## CandleCode alive!

The new approach to the analysis of candlestick chart is an indicator CandleCode. He attributes each candle a number that indicates the extent to which this reflects a bullish candle or a bearish market. This - the first quantitative method for interpreting candlesticks.

Construction of a numerical code

Before interpretation of candlestick was completely subjective and based on reasoning only psychologically. Number of candles has never been measured, in general, contrary to the spirit of technical analysis, where all to be accurately measured, weighed, and comparison.

Not surprisingly, published in the November 1999 Journal Technical Analysis of Stocks & Commodities my article on the quantitative description of candlesticks has attracted the attention of readers and experts, and caused a very active discussion. There were also meaningful themes was an attempt to declare the idea of a bulky design, unworthy of publication in a respected journal like S & C. But time has shown that the indicator CandleCode alive. And it works! I think the readers of "Sun" will also be interesting to see some aspects of the debate. This will help to better understand the intricacies of the method and to successfully apply it in trading systems.

Let us briefly recall the main idea and the scheme of constructing a numerical code. Candle, representing the price movement within a specified standard time interval consists of three elements: the body (body), the upper shadow (upper shadow) and the lower shadow (lower shadow). The original idea of the method: the greater the size of the candle, the more expressed the mood of the market, which points in the direction of the element. Thus, a large body of the white candle shows a much more bullish market sentiment than the small body of the white candle. And any black candle indicates a bearish sentiment - the more pronounced, the larger the size of her body. The upper shadow indicates a bullish (the larger, the longer the shadow), and the lower shadow indicates bearish sentiment that occurred during the relevant time period.

To construct a numerical code candle size of all the elements (body and shadows) are divided into four categories: large, medium, small, there is no (candle without a body - it doji). Four possible conveniently represented by two numbers: 0 and 1. Large cell, upward, is set to 11, medium 10, low 01, missing 00. Elements candle downward, get the codes in reverse order: a large 00, medium 01, low 10, missing 11. Under this assignment of codes, it is understood that the most bullish on the mood elements have the biggest codes less bullish - smaller codes bearish elements attributed to small codes, and the most bearish - the smallest codes.

Each candle eventually assigned a set of seven zeros and ones. This set is then treated as a binary representation of a decimal number. The resulting number is the value for the given CandleCode candles. CandleCode evaluation rule is that each character in the binary representation of a decimal number gets its weight (black numbers below the ruler).