Dissecting SPY with Multi Timeframe View and Candle Types

Tradingview provides the ability to look at multiple timeframes in one view. This feature allows candle analysis over the different timeframes.

Believe it or not, there are only three types of candles that can occur on a candlestick chart:

- Inside Bar (Candle Type 1)
- Up or Down Bar (Candle Type 2)
- Engulfing Bar (Candle Type 3)

A Type 1 candlestick represents a balance in the market between buyers and sellers. The next candle after a Type 1 candle can often predict a future move. The longer timeframes are more dominate than the shorter timeframes.

This chart uses a simple indicator that I have programmed called 'Candle Type' to get a trader thinking only about the three candle types. The link to this Pine Script is here:

The script is free and is in the public script list on Tradingview.

There is no need to use lagging indicators in trading such as SMAs and other indicators that are calculated using historical prices. They may work from time to time because large groups of other traders will be using them. However, generally lagging indicators will not work all the time or will work until they don't. Candlestick analysis is much more simplified.

The analysis of candlesticks strikes at the heart of real trading. That is, the battle between buyers and sellers that are working with different time horizons against each other.

This form of trading can be further researched on Twitter using the hashtag #TheStrat

Best trading,

October 2018


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