May

24

 It seems candle-charting technique may soon be of little value, if it ever was, due to the advent of electronic markets. I say that as the "seamless" markets we now have are losing a "true opening' as prices close in the pits, then open a few minutes later. Hence, there are no gaps between the close and opens as we once enjoyed.

Since candlesticks operate on the sole basis of the opening and the close, to form the body, the new electronic way of recording price movement totally redefines the spirit as well as the body of candlestick charting.

I guess Nisson, et al, will have to file a habeas corpus with the exchanges or devise some new glitzy charting technique.

David Goodboy writes: 

Many intra-day traders use candlestick charting. In fact it's the default style on most software packages. I believe your idea applies to daily candles only, wherein the open and close of an intra-day candle are based on a chosen timeframe and not the exchanges. 

Larry Williams replies:

I know many traders use candlesticks, intraday, but there are two problems there.

1) What time period is best in electronic markets where for hours nothing happens and then all four alarms go off? The solution is to not use time-based bars. But then what do the candles mean?

2) More important, when I test candlestick patterns most all of them have no predictive value. The sells are better as buys and the supposed best buy, engulfing bullish, is not even as good as a placebo pattern.

Since putting this view forward in an article in Futures Magazine 16 years ago, I still get the same answers in testing these patterns. They may be a great art form, an adjunct for trading to use in consideration of other factors. But my research does not support using them on their own. I am open-minded to all research of these patterns. There is some literature out there purporting they work. Read and test as I have, however, and I think you would disagree. 

Brian J. Haag writes:

What time period is best in electronic markets where for hours nothing happens and then all 4 alarms go off. The solution is to not use time-based bars. But then what do the candles mean?

This has always been true to an extent. Those who only use time-based measures have been at a disadvantage. It's just that now it's getting worse. 


Comments

Name

Email

Website

Speak your mind

1 Comment so far

  1. Patrick Diamond on May 27, 2007 8:04 pm

    Have you found that with the advent of overnight electronic trading that the “OOPS” pattern that keys off the pit opening no longer has a positive expectation?

Archives

Resources & Links

Search