Recognizing and Interpreting Candlestick Patterns

There are many candlestick patterns in the full spectrum of the Japanese candlesticks literature. It has been written that there are only about a dozen candlestick patterns that a trader has to learn about in terms of recognizing and interpreting candlesticks and how to apply that analysis to make trading decisions. I agree with that assessment given the need for the human to do the recognition and interpretation.

My preference is to use software to perform candlestick technical analysis. That way, I can focus more time on other matters of trading such as keeping track of company news and events, and monitoring the pulse of not only the company (and stock) but also the industry that the company is in.

As it would be ludicrous to have humans plot the charts manually, I feel that doing candlestick technical analysis is best left to computer software. In this age of technology, there is no reason to resort to human recognition of candlestick patterns. On the other hand, the humanís role is ultimately to look at the technical analysis results presented by the software and make the final judgement as it pertains to actual trading decisions.

Having said that, there are those who go one step further and say that trading should be totally automated without any human emotional and psychological interference. In theory that sounds good. In practice, Iím not sure such systems yet exist for the retail trader. That day may come sooner than we think.

In the meantime, I think using software to do the recognition and interpretation of candlestick patterns is the sensible thing to do. The application of the candlestick technical analysis results is left to human judgement. The trader decides whether or not to place the trade once presented with the option to do so as indicated by candlestick technical analysis.

More you might like

Trading Gold Stocks in 2009

This article examines various elements of importance for trading gold stocks.

Emotion Dominated Stock Trading

This article examines the domination of emotions over stock trading actions. Even if you know what to do, your inability to suppress emotions will lead to bad trading results.

Stock Trading Tug-of-War between Emotions and Technical Analysis

This article examines the continuing dilemma facing the stock trader: the tug-of-war between emotions and reasoning through technical analysis.

From Long-Term Investing to Short-Term Trading Ė How to Profit on the Stock Price Rise and Drop

This article presents the notion of migrating from a long-term buy-and-hold investing strategy to a short-term profit-making trading style, capitalizing on the rise and drop of the stock price (following the trend and profiting on the cycles).

Stocks look good in the rear view mirror

Here is a look at the stock comparison of two competing companies in year 2010. Baidu versus Google.



Visit the Camera Guy
to shoot your photos and videos.

Down by the bay



Define the universe and give two examples.

Share / Save
Provide Feedback

Share / Save    Provide Feedback