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 human’s 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, I’m 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
Execute Winning Trades and Boost Your Trading Success
This article examines the elements of successful stock trading. A stock trading method to execute winning trades and to achieve trading success. A trend following system based on candlestick technical analysis.
React to Technical Analysis Indicators to Trade the Rise and Drop in Stock Prices
This article examines the approach of trading stock price cycles as a means to achieve repeated trading profits in short-term trading. Take what the stock markets will give you.
What to Look For in a Technical Analysis System
This article covers the key attributes to look for in a technical analysis system.
Trading Research in Motion post Q1/2009
This article covers my observations on the trading of Research in Motion. With its huge rise leading up to and following the latest earnings announcement, where is the stock headed in the near term?
