Should I trade on candlestick charts, not line charts?

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Re: Should I trade on candlestick charts, not line charts?

Postby JimmyMac » Wed Apr 28, 2010 12:36 pm

Rom wrote:I can see all of you display candlesticks charts when you post charts.
Is there any advantage of using candlestick charts instead of line charts? To me they seem confusing.

I guess it’s simply preference rather than a particular advantage.
Candles & bars are merely representations of price action, nothing more.

I don’t know about you, but I, & colleagues I work with certainly don’t trade exclusively off (individual or small groups of) candles, bars, point & figure, line charts or any other price mirror visual.

If a level or zone is psychologically pertinent enough, then it’ll react whatever preference you decide to utilize.
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mirror mirror on the wall..

Postby JimmyMac » Wed Apr 28, 2010 12:59 pm

And here's a perfect example of what I mean.
Today's Cable price action finds support & psychological reaction at a previous area of 2 way activity.

4 hour view showing the zone of prior importance:

Image

and the smaller timeframe charts with the candles preference showing the bullish type representation (hammer & doji prints) as traders cover shorts, book profits & pare out into the closing London prices. Not so much the candles or bars, rather the area & zone that dictates the psychology of the participants that manifests itself via the candles/bars.

The level also happens to coincide nicely with the current average days range on this instrument....another common reaction level on the FX instruments!

Image
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Re: Should I trade on candlestick charts, not line charts?

Postby JimmyMac » Wed Apr 28, 2010 2:13 pm

Well like I said, if you begin to focus more on where the candles react & why they form & react, rather than the actual shape of the candle, you’ll begin to better understand how it all comes together so consistently & repetitively.

Forget whether it’s a doji or a hammer or a bullish/bearish engulfing candle, only that it represents the majority view of the trading at that particular time of the business day.
If enough traders decide a specific zone or level warrants close inspection, the candles will tell you very clearly what’s happening.

The smaller timeframes simply magnify that reaction faster & with more clarity.
They represent the dominant order flow at that time, at that level.

Was it so surprising the 5120-40 level attracted intense activity today?
After all, there were several reasons to mark it up as a potential area of 2 way action ahead of the price eventually arriving there.

Obviously a good percentage of players considered it a playable level otherwise it wouldn't have printed those aggressive reversal candles down there. Just look left to see how it got "played" both ways the previous 3 or 4 times that the price action vibrated the level.
Traders are creatures of habit. They enjoy laying & playing odds where they can establish & identify positive expectancy, especially the more active traders anyhow!

Traders (momentum) influence price.
That influence will either move passively or aggressively, dependant on the superior order flow as price vibrates the particular level. Your job is to position yourself around that type of price action according to your preferred strategy or model play.
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Re: Should I trade on candlestick charts, not line charts?

Postby JimmyMac » Wed Apr 28, 2010 4:23 pm

If you’re able to establish specific price movements or patterns that react often enough at particular levels or zones to offer you a playable edge, then you’ll make consistently profitable returns.

In essence, that’s what trading is all about.

I’m not sure 1/3rd retrace kicks from individual bars will get the job done consistently enough, but that’s for you to test & research I guess.

At the end of the day it comes down to what you’re looking to do with the information available to you. As long as you’ve thoroughly tested your set ups/triggers & they match your technical structure & psychological style, you’re working your strategies from a position of strength.
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