Candle Stick Alerts

Discussion in 'Ask A Question' started by Customer Questions, Jun 22, 2013.

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  1. Customer Questions

    Customer Questions John @ timetotrade

    How can timetotrade be used to provide trading alerts on candle stick patterns?
     

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  2. Customer Care

    Customer Care John @ timetotrade

    To ensure that common language is used when describing how to create alerts that can be used to identify candle stick patterns, lets start by explaining what a candle is and the how it can be described.

    A candle represents the changes in price over an interval of time such as 1 day or 1 minute. The main body of the candle illustrates the opening price at the start of the time interval and the price when the market closed at the end of the interval. The head and tail represent the highest and lowest prices during the interval.

    The length of the head is the difference between the highest price during the interval and the greater of the Open or Close price. The length of the tail is the difference between the lowest price and the difference between lesser of the Open or Close price. The length of the body if the difference between the Open and Close price.

    If the price closed at a price above the opening price, then the candle is referred to as a 'bullish' candle and if the price closed below the opening price, then the candle is referred to as a 'bearish' candle. On the timetotrade charts the bullish candles are coloured green and the bearish candles are coloured red as illustrated:

    Candle stick drawing.png

    When creating alerts historical candles can be referenced using the 'PAST' indicator. The 'OPEN', 'HIGH', 'LOW' and 'CLOSE' values represent the current candle. The PAST indicator can be used to reference the Open, High, Low or Close values for any candle in the past, as illustrated:

    Past_Candles.png

    Now to create some candle stick pattern alerts. In this first example an alert will be created to provide a notification of when there are three bullish candles. If the close price is greater than the open price then the candle is considered bullish. Three alert triggers can be created to test for this on the current and past candles e.g.

    Code:
    TRIGGER 1: (CLOSE - OPEN) > 0
    TRIGGER 2: (The CLOSE 1 candle in the PAST - The OPEN 1 candle in the PAST) > 0
    TRIGGER 3: (The CLOSE 2 candles in the PAST - The OPEN 2 candles in the PAST) > 0
    
    Using the timetotrade trigger language that would be implement as:

    Code:
    TRIGGER 1: (SUB(CLOSE, OPEN)) ABOVE 0
    TRIGGER 2: (SUB(PAST(CLOSE,1), PAST(OPEN,1))) ABOVE 0
    TRIGGER 3: (SUB(PAST(CLOSE,2), PAST(OPEN,2))) ABOVE 0
    
    This can be implemented as follows using the Alert Builder interface on the charts:


    TRIGGER 1: (SUB(CLOSE, OPEN)) ABOVE 0

    candle_stick_trigger_1.png



    TRIGGER 2: (SUB(PAST(CLOSE,1), PAST(OPEN,1))) ABOVE 0

    candle_stick_trigger_2.png

    candle_stick_trigger_2-1.png



    TRIGGER 3: (SUB(PAST(CLOSE,2), PAST(OPEN,2))) ABOVE 0

    candle_stick_trigger_3.png

    candle_stick_trigger_3-1.png


    When all three triggers are true at the same time an alert notification will be sent. The alert triggers should therefore be in a GROUP in '1 second' as illustrated:

    candle_stick_group.png

    To learn more about how alert triggers can be grouped and sequenced click here.
     

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  3. Customer Care

    Customer Care John @ timetotrade

    To create an alert trigger based on the height of the Candle Head, do so by subtracting the High price from the greater of the Open or Close price. For example to create an alert trigger where the height of the candle head must be greater than 0.01 the trigger language equation for doing so is:

    Code:
    SUB(HIGH - MAX(OPEN, CLOSE)) ABOVE 0.01
    which would be implemented using the Alert Builder chart interface as follows:
    candle_stick_trigger_4.png

    To create a trigger based on the size of the tail, subtract the lesser of the Open or Close price from the Low price. For example to create an alert trigger where the tail is greater than 0.2 the trigger language equation is:

    Code:
    SUB(MIN(OPEN, CLOSE), LOW) ABOVE 0.2
    which would be implemented using the Alert Builder interface as illustrated:

    candle_stick_trigger_5.png

    If an alert trigger was required on a previous candle Head or Tail height, then use the PAST indicator. For example to create an alert trigger where the tail of one candle in the past is greater than 0.02 the trigger language equation is:

    Code:
    SUB(MIN(PAST(OPEN, 1), PAST(CLOSE, 1)), PAST(LOW, 1)) ABOVE 0.2
    which would be implemented as:

    candle_stick_trigger_6.png

    candle_stick_trigger_6-1.png

    candle_stick_trigger_6-2.png
     

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  4. Customer Care

    Customer Care John @ timetotrade

    Alert triggers can be created to compare the values of Open, High, Low or Close prices for current and past candles. For example, to identify if the current candle has formed a lower Low price than one candle in the past, subtract the current LOW price from the PAST LOW price. If the result is less than zero then the current low is lower than the previous low. The trigger language to identify a lower low would be:

    Code:
    SUB(LOW, PAST(LOW, 1)) BELOW 0
    which would be input via the Alert Builder interface as illustrated:

    candle_stick_trigger_7.png

    To create an alert for example that required a sequence of a lower Low followed by a higher Low, as illustrated:

    candle_stick_lower_lows.png

    the trigger language for doing so would be:

    Code:
    TRIGGER 1: SUB(PAST(LOW, 1), PAST(LOW, 2)) BELOW 0
    TRIGGER 2: SUB(LOW, PAST(LOW, 1)) ABOVE 0
    
    which can be created via the Alert Builder interface as illustrated:

    candle_stick_trigger_8.png

    candle_stick_trigger_8-1.png


    candle_stick_trigger_8-2.png
     

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  5. Customer Care

    Customer Care John @ timetotrade

    Candle sequences can be combined with other price, volume, technical analysis and trend line triggers. For example, continuing from the very first example, if the requirement was for a sequence of three bullish candles and for RSI to be below 50 when the last bullish candle was formed, the trigger language for doing so would be:

    Code:
    TRIGGER 1: (SUB(CLOSE, OPEN)) ABOVE 0
    TRIGGER 2: (SUB(PAST(CLOSE,1), PAST(OPEN,1))) ABOVE 0
    TRIGGER 3: (SUB(PAST(CLOSE,2), PAST(OPEN,2))) ABOVE 0
    TRIGGER 4: RSI(CLOSE, 14) BELOW 50
    
    To implement the alert using the Alert Builder interface, after creating the first three triggers as per the first post above, add the RSI alert as illustrated:

    candle_stick_trigger_9.png

    If the requirement was for the RSI to be below 50 at each step in the sequence then the trigger language for this would be:

    Code:
    TRIGGER 1: (SUB(CLOSE, OPEN)) ABOVE 0
    TRIGGER 2: (SUB(PAST(CLOSE,1), PAST(OPEN,1))) ABOVE 0
    TRIGGER 3: (SUB(PAST(CLOSE,2), PAST(OPEN,2))) ABOVE 0
    TRIGGER 4: RSI(CLOSE, 14) BELOW 50
    TRIGGER 5: RSI(PAST(CLOSE, 1), 14) BELOW 50
    TRIGGER 6: RSI(PAST(CLOSE, 2), 14) BELOW 50
    
    For example trigger 6 would be implemented using the Alert Builder interface as illustrated:

    candle_stick_trigger_9-1.png
     

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  6. Customer Care

    Customer Care John @ timetotrade


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  7. Customer Care

    Customer Care John @ timetotrade


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  8. Dary

    Dary Dary McGovern Staff Member

    Added a set of indicators, which I thought I had already added, that calculates the Candle Head Tail Body length for creating candle stick alerts. Also includes indicators that compare the high to the previous high plus the low to the previous low to provide examples on how to compare values to previous candles. See: http://forum.timetotrade.eu/threads/custom-indicators.183/#post-1031
     
    Last edited: Mar 6, 2014

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  9. Dary

    Dary Dary McGovern Staff Member

    There is now an extensive range of Candlestick indicators pre-built that will detect a variety of candlestick patterns. For more information, please see the help wiki:
     

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