Two candle strategy
- Thread starter karthik_sri
- Start date
To make this strategy more clear I have taken Intraday data of TCS (Futures) chart of 26.09.13 in 30min time frame.
Conditions:
1). First Identify Two subsequent candle in same color (Red/Black or Green/White)
2). Once identified note down the High & Low price of the first candle. Then divide the same by 2 to get the 50% range/level and mark it with a horizontal level.
3). The 50% Range is very important and see that whether the second candle touches the 50% level or price range
4). If the 50% price range is touched by the 2nd candle ignore the setup and wait for another such setup to form.
In the attached chart I have circled the 1st condition of two subsequent candle which is Red Candle and means price is going down. The 1st candle 50% range is plotted by a Horizontal line in Blue. As per the condition the 2nd candle has not touched the 50% level or the Blue line. This Full fills the strategy condition to initiate trade.
1st Candle : High 1974.45, Low 1968.40 (50% level 1971.43)
2nd Candle : High 1968.80, Low 1962.00
Since the trend is down we take High price of 1st candle & Low price of 2nd candle and find the difference between High & Low and mark as Range. Divide the Range by 2.
Why to divide the Range by 2? I am looking for the price to move further down by 50% from the High Low it has made from the two candle.
In this case the Range is : 6.23 (1st candle High 1974.45 - 2nd candle Low 1962)/2
Entry Price : Low of 2nd candle (since the trend is down and we have two Red candle)
In this case we make short sell @ 1962.00 which is the Low price of 2nd candle
Target: I look for the price to move 50% from the High/Low range of the 2 candle.
In this case Target will be 1955.78 (Entry price minus Range) (1962-6.23)
Stop Loss : Same 50% range from the Entry price on the opposite direction.
In this case SL will be 1968.23 (Entry price plus Range) (1962 + 6.23)
Karthik
Conditions:
1). First Identify Two subsequent candle in same color (Red/Black or Green/White)
2). Once identified note down the High & Low price of the first candle. Then divide the same by 2 to get the 50% range/level and mark it with a horizontal level.
3). The 50% Range is very important and see that whether the second candle touches the 50% level or price range
4). If the 50% price range is touched by the 2nd candle ignore the setup and wait for another such setup to form.
In the attached chart I have circled the 1st condition of two subsequent candle which is Red Candle and means price is going down. The 1st candle 50% range is plotted by a Horizontal line in Blue. As per the condition the 2nd candle has not touched the 50% level or the Blue line. This Full fills the strategy condition to initiate trade.
1st Candle : High 1974.45, Low 1968.40 (50% level 1971.43)
2nd Candle : High 1968.80, Low 1962.00
Since the trend is down we take High price of 1st candle & Low price of 2nd candle and find the difference between High & Low and mark as Range. Divide the Range by 2.
Why to divide the Range by 2? I am looking for the price to move further down by 50% from the High Low it has made from the two candle.
In this case the Range is : 6.23 (1st candle High 1974.45 - 2nd candle Low 1962)/2
Entry Price : Low of 2nd candle (since the trend is down and we have two Red candle)
In this case we make short sell @ 1962.00 which is the Low price of 2nd candle
Target: I look for the price to move 50% from the High/Low range of the 2 candle.
In this case Target will be 1955.78 (Entry price minus Range) (1962-6.23)
Stop Loss : Same 50% range from the Entry price on the opposite direction.
In this case SL will be 1968.23 (Entry price plus Range) (1962 + 6.23)
Karthik
Attachments
can anyone spot differences in percentag levels marked in these 2 charts?
In the first chart, we have a valid 1st Candle and 2nd Candle. Buy triggered in the 3rd Candle.
I cannot see clearly on the chart, but let us assume that the target was achieved in the 3rd Candle itself. So now, will the 2nd Candle and 3rd Candle become another valid setup, because the 3rd Candle does not touch 50% of the 2nd Candle?
No such complications . . . take your profit and get out find another chart another setup . . . 
Its v v simple setup, run the exploration (Amibroker one is already on the thread) in your favorite Time frame (15/20/30) even can try daily/eod . . .
Select a scrip (or 2/3/5 as per ur comfort) trade it, go to next one . . .
Happy
Its v v simple setup, run the exploration (Amibroker one is already on the thread) in your favorite Time frame (15/20/30) even can try daily/eod . . .
Select a scrip (or 2/3/5 as per ur comfort) trade it, go to next one . . .
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