Stock Technical Analysis...Candlestick Charting

Technical analysis is not an exact science, and therefor the subject of much criticism. These so-called experts claim that, due to market efficiency, someone that uses technical analysis is doing little more than guessing. Technical analysis is a visual way to predict future of the stock/futures market based on the history of its trend. This trend can happen in a sudden rush or over a period of time. If you are a longtime investor knowing the fundamentals of the asset is important. For a trader, knowing the direction of the trend is essential. These so-called experts claim that, due to market efficiency, someone that uses technical analysis is doing little more than guessing. Market efficiency means that all the available information is already calculated in the stock prices, and that you can only guess how the price will behave in the future.

These experts might be right if it wasn’t for the fact that there are a significant number of traders who are able to consistently make profits in the stock/futures market. Technical analysis is one of the main tools they use. If technical analysis is a tool, than candlestick charting is the power that makes it run. There are many successful traders who utilize the technicals without candlesticks, however knowing just some of the candlestick patterns will make you more profits. Take for example the open and closing tick on a typical chart. What has happened between those two actions? A candle will light the way.


If we just start with the investing 101 concept that everyone knows. Buy low and sell high! So simple, yet why do so many fail to do it? Well one reason is most uninformed investors, get in much too late. Even a technical investor who does not use Candlestick Charting is playing a guessing game of sorts.
The Chinese invented the market concept, and the Japanese perfected charting techniques with the use of the candlesticks.
It is easy to understand this complex system, if we simply break it down to the ticks on the chart you follow every day. We know that the lower tick is where the stock opened and the higher is where it closed. Now if we made the two lines parallel and connected them, what would we have? A candle. However, during that movement, the stock might have gone lower or higher then where it opened or closed, So our candle has formed a tail and a wick. Is it starting to make a little sense to you?

Take these examples:
1. Lets assume a stock opens two cents higher than it closed yesterday.
It later closes three cents higher than that. Should we get in? Not necessarily. Because as the candlestick showed us, even though it had a five cent swing from the day before, a long wick was created. This meant that it went even higher then it eventually settled on. That tells us that the pressure to go higher wasn’t strong enough. We will put it on our watch list, and keep a keen eye on it.
2.A few days passes with similar results. Suddenly there is a break in the resistance. The stock has formed a candlestick with a long tail. What does this convey? We might put a buy signal for a couple of cents higher, because the long tail tells us that the bulls are ready to take over.
3. Ideally you want to wait for clusters to form. Of course the greatest indicator is a long candle. One that opens and closes with hardly any wick or tail.
4.Remember that volume will also help to determine the right stock.

I don’t profess to being an expert, but I do know of some. I obviously don’t have the time to go into all the details now, but at my site Market Mentalist you will find all you need to know about investing online. There is access to some of the top trading systems available including Candlestick software, books, newsletters, and Forums. Also you will find the most up to date articles on Online Trading, including additional information on Stock Technical Analysis...Candlestick Charting . Whether you are an inquisitive novice or a seasoned pro Market Mentalist offers the online investment resource you just might be seeking