CandleCode alive!


What is the size of the body corresponds to the category of "small" and "large" depends on the statistics of the market and on the purpose of coding. You can enter a lot of ranks: a very small, very small, small, medium, typical, etc., and the same number of grades in the direction of higher dimensions. If there is a need for this, such a scheme it is possible to build, even though I do not see the need for such complexity and uses only three size categories: small, medium and large.

Allocation size zero bodies in a separate category seems to me fundamental, because doji clearly characterizes the state of market uncertainty. Mathematical convenience is that the four dimensions of the body are represented by two bits. The objection that the zero size ascribe to not only the doji (open = close), but the candles with a very small body (say, 5-10 points) does not change anything in the approach. This option can easily be provided a small change of the computational scheme.

The weights assigned indicator SandleCode fully comply with these arguments. The body of a large white candle (Long White) gets a 111 code. Among all white candles (the first digit of 1) it is the bull (two following discharge in its code - 11), and a large body of the black candle (Long Black) coded 000, among the black candles (the first bit 0), it is very bearish. White candles for the code body, the higher the larger the size of the body. For black candle on the contrary - the code is smaller, the larger the size of the body. Most long white candles are the highest codes, and a long black candlestick is assigned the smallest codes. This ensures the greatest diversity of the codes of candles. A useful consequence is some statistical stability indicators, derived by averaging the weights. I hope I was able to convince readers that the coding and numerical weighting indicator SandleCode candles are the most natural. In fact, here I am not making this up at all, just on the mathematical language to write down some ideas that are well known to anyone who is engaged in technical analysis.

The use of Bollinger bands

There was also the objection to the choice of thresholds for CandleCode misused Bollinger (Bollinger Band). Bollinger Bands indicator is closely linked with the normal (Gaussian) distribution, and the size distribution of candles (or parts thereof) is a log-normal. First, a few words about why is needed Bollinger. The problem was related to the choice of thresholds. For each element of the candle (the body, the upper shadow, lower shadow) in the method, there are two thresholds: upper and lower. All elements of candles smaller than the lower threshold, are considered small. Those elements whose dimensions fall between the lower and upper thresholds, refer to the average, and anything above the upper threshold, it is considered large.

Many methods for representing the market graphs provided certain threshold criteria. For example, in view of the graphs tic-tac-toe (Points and Figure Charts, P & F), any price movement, less than a specified threshold value, generally not recognized. To have a new cross or toe, the price should go quite a long stroke.