Candlestick Pattern Recognition and Candlestick Indicators - What's the verdict?
Martin Thomas
Expert Author Martin Thomas
Candlestick indicators are very old Japanese system of divination price. Candlestick charts can be traced back 500 years of rice trade in Japan. Farmers use the beacon pattern recognition to try and identify when the best time to put their stored rice for sale.
It is widely popular system in use today. As a trader, I am very technical and pursue science and empirical evidence. However, I must admit, that a successful trading system should be perfect to be profitable. Using a simple money management, even 4 of 10 system can be profitable if your losses are small and your wins are great.
The essence of the candlestick pattern recognition can be seen as a kind of a study on price behavior using pivot points. The idea is that the price fluctuation chart will behave in a similar and predictable manner when small or large changes in direction will occur.
Candlestick Charting largely relies on the principle of buyer or seller exhaustion. When, for example, price increases in small loop, say a day, the idea is that you will always be only a limited amount of current client available at this price level. When these customers are dry, the price is somewhat predictable. Usually it opens and closes the creation of high-low long full red tape. This is logical because, as exhaustion approaches, the enthusiasm for buying is still there, but as a long bar develops, it closes much lower. This can usually predict the price reversal.
Candlestick charting is not accurate as a computer. It will be right 10 times out of 10. However, it would be right very often and it's all good trader to profit regularly.
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