How To Eliminate False Candlestick Signals

candlestick signals

The first mistake most traders make when using candlestick charts is assuming that every reversal pattern that forms on the chart will lead to a market reversal. Big mistake! In fact, for every candlestick pattern that signals a reversal there is an 80 percent probability it will be an invalid/false signal. Candlestick charting and trading on valid signals is an extremely profitable trading method if you know how to interpret what you see on the chart, but finding reliable information explaining how to correctly implement the techniques is next to impossible.

Many websites post information about candlesticks and reversal patterns but they fail to teach a profitable method to use candlesticks. Virtually none talk about the fact that most of those signals will be false. This leads to the misconception that all one has to do is trade on reversal patterns alone to profitably trade with candlesticks. Any wonder you're losing money using the methods your candlestick guru taught you while he claims he is winning using those same methods?

Many candlestick websites delve into the history of candlestick charting explaining how this method of trading is centuries old and therefore a tried and true, reliable method of trading. The problems are that today’s markets are completely different from centuries old markets and candlesticks were developed for ancient commodity markets - not present day forex or stock trading.

The trader who wants to benefit from modern day candlestick trading has to utilize modern, more advanced, methods. These methods are not only are compatible with today’s markets but are equally as simple to learn and apply.

Advanced methods don’t have to mean they are difficult - especially when using candlesticks. The method taught in Candlestick Trading for Maximum Profits is completely based on price action. There are no complicated indicators to learn or use and the learning curve is very quick.

If you would like to learn how candlestick charting could help your trading you need a solid course of study. Candlestick Trading for Maximum Profits is the course we recommend.
 

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Posted on July 21, 2011 12:51 by Tom Herod
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Swing Trading With Candlesticks

Candlestick patterns

The recent market action has not been kind to long term investors with prices going up and mostly right back down again. But to the swing trader this market volatility has really been nice to trade. Long term holders have seen little increase or worse in their portfolios while the swing trader has been able to take advantage of the ups and downs the market has given us.

While candlestick reversal patterns are a great tool to find changes in trends for the longer term trader to ride out they really shine when used to swing trade.

What is Swing Trading?

Swing trading is anticipating a move either after a breakout or a reversal pattern that forms at support or resistance and staying with the stock until it gets to the next level of support or resistance. It’s a shorter term trading technique that takes smaller profits than riding a trend but these profits add up quickly. Coupled with an exit strategy that really limits losses, swing trading allows the trader to maximize their profits.

With present market conditions the long term, buy and hold trader might be lucky to realize a profit of 10% in six months time as their stocks go through their periods of ups and downs. The swing trader however takes advantage of these price swings by entering and exiting with each move and taking the profits.

Candlestick Patterns to Swing Trade

Long trades are usually identified by the bullish engulfing and morning star patterns that form at points of support. High volume doji’s and hammers at support can also be profitable but confirmation is needed for these candles with future price action.

To trade short, look for bearish engulfing, evening star or piercing patterns at resistance. Again, high volume doji’s and hammers at resistance can also give an early warning of a drop in price but confirmation is necessary. If you don’t trade stocks short candlesticks can also give you accurate exit signals for your long trades by paying attention to the same.

The Secret to Profitable Swing Trading

You can employ these candlestick swing trading techniques successfully in all market conditions. The secret is to follow the market. There is an old saying among traders that goes; “A rising tide lifts all boats”. This is another way of saying that if the market is going up then so will most stocks and vice versa. Watch the broader markets as you trade. If you stay in step with the price action of the broader markets then your swing trading will be much more profitable.

While candlesticks can and are used by profitable longer term traders the real magic comes while swing trading. If you are a swing trader try using candlestick charts to analyze your potential trades. Once candlesticks are mastered you’ll find that they’re not only easier but also much more profitable.

Learn more...
 

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Posted on July 20, 2011 07:51 by Tom Herod
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Simple Candlestick Reversal Patterns Explained

Candlestick tradingBullish and bearish engulfing, morning and evening star patterns, and the bullish and bearish kicker have become well known among traders everywhere as common candlestick reversal patterns. There is more but they are some of the more popular patterns to trade.

Reversal patterns have become synonymous with candlestick charting but if you’re using them as a tool for trend reversal recognition only you’re missing half of the benefit candlesticks give.

Trend trading is undoubtedly the safest method of active trading. We’ve all heard the old adage, "the trend is your friend" and it’s as true today as was when it was first uttered. Candlestick reversal patterns can alert the trader to trend continuations with as much reliability as any method available. The best part is it is also one of the simplest methods available today.

Over a year’s time the market spends most of its time trending. Since most currencies and stocks follow the market doesn't it makes more sense trading with the trend than constantly looking for a reversal? Even if you’re a swing trader, you can ride the price through the next leg up and exit on the first bearish candle.

This method of trading works extremely well and is one of the methods taught in Candlestick Trading for Maximum Profits.
 

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Posted on June 21, 2011 10:54 by Tom Herod
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Not All Candlestick Reversal Patterns are Created Equal!

CandlesticksMost candlestick courses or books on the subject of candlestick charting will teach you the signals and maybe a little about using indicators to find a stock at the bottom or top of a trend. But what they don’t tell you that those same signals can happen at any point on any chart you look at. Just as an example, lets take the bullish engulfing reversal pattern (shown at left).

The bullish engulfing pattern is an extremely powerful reversal signal and most will tell you that. They show illustrated charts that will demonstrate the bullish engulfing pattern that formed prior to a nice uptrend as it was found at the bottom of the previous downtrend. Well, it’s easy to show you what’s happened in the past!

What they don’t tell you is, this same pattern can show itself anywhere on a stock chart…not just at the bottom! Check it out for yourself! Find a candlestick chart of a stock that trends up and down and see for yourself. You’ll find the bullish engulfing pattern in the middle of up trends, tops of trends, down trends and bottom of trends and only one of those will get you into a profitable trade. The same is true for all candlestick reversal patterns.

Anything worth doing is worth doing right. Learn the correct way to interpret candlestick charts.
 

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Posted on June 20, 2011 08:50 by Tom Herod
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Time To Learn How To Swing Trade

swing tradingSwing trading is anticipating a move either after a breakout or a reversal pattern that forms at support or resistance and staying with the stock until it gets to the next level of support or resistance. It’s a shorter term trading technique that takes smaller profits than riding a trend but these profits add up quickly.

Coupled with an exit strategy that really limits losses, swing trading allows the trader to maximize their profits.

With present market conditions the long term, buy and hold trader might be lucky to realize a profit of 10% in six months time as their stocks go through their periods of ups and downs. The swing trader however takes advantage of these price swings by entering and exiting with each move and taking the profits.

Learn how to swing trade with candlesticks.

 

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Posted on June 19, 2011 20:27 by Tom Herod
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