Key Reversal Days

Key-reversal days often occur at the end of a fast-moving market either up or down. We know from the analysis of the hammer candlestick chart pattern that the overall statistics are poor for that particular pattern, which is equivalent to a key-reversal day. Nevertheless, we concentrate on those key-reversal days that happen as third peaks or valleys within a chart pattern. A typical example can be seen in the daily chart of the largest European software company SAP (see Figure 4.39). Figure...

Structure of Candlestick Charts

Candlestick charts are based on the same market data as regular bar charts but present that data in a different way. The components of candlestick charts are the opening price level, the closing price level, the high price, and the low price of any data compression rate, be it weekly, daily or intraday data. Figure 3.12 shows the composition of a candlestick. Figure 3.12 Constituents of candlesticks. The relationship between the open price level and the close price level forms the body of the...

Exiting The Winphi Software

Left-click the Exit speed button from the WINPHI task bar to leave the WINPHI program. For questions and additional information, visit our Web site at www.fibotrader.com. Try out the online version of WINPHI with intraday datafeed, improved charting facilities, and many more international trading vehicles that can be analyzed real-time based on geometrical Fibonacci trading tools.

Fibonacci Retracement 618 Percent and Candlestick Patterns

Fibonacci Retracement Patterns

Seven sample trading signals can be found in the S& P 500 Index, again between December 2001 and April 2002 (see Figure 6.2). Figure 6.2 S& P 500 chart from 12-01 to 04-02. Simulation of trading signals based on plain price corrections daily in combination with candlesticks (EL entry long, ES entry short, XL exit long, XS exit short, S-L stop-loss, TS trailing stop). Figure 6.2 S& P 500 chart from 12-01 to 04-02. Simulation of trading signals based on plain price corrections daily in...

The Fibonacci Summation Series in Nature and Geometry

It is remarkable how many constant values can be calculated using Fibonacci's sequence, and how often the individual numbers of the sequence recur in myriad variations. This is not just a numbers game, however it is the most important mathematical representation of natural phenomena ever discovered. Generally speaking, the Fibonacci summation series is nature's law, and it is a part of the aesthetics found in any perfect shape or curve. Fibonacci discovered how nature's law related to the...

Generating Trading Signals Based on Candlestick Patterns

Hammer and Hanging Man Inverted Hammer A candlestick chart pattern is called a hammer if it has a long shadow and a small body black or white that is very close to the high of the day. At the end of a downtrend, the hammer is considered a bullish reversal signal see Figure 4.23 . The hammer often shows up at the end of a downtrend. After we identify a hammer, we buy next day at the high of the previous day. The stop-loss is below the low of the previous day. The corresponding candlestick chart...

Summary

A major advantage of candlesticks is that they show the momentum of every day's price moves. They are definitive, easier to understand than bar charts, and especially helpful for short-term traders. The usefulness of candlesticks as stand-alone trading tools has to be judged carefully. Our own simulation on the DJ EuroStoxx 50 Index came up with a solid profit potential and a decent profit loss ratio over a 3-month test period in mid-2002. However, negative test results were retrieved from...