Western Technical Analysis

Presented by Tina Logan

Rather than debate the superiority of Japanese candlestick analysis or western technical analysis, the smart trader utilizes them both. Savvy traders blend the two types of analysis in an effort to maximize their profits. Candlestick patterns can help strengthen other Western technical signals. The Japanese candlestick chart is visually more representative of investor sentiment than a western price bar. In addition, candlestick reversal patterns can help identify the likely turn­ing points so traders can react quickly to changes in price direction. Western technical analysis is broader in scope. In addition to referencing the price bars, many books on western charting provide discussion of topics such as:

·       Volatility

·       Retracement of previous price moves

·       Drawing trendlines

·       Divergence between price and indicators

·       Support and resistance levels

·       Identification of large chart patterns, such as triangles and channels

Candlestick patterns provide a micro view of price action, while western sig­nals provide a bigger picture look at the chart. Traders can combine these strengths to develop highly profitable strategies.

Combining Eastern and Western Analysis

Traders must survive before they can thrive. A major challenge for new traders is simply lasting long enough in the markets to learn the ropes. Those who do survive the early years eventually move from trading with emotion to trading with technique and discipline. As they gain experience, their focus shifts from that of mere survival to risk management and increasing profitability.