How I Discovered Japanese Candlesticks
Have you ever wondered why you hear stories of other people making fortunes in the stock market or trading in the Japanese Yen or whatever, and you never seem to make more than a moderate return each year at the very best? I wondered that for many years myself. So what is the best stock market investing advice?
I always asked myself the question, "What are these people doing that they can make fortunes in the market and I can't even hit my butt with either hand? I always heard that you can't time the markets. And the most common investment advice was to find a well-managed company and hold it for long term growth. But if that was the case, then how do some people make fortunes in the markets while the vast majority of investors make moderate to poor returns? Why do Warren Buffet and George Soros have fantastic reputations for producing extraordinary returns? If the markets can't be timed, why do they always seem to be able to pick the tops and bottoms better than the average money manager?
Twenty-five years ago I started searching for methods that would not only outperform the markets but also pull out huge profits. If one learns from their mistakes, I was becoming one of the smartest investors ever, at the cost of not making any money! I learned every technical investment method that I could get my hands on. Elliot Wave theory, moving averages, pattern recognition, momentum, stochastics, Bollinger Bands, timing oscillators, Fibanocci retracements, divergences. You name it, I learned it, trying to find a consistent method to produce profits.
Buy low and sell high! Can't get any simpler than that, yet I would hear great things about a company, invest in it and watch it go straight down. When I couldn't stand the pain any more, I would sell and take my losses. Inevitably, I would be selling out at the bottom. Of course that would mean I had usually bought at the top.
So what was my problem? I thought I was reasonably intelligent, as we all think we are, and I loved to invest. However, I was a constant contributor to somebody else's stock market profits. This went on for years. I kept hunting for that proven, tested trading system that would make me rich. I looked at every new "wonderful" investment program that was being touted, that promised "amazing results" with the divulgence of "never before exposed market secrets" and if you were lucky, these secrets were not even known by the Wall Street experts. Boy oh boy.
Being the wizard that I thought I was, the first thought that would come into my mind would be, "If this amazing secret was so spectacular, then why are you letting me buy it from you for a mere pittance of the profits that you could make for yourself by using it?" Clever reasoning I thought, but then I'd pay the money anyway.
Then My Investment Career Made A Complete Turnaround!
I discovered the Japanese Candlestick method. It was being hyped by an Investment Hyping firm. So I looked at it with the same skepticism that I did with all "wonderful" new investment programs. Except through all the hype, two unique aspects could be observed. With very little investigation, it was obvious that this trading methodology was not "new secrets" from Japan being suddenly exposed to the world. The signals had always been around. Nobody from the Western hemisphere ever took the time to investigate them, to see what made them so successful.
Also, the signals did not involve difficult formulas or extensive calculating processes to master the system. All that was required was to observe predetermined signals coordinated with some simple confirming indicators. Simple enough. IF the signals worked like they proclaimed they did, then past charts would have an inordinate amount of patterns that confirmed a change of direction when all the stars aligned.
As I did my normal research, it started to become evident that the signals could be seen an inordinately high percentage of the time at the turns in a price trend. I began to pay more attention to current signals.
I noticed that companies could be getting negative comments from analysts or the talking heads on the financial news stations commenting on how bad things were in that particular industry. Yet a bullish signal forming in those stocks would be followed by a continuing upward price movement after the buy signal appeared, no matter how many negative opinions were aired on the financial stations. This was not an unusual occurrence. It happened time after time.
After years of chasing the hot stories or the great recommendations from brokerage firms and not make any profits, the candlestick signals actually had me looking for stocks that were appearing to bottom out. What a unique concept! Buying at the bottom. Conversely, when a stock or an industry was being given great accolades in the media and a Candlestick sell signal appeared, it became very obvious that the sell signal was the correct indicator versus all the euphoric speculations on where the stock or the industry might be heading.
I was now looking for "buy" signals at the bottom and "sell" signals at the top. A complete turnaround from my early years of investing. But the profits were now consistently flowing into, not out of my trading accounts.
The signals demonstrated extremely high profit results year after year. Whether in stocks or commodities or any other investment vehicle, the results were inordinately impressive. Witnessing the different positions of the confirming indicators produced more refinement for eliminating the less productive signal formations. My "correct" trade ratio kept expanding. Profits kept compounding dramatically.
Learning the psychology behind accurate stock enter signals will truly alter your investment aptitude. You will start looking for "buy" signals in oversold stocks. You will start anticipating when to take profits in overbought stock positions. Remember, you are not being shown "secrets" of the investment world. You will be learning a trading program concept that will educate you on how the common investor thinks, then turn that thinking into huge profits. And you will learn how to do it without having to experience all the learning bumps that I did.
Coming around full circle, thinking what I would be thinking if I was reading all of this, is the same question that I would pose to all the other magnificently sounding investment programs that are on the market, "If this trading program is so great, why are you exposing it to everybody else?"
The One Major Drawback to Japanese Candlesticks.
Through the years it became apparent to me that the Candlestick trading signals were truly profitable trading indicators. So accurate that this system should be catching on like wildfire. However, the more I became convinced that the Candlestick methodology outperformed all other technical methods, the more I was surprised that very few people knew about its benefits. Very few. It was hard to find anybody who could intelligently converse about the signals. I can count on one hand the number of people that I could talk Candlestick trading with over the past ten years. And most of them had published books on the subject. The problem was that there was nobody to analyze my analysis, to confirm or reject what I saw in a signal formation. Essentially nobody knew how the Candlesticks worked and how positively effective they were.
It became apparent that this lack of knowledge would be detrimental in trying to establish a hedge fund using the Japanese Candlestick trading method. Convincing investors to invest in a fund that produces extraordinary returns, using Japanese Candlesticks, not a sophisticated sounding trading method, would be an uphill battle if trying to market to an uninformed public.
The truth of the matter is that teaching thousands of investors to utilize Candlestick investing will never affect any investments that the Candlestick Forum would be participating in. Each investor has their own specific areas of investment interest. Large cap stocks, bonds, grains, currencies, meats, options, and dozens of other investment vehicles will be the object of their investments. Even thousands of new Candlestick investors out in the investment arena would be a drop in the bucket compared to the many millions of investors in the world.
Take advantage of this candlestick investing knowledge. It will not take weeks or months to verify whether the signals work. They will prove themselves instantly. If you always keep in mind that the signals are the result of a change in investor sentiment, your road to extracting great amounts of profits from the markets will occur very quickly.
Stephen W. Bigalow