Candlesticks Summing Up

Summing Up

I’ve done a lot of summing up in the previous two chapters, because once you’ve trawled through the patterns and you understand the psychology behind them the main thing to do is to try and apply it in real life. It’s a criticism that I’ve often seen levelled at the technical analysis community: that it all reads well but how am I going to use it?

Hopefully you are now empowered sufficiently to feel that it is something worth trying out!

The best way I can sum up this book is to say this: hopefully you don’t see a candlestick chart as a “one stop shop” signal-generating tool. It’s not just there to be a robot, chucking out buy and sell signals. It’s not as simple as that, I’m afraid. It tells you where the market has been and whether this is the result of strong buying or selling, or a change of balance between these two conditions.

You need to treat it as such; it’s telling you where a market has been, and if you know what’s been going on up until the present, you can at the very least have an idea as to where things may go in the future. If the Australian cricket team have won 18 out of their last 20 test matches there’s a good chance they’ll do well in the next Ashes series, no? (Unfortunately!)

I find it incredible that traders and money managers can make decisions on a stock or a market without considering the sentiment in the market at the time, and I strongly believe that a chart, especially a candlestick chart, is one of the best ways to get a snapshot of sentiment, and any changes that may be occurring as far as the balance of bulls and bears is concerned.

I said at the very beginning of this book that my ideal reader is someone who is a cynic of technical analysis, and my hope is that this book will have converted them.

The tongue was in the cheek a bit when I wrote this. What I really hope is that the biggest cynics out there will at least identify that there’s some value in gauging market sentiment, and that candlestick analysis can do this as well as anything.

Good luck with whatever you’re doing in the markets, and hopefully candlesticks will now be a part of that!