Candlestick Signals Produce Many Benefits
Stock trading strategies are being developed every single day. The creation of stock trading strategies has become easy with a multitude of computer programs. Every day new stock trading strategies are being promoted. Tremendous results, through computer back-testing, is promised for future high profits. Surprisingly though, the results of the stock trading strategies do not correlate when going into future trading.
The basic benefit of Candlestick signals is that they have been proven. The results of Candlestick analysis have come from centuries of use. Not centuries of back-testing, but centuries of observations and successful utilization of the Candlestick signals. Stock trading strategies should be built upon existing results, not on back-tested results. Once you have found a basic building block for successful investing, stock trading strategies can be implemented with great success.
Candlestick signals work successfully because they are the visual results of patterns that have worked. Japanese Rice traders became immensely wealthy from using the signals. We would not be looking at Candlestick signals today if there was not credibility in their results. Successful stock trading strategies are not developed from back-tested results that “appear” that they could work in the future, the successful stock trading strategies are developed from what has actually been used in the past to produce profits.
Successful stock trading strategies should have some very simple features. They should not be difficult to implement. Many stock trading strategies are developed by using statistical information that has worked in the past and projected to work in the future. The disadvantage of not learning why those statistical results occurred leaves the investor high and dry when they do not work in the future. If you don't know what is broken, you don't know how to fix it.
The benefit of using Candlestick signals in honing successful stock trading strategies is that the psychology that forms the signals is very understandable. Knowing why the Candlestick signals are formed, the investor psychology that caused those signals to form, allows the investor to understand what should occur in the future. The Candlestick signals are a visual depiction of investor sentiment. Investor sentiment, fear and greed, will be the same two centuries in the future as it was two centuries in the past. Human emotions are what move prices. The Candlestick signals are the graphic depiction of those human emotions.
Learn the 12 major Candlestick signals and understand the psychology that forms the signals. You will forever have the insights into why prices move. Those insights put you in the category of the professional investors and what they analyze. This is not rocket science. This is simple visual analysis that has worked over and over.
Market Direction - Monday, the Dow revealed an obvious Shooting Star/Doji. What could have been a potential breakout for the Dow, coming up through the resistance level, was immediately shown to have fizzled. The Shooting Star/Doji becomes a valuable signal for the Candlestick investor. Being able to identify it as a potential signal, the speculation that once the Dow broke through the resistance level there could be a strong rally, becomes modified. The general consensus was that once that level is broken through, that new heights in the Dow may be achieved. However, the Candlestick “sell” signal provides an immediate warning that this may be the top. That fact was immediately confirmed on Tuesday with a lower open. It was further confirmed Wednesday when the dark candle breached the halfway point of Friday's bullish candle.
After the Doji, the recent Candlestick Forum market comments suggested to start taking some profits on the longs and adding to short positions. Keep in mind, this was an easy analysis. The Candlestick signals that have worked for hundreds of years made themselves evident. The Candlestick ?sell? signal portrays a high degree of probability that a reversal is about to occur. The stochastics, being in the overbought area, make the probability that much greater.