High Profit Candlestick Patterns

Candlestick patterns have been around for approximately 300 years and are therefore one of the earliest documented forms of technical analysis. As testament to their effectiveness, many traders still use them to this day. Thus they are often referred to as "high profit candlestick patterns." But to actually have that term live up to its name, a deeper understanding is required.

The novice trader begins his or her study of Japanese candlestick patterns by becoming educated in the strange names and their corresponding patterns.

Typical of the Eastern approach to things, candlesticks have very poetic titles such as "Shooting Star," "Dark Cloud Cover," "Dragonfly Doji," "Evening Star," "Gravestone Doji," "Abandoned Baby," etc.

There are a multitude of candlestick patterns, but most students focus on a small number of the most common patterns - usually somewhere between 10 to 30 patterns.

As an aid to memorize them, it's typical practice to create flash cards with a picture of the bar pattern on one side and the name of the pattern on the other side.

This is a good way to become familiar with the basic patterns, but it is certainly not enough to use them for high profit trading.

One of the most overlooked aspects of finding high probability and high profit candlestick patterns is to make note of the context in which the pattern occurs.

For example there are many Japanese candlestick patterns that indicate a reversal of price. However, the trader must note where in the larger chart pattern that reversal pattern occurs. He or she must consider the bigger picture of the chart, especially the trend and momentum in the market at the time.

Candlestick reversal patterns against the larger trend can signal a very short term shift in price, or even just a stalling of price before the market continues in the direction of the long-term trend.

Learning to read candlestick patterns is time well spent. However it is only one aspect of learning to trade using technical analysis and should not be used in isolation. One must also learn to read trends, momentum, cycles, support/resistance and fractals (other time frames/scales) so they can evaluate how the candlestick pattern fits into the entire trading landscape.

Dr. Barry Burns teaches traders how to make money with High Profit Candlestick, is the owner of Top Dog Trading and was featured as a case study in the book "Using Candlestick Charting - How to Earn High Rates of Return Safely."

He has been the featured speaker at DayTradersUSA, and developed a 5 Day Course for WorldWideTrders. Dr. Burns has been a headlining guest speaker for the Market Analysts of Southern California, given seminars around the country at many Wealth Expos as well as many Traders Expos, been interviewed on the Robin Dayne Elite Masters of Trading Radio Show, and is the former moderator of the FuturesTalk chat room.

Article Source: http://EzineArticles.com/?expert=Barry_Burns