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Candlesticks confusion

Discussion in 'Beginners Bootcamp' started by JamesBond, Oct 20, 2011.

  1. JamesBond

    JamesBond Recruit

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    Hey folks. Just entered the mad world of Forex. I have been reading the tutorial on the site 'Babypips' and decided to start testing what I have learnt using 4RunnerForex MetaTrader 4 test account. Took me a while to get used to the interface but getting there. ANyway, to the point, I have a couple of queries. First I thought I'd test what I'd learnt about candlestick patterns and what signals they give, whether the market is bullish, bearish etc. It seemed to work for a while but now I just seem to be getting wipe out all the time.
    My query is this, if you change the time period of the graph, then the candlestick structure totally changes. SO can these candlesticks really be of any use at all when one time scale is suggesting that you sell while another suggest buying would be the best proposition.

    Secondly, according to Babypips, with some interfaces you can draw a trend line, click on Fibonacci extension or retracement et voila, all you extension or retracement lines are drawn on the graph in realtion to the end of your trend line. It doesn't work like this for me. If I click on the graph after selecting this function, it just draws a horizontal line exactly where I click, which doesn't really tell me anything other than it has drawn a line where I have clicked my cursor.

    PLease help. ALready frustrated as hell after a week of this.

    Cheers

    Jim
     
  2. Pharaoh

    Pharaoh Colonel

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    I personally recommend against trading the shorter time frames. Some people seem to be able to scalp well on 1 minute and 5 minute charts, but the noise in the market on the shorter time frames interferes with your ability to rely on classical technical analysis.

    Now that you've done babypips, take a look at Forex Military School. Sive spends a lot of time showing how the "big fish" will snap up stops from people who follow classical analysis too closely.

    Forex Military School | Complete Forex Education by a Pro Banker - Forex Peace Army Forum
     
  3. f-man

    f-man 4Xangels Representative

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    A kind of simple explanation

    There are many books explaining technical analysis. You could spend a few years to read them all. I will try to give you a short explanation.
    All the patterns you learn, are based on history values. This means that all the technical analysis is based on statistics and as we all know, the statistics are not always right! If you manage to trade according to a technical system and take out the psychology, you will be profitable on the long term.
    You will always have a DD period. That's where you need excellent money management to keep you alive!
    To your first question:
    Compare similar time frames to make your decision. For example I have a system, where I make decisions according to daily charts, but I enter and exit the trades according to the signals of the 4hr candles. Do not compare a 4hr chart with a 5min chart. It will never work.

    Your second question is not clear to me. Upload a chart to explain better what you mean.

    Good luck in Forex!
     
  4. JamesBond

    JamesBond Recruit

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    Hi folks
    Thanks for replies. I willl try longer time frames then. Patience is a virtue I often struggle to demonstrate :)

    @f-man
    The question I asked was referring to the following article: -
    Fibonacci Retracement | Fibonacci | Learn Forex Trading

    First paragraph in the 'Uptrend' subsection

    Cheers

    Jim
     
  5. jpadventure

    jpadventure Private

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    "First I thought I'd test what I'd learnt about candlestick patterns and what signals they give, whether the market is bullish, bearish etc. It seemed to work for a while but now I just seem to be getting wipe out all the time."

    1 Price trends and ranges, it's important to keep with the strategy through the losses. The game is probability, through consistently applying the same method. Test properly, find out win ratio, average gain and average loss and do it from a clear trading plan so that you can't fudge the numbers. : )


    "My query is this, if you change the time period of the graph, then the candlestick structure totally changes. SO can these candlesticks really be of any use at all when one time scale is suggesting that you sell while another suggest buying would be the best proposition."

    2 Different time frames will give you different opportunities, they all work and fail at times. Using candles alone isn't highly reliable so using a longer time frame would help you win more.

    "Secondly, according to Babypips, with some interfaces you can draw a trend line, click on Fibonacci extension or retracement et voila, all you extension or retracement lines are drawn on the graph in realtion to the end of your trend line. It doesn't work like this for me. If I click on the graph after selecting this function, it just draws a horizontal line exactly where I click, which doesn't really tell me anything other than it has drawn a line where I have clicked my cursor."

    3 Sounds like a special indicator, it's not usually included with most packages and you may have to download it yourself. You'll have a trendline indicator though (the icon with the diagonal line) and you'll have a fibonacci indicator which you can custom assign extra levels to.


    Take your time, you're only at the beginning of this journey. There's an unbelievable amount to learn. Persist.
     
  6. dkami

    dkami Sergeant

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    I agree with whats been said above about higher time frames this is a must but 1 small tip different brokers close @ different times For eg. H4 candle close with one broker and another broker the H4 candle closes 1hr later;)
     
    #6 dkami, Oct 31, 2011
    Last edited: Oct 31, 2011
  7. dkami

    dkami Sergeant

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    This may be of some help also please only try on DEMO
     

    Attached Files:

  8. Ricex

    Ricex Sergeant

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    My query is this, if you change the time period of the graph, then the candlestick structure totally changes. SO can these candlesticks really be of any use at all when one time scale is suggesting that you sell while another suggest buying would be the best proposition.

    Sometimes we have the answer but don't yet know it. Understand what the candle information is really telling you about what's going on. Think about 'expectation', is the expectation of a trade always the same?

    When you place a trade you want it to have a fairly high probability of it working. Gather evidence from previous price structure to narrow your trading aim to where it has a chance of succeeding.

    For your second problem; can't find Fibs, look in the instructions of your trade station.
     
  9. Forexwatchman

    Forexwatchman Sergeant

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    Like Pharaoh said, stay away from the lower timeframes, it's a pipe dream for a beginner or even experienced trader to do well at that level. The big banks run the show there with there EA's that actually work and cost way more than $99, but that's another topic.

    Like Ricex said (hi Ricex btw, it's been a while) different timeframes will always give you different signals, and that's why you have to stick to two or three timeframes only that are relatively close together (I suggest the 1 hr, 4hr, and daily for beginners). The idea is to have the largest timeframe serve as you major resistance/support guideline and as your big picture for the day or week, then the 2 lower timeframes as the ones you use your other indicators on and the ones you use to pick your entries and exits from.

    As for Fibonacci, I drank a lot of coffee one morning and hammered out a brief, yet informative (to me anyways) lesson on drawing the fib lines, combining the extention and retracements into one indicator, and some techniques for using them. They are a great indicator in forex trading ONCE YOU LEARN TO USE THEM. That learning to use them part turns off most traders, but I recommend you do. Here it is: http://www.forexpeacearmy.com/forex-forum/beginners-bootcamp/8530-fibonacci-made-easy.html

    Oh, and with regards to the candlesticks, like I said originally, the lower timeframes are best avoided due to the persistent breaking of all the rules that goes on there. But I have found that on the higher timeframes, knowing just the most basic candlestick patterns has a very real effect on predicting future price action. Specifically I pay close attention to the spinning tops, candle sticks with long tails (aka hammer or hanging man), and a few others. They do reveal market psychology very well on higher timeframes a lot of the time.

    Good luck out there, you'll need it!
     
    #9 Forexwatchman, Nov 8, 2011
    Last edited: Nov 8, 2011
  10. Ricex

    Ricex Sergeant

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    hey there howdy!
     

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