Japanese candlestick picks and charting is a hundreds of years old trading strategy that was employed in the Far East for over 400 hundred years. The methodology was developed in the early 1700s in the Dojima Rice Exchange in Osaka, Japan for the trading of rice futures vouchers.
The concepts of the strategy were formalized by Japanese businessman Munehisa Homma. Mr. Humma stored in depth historical price records and findings of investor mindset. Mr. Homma was reputed to have accrued some considerable fortune. No one knows definitely and he may have passed away a broke trader. In otherwords, so far as we all know, the development of candlesticks could have been one vain endeavor by a crazy man to make money who eventually failed. Needless to say people that sell candlestick trading books and software are more than willing to propagate the rumor that Mr. Humma became rich but no one has produced reputable information verifying this rumor.
Candlestick charting was brought to the West by Steve Nison, with the publication of his book Japanese Candlestick Charting Techniques in 1991. Ever since then, candlestick charting has turned into a commonly accepted trading tool. Nearly all serious stock market charts have included candlestick charts as an option.
So what you just read about candlestick charting sounds neat. What a great story. But how about making money with candlesticks? Don't waste your time.
When I first began trading, I lost thousands of dollars using candlestick charting.
Fundamentally, candlesticks are no better than any one technical analysis tool. Some one say they are actually worse.
The problem with candlesticks is that they are one day patterns. Some candlestick patterns are 2 days. Fewer are 3 days. There are even some 4 day candlestick patterns.
Here's the question to ask yourself. Is it possible to predict the future price direction of a stock or market by looking at only 1, 2, or 3 trading days? If you said yes you are crazy. You do not know what you are talking about.
Longer term patterns trump shorter ones. Technical analysis tools like moving averages, MACD, stochastics, volume, and even most chart patterns take weeks to months to form. Even with using just 50 and 200 day moving averages, you are looking at 50 or 200 days worth of trading activity in order to predict future price direction. This works. This is establishing a trend over many weeks, months, and even years in order to predict investor psychology in the current market environment. The longer term technical analysis tools trump candlesticks because they form over much larger periods of time and larger pattern formations always trump shorter ones. This is not a subjective opinion, it's objective fact. Anyone who thinks that 1 to 4 days of price movement can be used to predict good size moves in stocks is someone who has never tried.
This is not to say that candlestick patterns are useless. But here's how I would rank them in terms of importance:
1. Downtrend channels, Head and Shoulders, and many other chart patterns.
2. Volume
3. Moving averages
4. MACD
5. Stochastics
6. Donchian Channel / Sar
7. 52 week high, 52 week low, 3 month high and low
8. Seasonality
9. Candlestick patterns
10. Astrology trading
Don't get me wrong. All my stock charts are drawn with candlesticks because I can visualize them easier than High / Low bars. But using candlesticks to visualize a day's price movement and using candlesticks to predict future price direction are two completely different things.
There's a reason that candlesticks were used 400 years ago and ultimately they died out.
The idea of digging something out of a 400 year old trash can and then romanticizing it as if the Japanese 400 years ago were smarter and better traders than we are today is nonsense. But I do admit, it's great marketing: "400 Year Old Secret Revealed Inside The Dead Sea Scrolls - Took 5 Linguistic Experts 10 Years To Translate!" or something dramatic like that. Great story that really sells, but as a price prediction stand alone tool it's pretty pathetic.
If all the tools we have today including computers, these Japanese had 400 years ago, I'm confident that even they would not be using their own candlesticks.
Candlesticks were created as a by-product of their time. The people who created them couldn't even make a computer, a car, or other engineering feats which require mathematics. In fact, many people 400 hundred years ago in Japan thought that their emperor was a god and only they ruling class was educated and even that was pathetic compared to Western civilization.
Imagine if a worm hole took a candlestick trader from 400 years ago, and planted him in a modern day trading room today. You'd have a guy in a robe scratching candlesticks on parchment and charting maybe 20 stocks and markets in a day. Compare that to a guy sitting in front of a computer scanning over 20,000 charts in real time looking at 8 other technical analysis tools (everything I listed above) beyond just candlesticks, and using sector rotation and inter-market analysis to make a prediction on which way a market was headed, and doing it all before the guy with the parchment was done scribbling his first candlestick. Now tell me the 400 year old Japanese candlestick trader wouldn't gladly use his parchment as toilet paper after seeing what a modern day trader can do.
Japanese candlestick picks and charting is a hundreds of years old trading strategy that was employed in the Far East for over 400 hundred years. The methodology was developed in the early 1700s in the Dojima Rice Exchange in Osaka, Japan for the trading of rice futures vouchers.
The concepts of the strategy were formalized by Japanese businessman Munehisa Homma. Mr. Humma stored in depth historical price records and findings of investor mindset. Mr. Homma was reputed to have accrued some considerable fortune. No one knows definitely and he may have passed away a broke trader. In otherwords, so far as we all know, the development of candlesticks could have been one vain endeavor by a crazy man to make money who eventually failed. Needless to say people that sell candlestick trading books and software are more than willing to propagate the rumor that Mr. Humma became rich but no one has produced reputable information verifying this rumor.
Candlestick charting was brought to the West by Steve Nison, with the publication of his book Japanese Candlestick Charting Techniques in 1991. Ever since then, candlestick charting has turned into a commonly accepted trading tool. Nearly all serious stock market charts have included candlestick charts as an option.
So what you just read about candlestick charting sounds neat. What a great story. But how about making money with candlesticks? Don't waste your time.
When I first began trading, I lost thousands of dollars using candlestick charting.
Fundamentally, candlesticks are no better than any one technical analysis tool. Some one say they are actually worse.
The problem with candlesticks is that they are one day patterns. Some candlestick patterns are 2 days. Fewer are 3 days. There are even some 4 day candlestick patterns.
Here's the question to ask yourself. Is it possible to predict the future price direction of a stock or market by looking at only 1, 2, or 3 trading days? If you said yes you are crazy. You do not know what you are talking about.
Longer term patterns trump shorter ones. Technical analysis tools like moving averages, MACD, stochastics, volume, and even most chart patterns take weeks to months to form. Even with using just 50 and 200 day moving averages, you are looking at 50 or 200 days worth of trading activity in order to predict future price direction. This works. This is establishing a trend over many weeks, months, and even years in order to predict investor psychology in the current market environment. The longer term technical analysis tools trump candlesticks because they form over much larger periods of time and larger pattern formations always trump shorter ones. This is not a subjective opinion, it's objective fact. Anyone who thinks that 1 to 4 days of price movement can be used to predict good size moves in stocks is someone who has never tried.
This is not to say that candlestick patterns are useless. But here's how I would rank them in terms of importance:
1. Downtrend channels, Head and Shoulders, and many other chart patterns.
2. Volume
3. Moving averages
4. MACD
5. Stochastics
6. Donchian Channel / Sar
7. 52 week high, 52 week low, 3 month high and low
8. Seasonality
9. Candlestick patterns
10. Astrology trading
Don't get me wrong. All my stock charts are drawn with candlesticks because I can visualize them easier than High / Low bars. But using candlesticks to visualize a day's price movement and using candlesticks to predict future price direction are two completely different things.
There's a reason that candlesticks were used 400 years ago and ultimately they died out.
The idea of digging something out of a 400 year old trash can and then romanticizing it as if the Japanese 400 years ago were smarter and better traders than we are today is nonsense. But I do admit, it's great marketing: "400 Year Old Secret Revealed Inside The Dead Sea Scrolls - Took 5 Linguistic Experts 10 Years To Translate!" or something dramatic like that. Great story that really sells, but as a price prediction stand alone tool it's pretty pathetic.
If all the tools we have today including computers, these Japanese had 400 years ago, I'm confident that even they would not be using their own candlesticks.
Candlesticks were created as a by-product of their time. The people who created them couldn't even make a computer, a car, or other engineering feats which require mathematics. In fact, many people 400 hundred years ago in Japan thought that their emperor was a god and only they ruling class was educated and even that was pathetic compared to Western civilization.
Imagine if a worm hole took a candlestick trader from 400 years ago, and planted him in a modern day trading room today. You'd have a guy in a robe scratching candlesticks on parchment and charting maybe 20 stocks and markets in a day. Compare that to a guy sitting in front of a computer scanning over 20,000 charts in real time looking at 8 other technical analysis tools (everything I listed above) beyond just candlesticks, and using sector rotation and inter-market analysis to make a prediction on which way a market was headed, and doing it all before the guy with the parchment was done scribbling his first candlestick. Now tell me the 400 year old Japanese candlestick trader wouldn't gladly use his parchment as toilet paper after seeing what a modern day trader can do.
Japanese candlestick picks and charting is a hundreds of years old trading strategy that was employed in the Far East for over 400 hundred years. The methodology was developed in the early 1700s in the Dojima Rice Exchange in Osaka, Japan for the trading of rice futures vouchers.
The concepts of the strategy were formalized by Japanese businessman Munehisa Homma. Mr. Humma stored in depth historical price records and findings of investor mindset. Mr. Homma was reputed to have accrued some considerable fortune. No one knows definitely and he may have passed away a broke trader. In otherwords, so far as we all know, the development of candlesticks could have been one vain endeavor by a crazy man to make money who eventually failed. Needless to say people that sell candlestick trading books and software are more than willing to propagate the rumor that Mr. Humma became rich but no one has produced reputable information verifying this rumor.
Candlestick charting was brought to the West by Steve Nison, with the publication of his book Japanese Candlestick Charting Techniques in 1991. Ever since then, candlestick charting has turned into a commonly accepted trading tool. Nearly all serious stock market charts have included candlestick charts as an option.
So what you just read about candlestick charting sounds neat. What a great story. But how about making money with candlesticks? Don't waste your time.
When I first began trading, I lost thousands of dollars using candlestick charting.
Fundamentally, candlesticks are no better than any one technical analysis tool. Some one say they are actually worse.
The problem with candlesticks is that they are one day patterns. Some candlestick patterns are 2 days. Fewer are 3 days. There are even some 4 day candlestick patterns.
Here's the question to ask yourself. Is it possible to predict the future price direction of a stock or market by looking at only 1, 2, or 3 trading days? If you said yes you are crazy. You do not know what you are talking about.
Longer term patterns trump shorter ones. Technical analysis tools like moving averages, MACD, stochastics, volume, and even most chart patterns take weeks to months to form. Even with using just 50 and 200 day moving averages, you are looking at 50 or 200 days worth of trading activity in order to predict future price direction. This works. This is establishing a trend over many weeks, months, and even years in order to predict investor psychology in the current market environment. The longer term technical analysis tools trump candlesticks because they form over much larger periods of time and larger pattern formations always trump shorter ones. This is not a subjective opinion, it's objective fact. Anyone who thinks that 1 to 4 days of price movement can be used to predict good size moves in stocks is someone who has never tried.
This is not to say that candlestick patterns are useless. But here's how I would rank them in terms of importance:
1. Downtrend channels, Head and Shoulders, and many other chart patterns.
2. Volume
3. Moving averages
4. MACD
5. Stochastics
6. Donchian Channel / Sar
7. 52 week high, 52 week low, 3 month high and low
8. Seasonality
9. Candlestick patterns
10. Astrology trading
Don't get me wrong. All my stock charts are drawn with candlesticks because I can visualize them easier than High / Low bars. But using candlesticks to visualize a day's price movement and using candlesticks to predict future price direction are two completely different things.
There's a reason that candlesticks were used 400 years ago and ultimately they died out.
The idea of digging something out of a 400 year old trash can and then romanticizing it as if the Japanese 400 years ago were smarter and better traders than we are today is nonsense. But I do admit, it's great marketing: "400 Year Old Secret Revealed Inside The Dead Sea Scrolls - Took 5 Linguistic Experts 10 Years To Translate!" or something dramatic like that. Great story that really sells, but as a price prediction stand alone tool it's pretty pathetic.
If all the tools we have today including computers, these Japanese had 400 years ago, I'm confident that even they would not be using their own candlesticks.
Candlesticks were created as a by-product of their time. The people who created them couldn't even make a computer, a car, or other engineering feats which require mathematics. In fact, many people 400 hundred years ago in Japan thought that their emperor was a god and only they ruling class was educated and even that was pathetic compared to Western civilization.
Imagine if a worm hole took a candlestick trader from 400 years ago, and planted him in a modern day trading room today. You'd have a guy in a robe scratching candlesticks on parchment and charting maybe 20 stocks and markets in a day. Compare that to a guy sitting in front of a computer scanning over 20,000 charts in real time looking at 8 other technical analysis tools (everything I listed above) beyond just candlesticks, and using sector rotation and inter-market analysis to make a prediction on which way a market was headed, and doing it all before the guy with the parchment was done scribbling his first candlestick. Now tell me the 400 year old Japanese candlestick trader wouldn't gladly use his parchment as toilet paper after seeing what a modern day trader can do.
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