Becoming a Profitable Candlestick Investor

Becoming a Profitable Candlestick Investor

Most investors do not have an investment plan. This is simple to confirm. Ask friends and associates how they find their investment picks. The answers will range across the board: a tip from a friend of a friend, an article about a company in a magazine, a news clip about a firm or product on CNBC, the number one stock pick from an investment newsletter. On top of it all, it is usually a combination of these and many other mishmash approaches. The performance is inconsistent. To make matters worse, if the performance is decent, there usually is no way to measure the successful sources. This book will provide you with strategies that will dramatically increase your investment returns. You will be exposed to techniques that teach you how to remember and utilize the signals, quickly.

The descriptions of the signals in this book will be provided in a "condensed" version. Again, the point is to educate you in an efficient, yet expeditious manner. There are other books on the market that will be recommended for your full learning process. Those books will be more descriptive in how the signals were named and the psychology behind their formation. The primary value of this book to you is learning how to produce consistent profits from the signals.

This book is divided into two sections. The first section is oriented towards

• Learning the signals.
• Evaluating the most profitable trades quickly.
• Learning what confirming indicators are the most effective.

The implementation of this information will be used to eliminate "false signals." Search results will be quantified for harvesting the trades with the greatest potential.

The second section focuses on how to maximize profits. This includes trading strategies that minimize the downside risk. You will learn how to close out losing trades with minimal loses and no emotional attachment. At the same time, profit maximization procedures and philosophies will be demonstrated when closing out profitable trades.

Creating Maximum Trade Probabilities

The Candlestick methodology focuses on the investor's main objective: How do I maximize profitability? There are always rationalizations that move away from this vital outlook. Common investment counseling states, "Long term investing is the only way to make good returns: you can't time the market." Or, "Find a strong fundamentally sound company and it will grow." These reasons are heard all the time. But that is usually the advice for a person who doesn't want to or can't focus on maximizing the returns with the minimum of risk—the point of investing.

Whether one is managing money for others or whether they are managing their own funds, the same basic question should arise each time an investment decision is required: "Is this the best possible place for my investment funds to maximize returns, based upon my risk tolerances?" The use of the Candlestick method keeps the investor focused on that question. The cultivation process is directed to finding the best place for investment funds. This step-by-step procedure (explained in Chapter 9) builds in a self-directing discipline for maintaining profit maximization.

To enhance those probabilities, you will have the benefit of reading about subtle signal variations that will keep you from losing money. You will be exposed to common mistakes that can be avoided when producing a profit maximization program. This book introduces you to software programs with excellent search capabilities. You will be exposed to search formulas that produce highly profitable trade situations in a matter of minutes. Step- by-step trade implementation procedures describe how to place all the probabilities in your favor. This is a powerful, common sense trading process that the signals create for the candlestick-educated investor. Not only does Candlestick analysis provide a mechanical investment game plan, it produces a blueprint for establishing a non-emotional investment procedure.

Fundamental Analysis Versus Technical Analysis

Fundamental analysis influences 90 percent of all investment decisions. For the long-term investor, it is the reasonable basis for committing long-term funds. Yet, is it the way to maximize returns? Consider what is involved when analyzing the future potential of a stock price. Projecting the future of a company's capabilities has hundreds of different variables. Is the management capable? Is the product line sustainable? What are their competitors doing? How are government regulations affecting this industry? Any one of many fundamental elements can change at any time, creating a reversal in the growth potential of a company.

Most financial "experts" advise buying the good quality company and hanging on to it for the long term. The stock market has averaged approximately an 11 percent return annually over the course of history. These statistics have been skewed during the past four years. Until 1997, the market never had more than two years in a row of double-digit growth. Most investors today have not experienced a severe bear market. A bear market does not give a hoot about fundamentals. When the market tide goes down, all corporate ships are lowered. Conversely, the worst stocks in the world can get a boost when the markets are skyrocketing.

Ultimate Criteria for the Optimal Trading Program

• Proven and tested results.
• Easy to identify reversal indicators.
• Elimination of emotional decision-making aspects.

Using any trading discipline will produce greater returns than the normal non-structured investment approach. Using the Candlestick signals, however, will produce a greater profit-potential investment strategy than you can imagine. Hundreds of years of honing the visual identification process the initial form of statistical analysis provide a well-founded investment stratagem. You can reasonably assume that the percentage of positive results from Candlestick signals is significantly worthwhile. Otherwise, those signals would not be in existence today.

Additionally, it is extremely useful to implement a trading strategy that can be documented and analyzed. Each new trade provides an analytical tool. What went right with this trade? What went wrong with this trade? The post trade results can be compared to existing results produced by similar signal formations. An investor should be able to evaluate each trade in order to better the results of the next trade. Being able to identify the potential of a high- probability trade, days ahead of the other market participants, has obvious advantages. The downside risk is reduced. The signals alert you to the first change in investor sentiment. You get into and out of positions before the masses. Upside potential is enhanced, exploiting the next round of buying by the investment analysts.

"Why isn't everybody using Candlesticks?" You will be asking that same question when you finish this book. Candlesticks provide all of the elements needed for successful investing:

• They identify where the buying or selling is occurring.
• They are accurate enough to still be in use 400 years after their beginning.
• They eliminate emotion and instill discipline.
• They enhance existing technical methods.
• They tell you when to get into and out of a trade.

Once you finish this book, your mental investment procedures will be radically altered. Mastery of the Candlestick technique will provide the mindset of a successful professional investor. You will also gain valuable insights into human nature. You will be able to cash in on low-risk, high- potential opportunities overlooked by the common investor. The inherent nature of the signals instills common sense disciplines. You are about to be exposed to the most refined signal generating system in all of financial history. Hundreds of years of observation have produced results with a system that has thrived through the centuries.

Are you tired of settling for mediocre returns? Does the rationale of losing less than what the indexes lost not impress you anymore? Do recommendations from major Wall Street brokerage firms appear to have lukewarm potential by the time they are presented to you? Why settle for watered down investment programs when you can pinpoint exact bottoms and tops? Why forego profit potential that can be extracted from the markets directly into your pocket? The effort required to master the Candlestick technique is minimal when going about it in a structured manner. Practical insights derived from the visual aspects of the signals will point out the real profit potential of investing.

The following chapters explain the formations, the psychology behind the formations, and give illustrations of the signals. Read these sections at your own pace. It is not necessary to remember each signal and the psychology behind it to a high degree. Learning how the signal is created aids in remembering the signal, but it is not required for making profits. Of the 40 or so signals, there are approximately ten major signals. Become familiar with what the signals look like. Later chapters outline the process for learning the signals easily and rapidly.