Dancing with the Trend

Candlestick Analysis - Statistics II

by Greg Morris

Candle patterns are predictable psychological trading pictures (windows) that produce reasonable forecasting results when used in the proper manner.  This article will explain the technique used to determine the various statistics developed to show the success of candle patterns.  Note that no magnitude of success is used, only a relative success and failure.  Keep in mind, though, that success still means that the pattern correctly predicted the market move and failure means that it did not. Using all of the information about pattern recognition Read More 

Dancing with the Trend

Candlestick Analysis - Statistics I

by Greg Morris

The candle pattern statistics in Table A below show the amount of data used in this analysis, the type of data used, and various other pertinent statistics.  All common stocks on the New York Stock Exchange, the Nasdaq market, and the American Stock Exchange were used over a 13-year period. Using stock data prior to late 1991 would distort the analysis because most data services did not provide open prices then.  When I wrote the first edition of my book in 1992, I had to use mostly futures data since stock data with open price was rare.  Any discrepancies in the summary Read More 

Dancing with the Trend

Are Mutual Fund Statistics in the Dark Ages?

by Greg Morris

Since the dawning of the Internet in the early 1990s, investors now have access to volumes of data and statistics that were only reserved for a select group before.  There are some things you need to know about financial data that is readily available for your use.  There are some problems that don’t seem to be addressed by those who should know better. Daily vs. Monthly Statistics Almost all of the financial statistics you see on mutual funds are based upon monthly returns.  Did you ever wonder why some of the big mutual fund sites only show some statistics for funds that Read More 

Dancing with the Trend

Candlestick Analysis - Recognition Reliability

by Greg Morris

Using the pattern identification philosophy developed in the previous article on Pattern Identification, one can now adapt a method of determining just how successful candle patterns are?  The techniques I used are quite analytical and I find they are somewhat difficult to explain, so here goes. Measures of Success The following three assumptions were used in measuring the success and/or failure of the many different candle patterns: 1. The pattern must, of course, be identified based upon its open, high, low, and close relationships (see Read More 

Dancing with the Trend

Candlestick Analysis - Pattern Identification

by Greg Morris

All books on candlesticks offer detailed descriptions of the relationships among the open, high, low, and close.  They also deal with the concepts of trend determination which I did in the previous article; while this article focuses on pattern identification.  In addition, a method of determining long days, short days, doji days, etc., is needed, including the relationship between the body and the shadows.  The latter is essential for proper identification of patterns such as the Hanging Man and Hammer.  The following will show the multitude of methods used to Read More