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>Specifically, after doing this exercise,
>do you agree with both conclusions A and B above
Interesting experiment. I could not find any reverses that refute your
assertions, and it leads to some interesting possibilities. With
these assertions, I have a couple of other questions. What frequency
do reversals have clear candlestick reversal patterns without shifting
the time? Given the number of patterns, I'll bet the percentages are
high. And what frequency do these same reversal patterns occur
when not associated with a reversal?
A couple of years ago a friend indicated that he was making good
money using candlestick charting to trade stocks. At that point, I
only given candlestick charting a passing glance. I decided to test
candlesticks. I had 18 months of daily data on the approximately
2100 optionable stocks. I tested about 12 reversal patterns. The
candlestick pattern was the only entry criteria, and I tried a couple
of different exit criteria. After taking into account minimal slippage
and commissions, none of the patterns showed a profit.
On the other hand, several of the patterns were near enough to break
even that if a person were to figure out a way to eliminate false
signals, candlesticks might be used successfully.
While he did not say so in so many words, I believe my friend lost
money in the end trading off candlesticks.
== Rob ==
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