CandleStick Body and Close Analysis

• 10/22/2017 at 12:03 PM #50206
  Vonasi

  I thought I posted this but it disappeared! So apologies if it now appears twice.

  In my search for the elusive ‘edge’ I wanted to analyse what effect the size of candlestick body compared to its range has on the probability of the next candle closing in the same direction. I also wanted to see what effect the close position within the range had. So I wrote a little code to do this. I then added a filter of ATR rising which seemed to give a little edge if set to a very short period. This ATR filter can be turned on or off.

  I added an equity curve based on closing each position at the close of the next candle just to see what the result was. Interestingly most markets seemed to stop being profitable from this simple entry and exit criteria somewhere around the 90’s.

  Although this is technically an analysis tool rather than an indicator I wrote it as an indicator rather than a strategy so I’ve posted it here. Any comments will be appreciated – especially if you spot something wrong as I wrote it after a couple of glasses of wine!

  From a few quick tests on daily markets it seems that an edge of 2 to 4% can be gained over the 50/50 chance of random entry by considering the close position and body size – especially if the ATR filter is added.

  // //CandleStick Analysis Tool // //CloseLevel = Close price as % of Range //BodyLevel = Total body size as % of Range //ATRPeriod = Period to be used for ATR Rising filter //Spread = Spread for market being analysed //ATROn = Tick to apply ATRRising filter within analyse // //CandleStick Analysis Tool can be used to analyse the effect that candlestick bodysize and close position within range has on the next candle closing in the same direction. An AverageTrue Range filter can also be applied to analyse the benefits or disadvantage of this. The Equity +/- is calculated on close of position after one candle. Spread is deducted from each position. //Average True Range Calculation ATR = AveragetrueRange[ATRPeriod] ATRRising = ATR[1] < ATR //Body % Calculation BodyPerc = ((ABS(close[1] - open[1]))/(High[1]-Low[1]))*100 //Close % Calculation IF close[1] > Open[1] THEN ClosePerc = ((Close[1] - Low[1])/(High[1] - Low[1]))*100 ENDIF IF close[1] < Open[1] THEN ClosePerc = ((High[1] - Close[1])/(High[1] - Low[1]))*100 ENDIF //Analysis including ATR Filter IF ATROn THEN //Up Candle followed by Up Candle IF BodyPerc > BodyLevel and close[1] > open[1] and close > close[1] and ClosePerc > CloseLevel and ATRRising THEN Win = Win + 1 Count = Count + 1 Amount = Amount + ((Close - close[1])-Spread) ENDIF //Up Candle followed by Down Candle IF BodyPerc > BodyLevel and close[1] > open[1] and close < close[1] and ClosePerc > CloseLevel and ATRRising THEN Count = Count + 1 Amount = Amount - ((Close[1] - close)+Spread) ENDIF //Down Candle followed by Down Candle IF BodyPerc > BodyLevel and close[1] < open[1] and close < close[1] and ClosePerc > CloseLevel and ATRRising THEN Win = Win + 1 Count = Count + 1 Amount = Amount + ((Close[1] - close)-Spread) ENDIF //Down Candle followed by Up Candle IF BodyPerc > BodyLevel and close[1] < open[1] and close > close[1] and ClosePerc > CloseLevel and ATRRising THEN Count = Count + 1 Amount = Amount - ((Close - close[1])+Spread) ENDIF //Analysis without ATR Filter ELSE //Up Candle followed by Up Candle IF BodyPerc > BodyLevel and close[1] > open[1] and close > close[1] and ClosePerc > CloseLevel THEN Win = Win + 1 Count = Count + 1 Amount = Amount + ((Close - close[1])-Spread) ENDIF //Up Candle followed by Down Candle IF BodyPerc > BodyLevel and close[1] > open[1] and close < close[1] and ClosePerc > CloseLevel THEN Count = Count + 1 Amount = Amount - ((Close[1] - close)+Spread) ENDIF //Down Candle followed by Down Candle IF BodyPerc > BodyLevel and close[1] < open[1] and close < close[1] and ClosePerc > CloseLevel THEN Win = Win + 1 Count = Count + 1 Amount = Amount + ((Close[1] - close)-Spread) ENDIF //Down Candle followed by Up Candle IF BodyPerc > BodyLevel and close[1] < open[1] and close > close[1] and ClosePerc > CloseLevel THEN Count = Count + 1 Amount = Amount - ((Close - close[1])+Spread) ENDIF ENDIF //Win Rate as % WinRate = (Win/Count) * 100 Return WinRate coloured (0,0,0) Style(Line,2) as "Win Rate", Win coloured (0,255,0) Style(Line,1) as "Wins", Count coloured (255,0,0) Style(Line,1) as "Bets", Amount coloured (0,0,255) Style(Line,1) as "Equity +/-"

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  // //CandleStick Analysis Tool // //CloseLevel = Close price as % of Range //BodyLevel = Total body size as % of Range //ATRPeriod = Period to be used for ATR Rising filter //Spread = Spread for market being analysed //ATROn = Tick to apply ATRRising filter within analyse // //CandleStick Analysis Tool can be used to analyse the effect that candlestick bodysize and close position within range has on the next candle closing in the same direction. An AverageTrue Range filter can also be applied to analyse the benefits or disadvantage of this. The Equity +/- is calculated on close of position after one candle. Spread is deducted from each position.   //Average True Range Calculation ATR = AveragetrueRange[ATRPeriod] ATRRising = ATR[1] < ATR   //Body % Calculation BodyPerc = ((ABS(close[1] - open[1]))/(High[1]-Low[1]))*100   //Close % Calculation IF close[1] > Open[1] THEN ClosePerc = ((Close[1] - Low[1])/(High[1] - Low[1]))*100 ENDIF   IF close[1] < Open[1] THEN ClosePerc = ((High[1] - Close[1])/(High[1] - Low[1]))*100 ENDIF   //Analysis including ATR Filter IF ATROn THEN //Up Candle followed by Up Candle IF BodyPerc > BodyLevel and close[1] > open[1] and close > close[1] and ClosePerc > CloseLevel and ATRRising THEN Win = Win + 1 Count = Count + 1 Amount = Amount + ((Close - close[1])-Spread) ENDIF   //Up Candle followed by Down Candle IF BodyPerc > BodyLevel and close[1] > open[1] and close < close[1] and ClosePerc > CloseLevel and ATRRising THEN Count = Count + 1 Amount = Amount - ((Close[1] - close)+Spread) ENDIF   //Down Candle followed by Down Candle IF BodyPerc > BodyLevel and close[1] < open[1] and close < close[1] and ClosePerc > CloseLevel and ATRRising THEN Win = Win + 1 Count = Count + 1 Amount = Amount + ((Close[1] - close)-Spread) ENDIF   //Down Candle followed by Up Candle IF BodyPerc > BodyLevel and close[1] < open[1] and close > close[1] and ClosePerc > CloseLevel and ATRRising THEN Count = Count + 1 Amount = Amount - ((Close - close[1])+Spread) ENDIF   //Analysis without ATR Filter ELSE //Up Candle followed by Up Candle IF BodyPerc > BodyLevel and close[1] > open[1] and close > close[1] and ClosePerc > CloseLevel THEN Win = Win + 1 Count = Count + 1 Amount = Amount + ((Close - close[1])-Spread) ENDIF   //Up Candle followed by Down Candle IF BodyPerc > BodyLevel and close[1] > open[1] and close < close[1] and ClosePerc > CloseLevel THEN Count = Count + 1 Amount = Amount - ((Close[1] - close)+Spread) ENDIF   //Down Candle followed by Down Candle IF BodyPerc > BodyLevel and close[1] < open[1] and close < close[1] and ClosePerc > CloseLevel THEN Win = Win + 1 Count = Count + 1 Amount = Amount + ((Close[1] - close)-Spread) ENDIF   //Down Candle followed by Up Candle IF BodyPerc > BodyLevel and close[1] < open[1] and close > close[1] and ClosePerc > CloseLevel THEN Count = Count + 1 Amount = Amount - ((Close - close[1])+Spread) ENDIF ENDIF   //Win Rate as % WinRate = (Win/Count) * 100   Return WinRate coloured (0,0,0) Style(Line,2) as "Win Rate", Win coloured (0,255,0) Style(Line,1) as "Wins", Count coloured (255,0,0) Style(Line,1) as "Bets", Amount coloured (0,0,255) Style(Line,1) as "Equity +/-"

   

  3 users thanked author for this post.

  Nicolas, manel, Despair

  

  Vonasi

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  10/22/2017 at 12:06 PM #50208
  Vonasi

  Forgot to add the ITF file so here it is.

  

  Vonasi

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  10/29/2017 at 10:18 AM #50813
  Nicolas

  Thanks Vonasi, very interesting concept. Did you try something with optimisation of the few variables with ProBacktest? You should consider it seriously.

  

  Nicolas

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  11/07/2018 at 5:33 PM #84345
  Bard

  Interesting concept @Vonasi, thanks for the code. Is there anyway to change the length of hold period (for the equity curve calculation), it’s hard coded?
  I’m wondering what would happen if the hold period was lengthened from one bar, sometimes a strong candle intimates bigger impending moves?

  

  Bard

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  11/07/2018 at 5:57 PM #84346
  Vonasi

  I’d forgotten this one!

  It was really just coded as an analysis tool and not a strategy. It could be re-coded for longer hold periods by just changing the candle analysed to be close[n] instead of close[1] and by adjusting the profit /loss calculations to cover the longer period.

  I’m a little too busy with boat maintenance at the moment to do it myself but feel free to give it a go. The code is quite logical and unusually well commented compared to my recent work!

  

  Vonasi

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