on Jan 5th or so in 2004.

So - I am not knocking the Kicker Signal but wondering how you eliminate all the duds that pop up with the searches.
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candlestick1
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Joined: 27 Jun 2004
Posts: 503
Location: Houston, Texas

PostPosted: Mon Mar 21, 2005 1:33 pm    Post subject: kickers Reply with quote

That would be an interesting study, I have made money and big money on the kicker signals. They work especially well when coming off moving averages but worked very well even without that criteria. If you do not mind, if you have a list of the ones that worked in the ones that did not work, please e-mail them to me at Steve@candlestick forum.com. That way I can do an evaluation and see what made some work and some not to work.
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tab321



Joined: 22 Jan 2005
Posts: 368
Location: Texas

PostPosted: Mon Mar 21, 2005 5:25 pm    Post subject: The Kickers that Fail Reply with quote

Steve

I sent that list to you. Here is an example that was not included:

http://www.candlestickforum.com/forum/viewtopic.php?t=425

INSP made a huge Kicker in January and an immediate downtrend followed. Today, this one has a Doji followed by a Gap Up. It looks like a buy to me. Of course, the 50 Day MA could be a stalling place for it.

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dtdtrader



Joined: 15 Sep 2004
Posts: 24

PostPosted: Mon Mar 21, 2005 7:01 pm    Post subject: Reply with quote

Tab, great observations and I have found the same to be true. Candlestick1, please share the results of your analysis. Also, thanks for being so willing to share your knowledge and your willingness to particpate in discussion.
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