posted 02-18-2006 02:25 PM         

HEIKIN ASHI (HA) CANDLES

HA candles can filter out "noise" (1-2 day random fluctuations in price), allowing you to view more clearly, and hence trade, a major price trend.

HA is an averaging technique, that uses the average of prior day's candle(s), to plot the summary HA candle. Because it uses averaging, HA candles will always 'lag' the real OHLC action by 1-2 days, hence their signals are late. However, given that one can not forecast imminent price direction with certainty, this is also true of most other trend-following techniques.

The above chart posted by Mr Admin is a fine example of how to use HA candles. When today's candle turns green, you buy; when it turns red, you sell. If prices continue to trend long enough to generate a prolonged sequence of candles of the same color, then you will profit. You can see the green uptrends and red downtrends clearly in the chart.

The size of the candle body can also be helpful. When a trend weakens, successive candle bodies get smaller, which can sometimes point to an impending reversal. A "doji" (cross shaped) candle is the smallest possible bodied candle, and is an indication of indecision in the market.

It's important not to associate the wicks and tails on HA candles as shifts in buying and selling pressure, as one does with 'normal' candles. For a good article on caveats in interpreting HA candles, see here:
http://www.ensignsoftware.com/tips/tradingtips57.htm

Also, more information on Heikin-Ashi in the following threads:
http://www.stock-anal.com/ubb/Forum1/HTML/000897.html
http://www.stock-anal.com/ubb/Forum2/HTML/000034.html

EQUIVOLUME CANDLES

Richard Arms is the inventor of equivolume candles – download his free book here:
http://www.armsinsider.com/pdf/ArmsBookwcontents.pdf
(NOTE – You will need Adobe Acrobat Reader to read this book.)

Or, if you prefer a shorter explanation:

Equivolume candles represent volume as the width of the candle. Thus a wide candle indicates high volume for the day; a narrow candle low volume.

When a price breaks out (usually upward) from a period of tightly congested sideways movement, it can generate a lot of buyer excitement, and of course the increased participation results in high volume, hence a wider candle. A fast breakout, where the price rises quickly, will of course mean that the candle has height as well as width. If you are an intraday trader, you may be able to catch this breakout as it occurs. If you trade only end-of-day (e.g. a swing or position trader), then you must somehow decide (in reality, guess) whether the price rise will continue into the following day(s).

When prices are nearing the end of a trend, any loss of momentum will result in shorter candles. As more traders start selling off the stock, volume increases, so the equivolume candles will widen. So short, wide candles can sometimes signal that a trend is about to end. The same can also be true for a downtrend, i.e. short wide candles near the end of a downtrend can indicate a "sell-off", where the fall is almost over, and traders will start buying in again. However, a long wide candle can indicate panic selling as prices plummet.

Narrow equivolume candles tend to occur while a trend (either up or down) is in progress, and indicate probability that the trend will continue; lower volume indicates that there are potentially more participants still to join in the rise (or fall). When volume increases (hence the candles get wider), this is often a signal that something extraordinary is about to happen.

To see all of this more clearly, refer to the diagrams in Mr Arms' book.

Volume is sometimes difficult to read. The volume-based indicators in Best-Charts (EFI, MFI, OBV, PVT) show money flowing into (when they rise) or out of (when they fall) a stock

GUPPY MULTIPLE MOVING AVERAGES (GMMA)

GMMAs consist of two sets of exponential moving averages. The faster set is 3, 5, 8, 10, 12 and 15 period EMAs, and is supposed to summarise the activities of TRADERS, while the slower is 30, 35, 40, 45, 50 and 60 period EMAs, and is supposed to reflect the activities of INVESTORS.

When a price trend accelerates (upward or downward), the shorter EMAs tend move away from the longer ones, causing the bands to widen. Thus in a healthy trend there is space between the lines in both bands.

Conversely, when a price trend decelerates (loses momentum), the bands tend to contract (get closer together), and if the trend reverses, the bands will cross over each other shortly after that. The faster moving bands cross first. A "pullback" in the price results in the faster band contracting, while a full "reversal" of the trend is often preceded by the contraction (and eventual crossover) of the slower band.

See also my post here:
http://www.incrediblecharts.com/forums/messages/191443/493874.html#POST67064

The following links explain all of this further:
http://www.startraderreport.com/Articles/GuppyMMA/GMMAArticle1.html
http://www.chartfilter.com/articles/movingaverage.htm
http://www.market-analyst.com/kb/article.php/Guppy_Multiple_Moving_Average/
http://www.traderji.com/technical-analysis/620-guppy-multiple-moving-average.html
http://tradermike.net/2004/05/another_look_at_multiple_moving_averages
http://www.aussiestockforums.com/forums/showthread.php?t=1650
http://www.justdata.com.au/Journals/AlanHull/guppy_mma.htm

There's no magic in how I found these. Simply type 'Guppy MMA' into Google.

Best wishes
David

posted 05-28-2006 03:51 AM         

I am currently involved withe the folliwng three stocks

CCUR, IIP and AFOP

Here are daily HA carts for each (excel format):
http://www.mektek.net/j2k/stocks/ccur.xls http://www.mektek.net/j2k/stocks/iip.xls http://www.mektek.net/j2k/stocks/afop.xls

In addition, here are weekly charts: http://www.mektek.net/j2k/stocks/ccur-weekly.xls http://www.mektek.net/j2k/stocks/iip-weekly.xls http://www.mektek.net/j2k/stocks/afop-weekly.xls

In each case, the data page has a graph which is a plot of percentage changes of the HA BODY lengths on a daily or weekly basis.

When 3-days cross 30s up the price usually goes up. Mind the 10-day averages!!!!!

When 3-week cross 30s up, buy, Sell at a 3-week high.

Any rate, I am new here, let's debate this. I am thinkingabout setting up a website so HA fans can discuss the methods.

-Jeho

posted 05-28-2006 03:53 AM         

Discuss!

posted 05-28-2006 04:01 AM         

The bear and bull markets are DEFINED by the WEEKLY charts.

Never buy into a BEAR market (black HA sticks on weekly charts). BUY into a bull market (defined by white HA sticks).

Also, never SELL in a BULL market, or BUY into a BEAR market.

Use the daily HA sticks to plan your moves WHEN THE TRENDS CHANGE. Otherwise, HOLD or WAIT until the trend changes.

Weekly HA sticks completely average out the day-to-day volatility. I learned the hard way with daily HA sticks.

Yeah, you may lose a few streaks here and there, but if you use the WEKLY HA trends, you will win 99% of the time.

Good Luck!

posted 05-29-2006 03:59 PM         

Good point about the weekly bars. Markets tend to move as waves within waves, and probability of success is greatly increased by trading in the direction of the prevailing trends.

Doesn't really matter what indicators you use, beacuse all indicators are ultimately derived from price and volume. Bottom line is that if a trend you're riding persists long enough after your entry to overcome transaction costs, then you will profit, otherwise you will lose. Long term success depends on how consistently you can achieve this across all market conditions.

See my Essay # 5.2 here for more ideas: http://www.stock-anal.com/ubb/Forum1/HTML/000684.html

Another key is to select the best performing stocks in the best performing sectors.

Another key is to set an exit point ("stoploss") at which you exit if the price moves against you. That way you know what your worst case loss is before you enter the trade. By keeping your losses small, relative to your wins, you enhance profitability further.

A further key in risk management is to only risk a certain proportion of your total capital on each trade, i.e. if the stoploss exit is reached. Trading gurus recommend as low as 2%. Stoplosses, sizing positions, etc are discussed further in Essay # 8.1 in the above link.

Good luck
David