V. 19:3 (38-44): Coding Candlesticks (II) by Viktor Likhovidov

V. 19:3 (38-44): Coding Candlesticks (II) by Viktor Likhovidov
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Analyzing Candlesticks Quantitatively Coding Candlesticks (II)

Few charting innovations have become so widely accepted in the US since their introduction from Japan as candlesticks. Until Viktor Likhovidov’s article in the November 1999 issue of STOCKS & COMMODITIES, their interpretation was subjective. In his article, however, he showed how to develop quantitative values for candlesticks — values that could be used in software to create indicators for trading. His proposal did draw one critique, from Jan W.E. Roberts (see “Letters to the Editor”). We thought the results of their exchange and Likhovidov’s Excel spreadsheet for coding would be valuable for our readers to study.

by Viktor Likhovidov

Jan W.E. Roberts’s letter (see page 10) questioned the quantitative approach to candlestick charting that I described in the November 1999 S&C. The issues that he brought up deserve discussion that could help readers to better understand the basis and possible application of my method.

My idea of assigning a numeric value to a single candlestick is based on the principle that the relationship between opening and closing prices is the most important for interpretation of the candle. So in construction of the quantitative characteristic of a candle, I took these prices into account as the main factor.

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