What does the Ctabs chart tell you?
The Ctabs chart shows [open, high, low, close] price points at the end of each trading day. The green candlesticks are called up candles which occur when the closing price is higher than the opening price. The red candlesticks are called down candles which occur when the closing price is lower than the opening price. The color-shaded portion is called the body of the candlestick. The tails above and below the candlestick body mark the high and low points, respectively. The solid blue line shows the 10-day exponential moving average.
Candlestick patterns can be 1-day, 2-day or 3-day patterns in the Ctabs implementation. For example, a spinning top is a 1-day pattern; a separating lines gapup is a 2-day pattern; a morning star is a 3-day pattern. The actual candlestick patterns are less important that what they signify to the trader. When an Ctabs candlestick pattern occurs, it means there is potential for a trend reversal. Such an occurrence is shown by the use of a signal indicator on the horizontal axis of the chart.
When a signal indicator is shown on the horizontal axis of the chart it means a candlestick pattern has occurred and the trader must watch the stock movement on the next trading day in order to assess whether it is a trend reversal or a trend continuation.
Ctabs, being a machine/program trader performing simulated trades based on its Ctabs candlestick analysis, is always in the market with a long or short position. So, when a candlestick pattern has emerged, Ctabs shows a signal indicator on the horizontal axis of the chart and provides action commentary such as "Next trading day, sell if stock closes below $47.87 with a down candle.".
Ctabs shows its buy/sell action by marking a B or S on the horizontal axis of the Ctabs chart. In this case, Ctabs would provide action commentary such as "Today, stock was sold at $53.75.". Ctabs deems its buy/sell executions at the price point stated based on the assumption that the price point can be obtained by examining the daily [open, high, low, close] data from day to day. Your optimal trading success depends on you carrying out the buy/sell action at the Ctabs stated price points.
There are situations where Ctabs will execute a buy or sell on a day when a candlestick pattern occurs. In such a case, Ctabs might show action commentary as "Today, stock was sold at $47.87. Next trading day, buy if stock closes above $47.75 with an up candle.". The "sold" was executed to fulfill the action commentary from the day before. However, the current trading day results in a candlestick pattern so Ctabs issues the "Next trading day, buy if stock closes above $47.75 with an up candle." action commentary.
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