Back-testing of some candlestick patterns 🧵
I hv back-tested patterns shown below on 500 stocks (Nifty 500 stock group as on today) since inception on daily timeframe charts.
Below is some interesting information.
Criteria: Hit ratio & returns of pattern giving 1:1 risk-reward if the entry is at the closing price of the pattern.
Inverted Hammer or Shooting Star – 74.72%
Multi-Harami breakout - 65.23%
Bullish Harami cross – 64.6%
Bullish Kicker – 63.53% (Got better returns)
Bullish separating line – 61.69% (It has got better returns)
Engulfing and Harami patterns have got better returns when traded at next candle of confirmation.
Black crows – 77.69%
Bearish Engulfing – 73.5%
Evening star – 65.19%
Hammer or Hanging man – 67.82% (Average returns are good)
Bearish Harami cross – 54.33%
Bearish separating lines – 53.77% (Average returns are good)
Multi-harami bearish – 53.45%
Bearish counter-attack lines – 53.42%
It did not take me much to do all these in TradePoint.
More from Prashant Shah
Trading based on Pivot levels is one of the popular approaches. Both short-term and intraday traders track Pivot levels to identify support and resistance levels in any instrument.
Let’s discuss how these levels are calculated.
The pivot calculation method considers the previous day prices to calculate the support and resistance levels.
There are seven levels marked on the chart when we plot Pivot as a tool.
There is a Pivot level, 3 support levels (S1, S2 & S3) & 3 resistance levels (R1, R2 & R3).
We have four prices for any trading session - Open, High, Low, Close.
They give us the important information about what happened during that session. Levels is calculated using the High, Low & Closing price of the previous day. Let’s understand Pivot calculation with an example
The difference between high and low is a range of the day.
High – Low = Range
In our example, range of the session is 10 points.
105 – 95 = 10
Mid-price of the session is average of high and low price.
The Mid-price in this case would be 100.
(105 + 95) / 2.
Mid-price is average of range of the session. How about including the closing price to this calculation?
If we calculate the average of High, Low and Closing price - we get the Pivot point.
(105 + 95 + 103) = 101 is the Pivot level in our example.
Continuing our discussion on pivot levels, we look at the Camarilla levels which is another widely followed tool.
Word ‘Camarilla’ is borrowed from Spanish. It translates to a group of confidential & private advisers of the King or person in authority.
The Camarilla equation was first developed by a bond trader named Nick Scott in 1989. It is said that he didn't disclose the equation, but people studied the levels & reverse engineered it to find the formula. There r different versions of this formula.
We discussed about ‘Range’ in the earlier thread. The range is basically the difference between High & Low of the session.
High – Low = Range of the session
Continuing with the same levels as an example, If High of the day is 105 and Low is 95, Range of the session is 10 points.
Range shows us activity during the session irrespective of the trend.
Narrow range = Not much movement
Wide Range = Strong activity
Camarilla calculation depends on the Range of the session.
Let’s expand the range to 110%. If Current range is 10, let us make it 11.
Let’s now divide this Range in four parts.
9.17%, 18.33%, 27.50% and 55% of the range.
So, if Range is 10 points:
10 x 9.17% = 0.92
10 x 18.33% = 1.83
10 x 27.50% = 2.75
10 x 55% = 5.50
Triangles, Broadenings and Rectangles.
Many traders analyse and practice western chart patterns. There are many such patterns and enough is talked about them in various books and resources.
Long back, I read a book “Encyclopedia of Chart Patterns” by Thomas N. Bukowski. It’s a brilliant work (Must read).
He backtested many patterns & ranked them based on their performance. Most imp is that he separated the patterns based on their performance in uptrend & downtrend.
I read about those patterns at many other places & in different theories and I realised that most of them are-
-variations of broad category of patterns. I have bifurcated these patterns in various categories.
Triangles, Broadenings & Brackets or Rectangle patterns are most common & effective patterns. Below are 5 bullish & bearish proven, time-tested patterns of these categories.
Horizontal pattern breakout. Price remains between two horizontal lines before upward brkout. Its a decent continuation breakout pattern when appears in uptrend. Reversal pattern when appear in downtrend (Decent Risk-reward). Tend to pullback
Developed by Olivier Seban, Super trend is an indicator plotted on the price chart like a moving average.
Let us discuss three important components of this indicator.
In every bar or candle, we have four prices - Open, High, Low, Close.
We have the option to select any price of above to define the trend.
For example, we may define an uptrend as today’s close being above yesterday’s close.
We can also calculate range price of every bar. It is also known as Average price or Mid-price.
Range price = (High + Low) / 2
Have a look at the images below.
In the first Image below , the closing price of each candle is connected to the closing price of the next candle.
In the below chart, the “range-price” or the mid-point of each candle is connected.
#Darvas #knowledgesharing #Definedge
Nicolas Darvas (1920 – 1977) was a professional dancer and he travelled around the world. He founded a Dance company in 1950s. Someone offered him shares against his Dance programme and that is how he came across stock market and the business of trading.
He reportedly turned thousand dollars into millions in the late 1950s.
He wrote a popular book during 1960 “How I made $2000000 in Stock Market” in which he explained his Box theory. It is a must read.
He used a combination fundamental and technical approach for investing.
He believed in investing in only growth stocks. I think he did not explain a few things in his book, and I found some difference in interpretation of box-theory at various places because of that. This post is my interpretation of his theory.
Darvas was tracking stocks only making new high. I do not think he really talked about 52-week high. He mentioned about stocks breaking 2-3 year high. But 52-week high is mostly tracked for this theory so let us keep it that way to begin with for the sake of objectivity.
More from All
A paadal Petra sthalam where Shiva took the form of Sundareswarar (the handsome one) and married Devi Parvati (Meenakshi).
Devi is also known by the name Angayarkanni (mother with the beautiful fish eyes).
Devi Meenakshi emerged from yagna fire as a 3 year old girl when Pandyan King Malayadwaja and Kanchanamalai were praying for a child.
It is said that Devi was born with three breasts and there was a prophesy that her superfluous breast would melt away when she met her husband.
Devi ruled over Madurai and captured Indralok. She went on to capture Kailasha. When she saw Shiva, her 3rd breast disappeared and she realised that Shiva would be her consort.
The divine marriage was attended by all Devas and Sri Vishnu (as her brother) gave her hand to Shiva.
It is said that Indra found a swayambhu lingam at Kadamba Vanam. He placed it in Madurai where the kshetram stands. Here, Shiva is seen on the vehicle of Indra.
The Golden Lotus Tank is said to be the place where a golden lotus blossomed for the puja performed by Indra.
The Meenakshi Thirukalyanam festival is celebrated in the Chithirai month to mark the divine marriage of Meenakshi Amman. The festival includes a procession where Meenakshi and Sundareshwara travel in a chariot and Sri Vishnu gives away his sister in marriage to Shiva.
Mangottu Bhagavathi Temple is situated in Athipotta near Alathur of palakkad district. Devi is kshipraprasadi here and grants relief to those who worship with full faith.
Mookken Chathen, situated on the Northern 👇
side of the temple, is guarding Devi here.
Story says that, once there lived a weaver named Kuttan who was a Devi Bhaktan. During one festival time Kuttan was so pleased by the Devi Vigraham that he requested her to come along with him. At that time wind blew heavily and Cloths
in Vigraham flew. Kuttan immediately decorated Devi with his cloth which stuck to Vigraham and returned to his village and with his Umbrella. Devi came with him in that Umbrella and stayed in his place. This place is Mangottu Bhagavathi temple now.
Five billionaires share their top lessons on startups, life and entrepreneurship (1/10)
I interviewed 5 billionaires this week— GREG ISENBERG (@gregisenberg) January 23, 2021
I asked them to share their lessons learned on startups, life and entrepreneurship:
Here's what they told me:
10 competitive advantages that will trump talent (2/10)
To outperform, you need serious competitive advantages.— Sahil Bloom (@SahilBloom) March 20, 2021
But contrary to what you have been told, most of them don't require talent.
10 competitive advantages that you can start developing today:
Some harsh truths you probably don’t want to hear (3/10)
I\u2019ve gotten a lot of bad advice in my career and I see even more of it here on Twitter.— Nick Huber (@sweatystartup) January 3, 2021
Time for a stiff drink and some truth you probably dont want to hear.
10 significant lies you’re told about the world (4/10)
THREAD: 10 significant lies you're told about the world.— Julian Shapiro (@Julian) January 9, 2021
On startups, writing, and your career:
Hi, I’m Ben.
I received an MBA from Cornell.
I’ve also read 300+ business books.
Trust me: You can get 90% of the knowledge from reading books
(and without spending $150k).
So, I put together a 6-month personal MBA for you...
The 6-month curriculum is 12 books
(you’ll read 2 books every month).
Here we go...
Zero to One
by Peter Thiel and Blake Masters
• Escape competition
• Contrarian approaches create value
• Go from “0 to 1,” not “from 1 to n”
The Lean Startup
by Eric Ries
• Build minimum viable products
• When in doubt, simplify
• Win by getting feedback + learning fast
However, 98.8 percent of users missed out on the best content on this platform.
Here are the top 26 threads from the past 26 weeks of 2022: 🧵
Collaborated with @niki_poojary
1/ Mistakes made by an Option Seller by
10 mistakes in my 14 years of trading as an option seller \U0001f9f5— Sarang Sood (@SarangSood) March 19, 2022
@SarangSood 2/ Jhunjhunwala's 6 best trades by
@SarangSood 3/ Free courses on technicals worth 80k by
Full technical analysis courses in one thread \U0001f9f5— Vikrant (@Trading0secrets) February 27, 2022
For free which is Worth \u20b980k \U0001f447
@SarangSood @Trading0secrets 4/ Myth of "Edge" in overnight Option selling by
A thread addressing the myth of "Edge" in overnight option selling, got many questions around this after the F2f scession!— Bandi Shreyas (@BandiShreyas) January 9, 2022
Assume you sell a 0.05 delta call option every month at the beginning of the month (basically an option that is 0.05 probability
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Here's how I'd measure the health of any tech company:— Jeff Atwood (@codinghorror) October 25, 2018
How long, as measured from the inception of idea to the modified software arriving in the user's hands, does it take to roll out a *1 word copy change* in your primary product?
How long does it take, measured from initial expression of interest through offer of employment signed, for a typical candidate cold inbounding to the company?
What is the *theoretical minimum* for *any* candidate?
How long does it take, as a developer newly hired at the company:
* To get a fully credentialed machine issued to you
* To get a fully functional development environment on that machine which could push code to production immediately
* To solo ship one material quanta of work
How long does it take, from first idea floated to "It's on the Internet", to create a piece of marketing collateral.
(For bonus points: break down by ambitiousness / form factor.)
How many people have to say yes to do something which is clearly worth doing which costs $5,000 / $15,000 / $250,000 and has never been done before.
The Ife 6-Year Primary Project.
In 1970, as the Director of the Institute of Education of the then University of Ife (now Obafemi Awolowo University, Ile-Ife), later Dean Faculty of Education, Prof. Babs Fafunwa & his team embarked on one of the most groundbreaking research projects in education for Yorubaland.
The aim of the project was to test the hypothesis that the best instructional medium for good concept formation at a very tender age is the mother tongue.
This was bolstered by the observation that “of all the continents and peoples of the world, it is only in Africa…
…that formal education is offered in a language that is foreign to the child.”
So, Yoruba was to be used & tested as an exclusive medium of passing information or instructions to a set of pupils.
The project was based on the premise that:
(a). the child will benefit culturally, socially, linguistically & cognitively.
(b). the child’s command of English will be improved if he is taught English as an entirely separate subject by a specialist teacher through the 6 years.
These are turn-based wargames for windows 3.x, sharing the same engine.
Battles in a Distant Desert is from 1992, and is based on the first Iraq war (Desert Storm)
and Battles on Distant Planets is from 1991, and takes place in SPACE!
I'm pretty sure this is the one I played as a kid.
They've got 3 options to play with:
* Player vs. Player
* Player vs. Computer
* Computer vs. Computer
So it's a 0-2 player game!
They also did a DOS strategy game called "STARDATE 2140.2: GALACTIC CONQUEST" in 1990, but it seems to be lost.
All the games share an experimental AI system based on neural networks.
People in a free society are entitled to any point of view no matter how obviously wrong or outlandish or destructive provided they do not impose their views on others.
But suggesting that something ignorant or divorced from reality warrants the same kind of treatment in public debate as something based in fact or at least credible is absurd and when done on behalf of a society in public media or academic settings it is self-destructive.
We would not grant media coverage or much bandwidth at all to a group that argued that unicorns exist or that there was a pot of gold at the end of the rainbow. Yet views like denying climate change or basing policy decisions on sweeping, obvious lies, are just as unsound.
Somewhere, somehow, judgments must be made. Some behaviors are wrong and must be condemned. Someone must challenge lies and demand facts. Coddling people who embrace idiocies does not help them no matter how loudly they demand to be coddled.
When Saudi Arabia's King visited India in 1955, PM Nehru ordered all the Hindu Temples and Idols of Hindu Deities that came in Saudi King's way to be covered up.
Our temples are the architectural marvels in their own league.
Each of our temples tells the story of our rich history and cultural heritage. Was Nehru that ashamed of his own nation's heritage that he had to cover them up or there was some other reason? The answer would be best known to him only.
PM Nehru invited the then Saudi King Saud bin Abdul Aziz to India who accepted the invitation and planned a 17 day long official visit to India in 1955. Saudi King had brought a large delegation with him and he had to visit various Indian cities like Mumbai, Hyderabad, Agra,
Aligarh, Shimla, Mysore and Varanasi. However, when Saudi King reached Varanasi, Nehru ordered to cover all the temples and Idols with curtains that came in the way of the Royal Convoy. During his stay in Varanasi, Govt buildings were painted with the words "Kalma Tayyiba".
'Kalma Tayyiba' means 'There is not God but only Allah and Mohammed is his messenger'. In addition to it, Pooja and Aartis were also stopped at temples. I can call it the appeasement politics of the highest order and Nehru was indeed the greatest appeaser of all times.