A little confused about understanding candlestick charts
- Thread starter johnstac
- Start date
Here is a well-organized resource for understanding the psychology behind candlestick price patterns:
http://www.daytradingcoach.com/daytrading-candlestick-course.htm
...and common P/A trading patterns with positive expectancy:
http://www.daytradingcoach.com/daytrading-technicalanalysis-course.htm
I studied Al Brooks' "Reading Price Charts Bar By Bar" several times. The first time I had to skip quite a bit because I simply didn't understand a lot of it. I extracted what I understood and began doing my own research (10-20 hours a week outside RTH) to develop a trading plan.
Later after I had a lot more real-time price action trading experience and was actively trading a well-defined plan, I picked up his book again and found that I understood every concept he addressed. Imagine taking a beginner's French course, attempting to read a serious French literary work, then taking three more semesters of French, spending three months living with a family in France, and reading the French work of literature again. The Brooks before/after experience was that different.
So you can see how his book would get a lot of poor reviews. Especially because the acronyms he uses in the book aren't explained up front (they're in a glossary in the back of the book) and the charts are nearly microscopic.
Those who've been programmed to expect instant gratification without hard work (95% of traders?) will throw the book down in frustration and feel very superior and self-righteous telling everyone else that it's piece of crap. Consider this a major asset for the few who are willing to study hard and put in the time to prepare themselves well.
Al Brooks' book is an encyclopedia of price action, covering concepts from the simplest to the most advanced. If you're new to trading or if you've been trading unprofitably for any length of time, mastering Brooks concepts will be extremely difficult and trading the way Brooks encourages will be quite uncomfortable at first.
The payoff, if you persevere and learn how to function in an environment of constant uncertainty, will be far more than you imagined possible.
Alan Farley's "The Master Swing Trader" is another top level study in technical price analysis and also an advanced read. Farley and Brooks basically cover the same concepts, with Farley focusing on longer time frames.
The main point of my post was to find out how much information on candlesticks is necessary to trade price action. Clearly there is a ton of info out there. When I started reading posts about Al Brooks and his work and Steve Nison and all of his books on candlesticks, I began wondering, "What is to much?" Maybe reading all of it is not enough. Maybe reading any of it is too much. You get what I mean? How important is the subject of candlesticks as it relates to price action and how much do I need to learn on the subject?
You need to learn enough until you're consistently profitable. How long the takes and how much learning is required is different from one trader to another trader.
There are hundreds of different price action methods and Japanese Candlestick analysis is just one of them. It's importance is only relevant to the trader that's interested in it.
Just as a point of interest, those who invented candlestick charts don't use them anymore. Even though most printed charts and also those on the local (Japan) sites are candlesticks, those who still use candlestick analysis here in Japan are almost nowhere to be found. If you go to a Japanese bookstore, there might be one 'dusty' book on candlestick analysis still on the shelf. Again, this is just FYI. If you like them and can make money with them, that's fine.
Japanese Candlesticks was invented a few hundred years ago. Move info @ http://en.wikipedia.org/wiki/Homma_Munehisa
Therefore, of course they don't use them anymore...the inventors are all dead and if one of them was still alive, he'll be the oldest person to ever lived.
Seriously, I know you've implied that there aren't any Japanese traders that use Japanese Candlestick Analysis. That's false. I personally know 1 institutional trader in Japan and 5 retail traders in Japan that uses Japanese Candlestick Analysis. Yet, its just a tool to them as it was originally designed and its not their primary trade method nor their primary analysis as it was originally intended for use.
The difference is that there are more traders in the Western hemisphere that used Japanese Candlestick Analysis in comparison to those in Asia. The primary reason is that Japanese Candlestick Analysis was (still is) heavily promoted in the west by folks like Steve Nison whereas it has very little promotion in in Asia itself even though it originated in Asia. There just wasn't a market in Asia like it was in the west because the marketing was primarily aimed at retail traders. The secondary reason is that it was initially promoted in the west as a primary trade method whereas in Asia its used as a secondary analysis to support market context as it was originally designed.
Independent day trading is much more popular in the west than it is in Asia as a whole or Japan itself. Remember those day trading commercials in the 1990's in the United States...I don't remember commercials as such in Japan nor heard of any in Japan from my Japanese friends during the same time period.
Last of all, in my opinion, some of the best testing of Japanese Candlestick Analysis have been performed by academia of Japan. The comparison to academia in the west is at least the Japanese understand its an analysis whereas the west applies it as a trade method.
As soon as someone understands the difference between Analysis versus Trade Method...they'll apply Japanese Candlestick Analysis as it was originally intended along with seeing its usefulness.
P.S. I myself still use the phrase "trade signal" or "trade method" but have to remind myself here and there it was not originally designed as such.
>wrbtrader
As English is not your native language, you might want to enroll at Berlitz to learn how the word 'almost' can be used.
As English is not your native language, you might want to enroll at Berlitz to learn how the word 'almost' can be used.
Quote from wrbtrader:
This is not an English class.
Regardless, you fully understood exactly what I stated and implied (pun intended). That's important.
But you didn't understand what I had said, and that's why you need English lessons!!