High Profit Patterns Enhanced with Candlestick Signals

High Profit Patterns Enhanced with Candlestick Signals

The effectiveness of candlestick signals stem from one basic factor. Human emotions! When applied to investment decisions, human emotions produce signals. Technical analysis, in general, is the result of price patterns forming recurring patterns. The ebb and flow of investor decision-making processes have produced a multitude of technical indicators. The utilization of these indi­cators is the result of recognizing statistically favorable price movements. Indi­cators, such as stochastics, Fibonacci numbers, Elliot Wave, and many other technical analytical tools exist because they identified recurring price patterns.

Most technical analysis is the anticipation of price behavior at specific levels. The Fibonacci investor is expecting something to occur at the 38% retracement, 50% retracement, or the 62% retracement level. The ‘stochastics’ investor will buy when the slow stochastics and the fast stochastics cross each other in the oversold condition. An investor, utilizing trend-lines, will buy or sell when a price confirms a reversal at those levels.

A major benefit of candlestick signals is the illustration of what investors are doing right at that time. Applying candlestick signals to other technical methods dramatically increases the probabilities of being in a correct trade. Instead of anticipating, then waiting for confirmation of a trend reversal at a major technical level, an investor can immediately analyze what investor senti­ment is doing right at that level. This allows for entry and exit strategies to be implemented at opportune times or levels.

An additional benefit of the candlestick signals is the ability to recognize a high-profit pattern in the process of forming. Having the ability to visually ana­lyze a high-profit pattern formation allows for the preparation of entering a trade at a low-risk level. Entering a trade in the early stages of a reversal pattern makes the stop-loss strategy easier to implement. A failure of the pattern permits an investor to close out a made with minimal losses.

Recognizing the components of a high-profit pattern allows an investor to take profits when it is time to take profits. It also allows the investor to re-enter the trade when the pattern indicates further profitability. This ability greatly reduces the risk factors.