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First of all, the trader should know by heart the 15 or so major Japanese Candlestick Reversal Patterns. We tend to forget, perhaps, that the most important single feature of the Candlesticks is their ability (when properly interpreted) to forecast reversals of trend. Every trader wants to know what prices are likely to do tomorrow. All trading and investing is built on guesses, or predictions, or forecasts, or hopes, for tomorrow. The Candlesticks are especially adept at discovering the mindset of traders which, after all, is the driving force behind price action. There are several rather daring Japanese Candlestick Charting techniques for taking advantage of early knowledge.

Let’s take the example of the Shooting Star reversal pattern The Shooting Star looks very much like its namesake. It will appear after a long uptrend, far above the last previous price, way up there in price clouds, sporting a tiny head, a long tail, and will be pointing at the Earth.

It is a loner. We read the Shooting Star as a temporary price aberration which will very likely be cured soon, quite possibly even as soon as tomorrow. Some traders who are very much on the qui vive, upon seeing a Shooting Star forming, will wait until nearly the end of the trading day and if, just before Closing, it still appears that a Shooting Star will be the final pattern of the day, will buy a Put option on the spot. That’s ambitious trading. Others will wait until the next morning, to see whether prices opened lower, and if they do, then to take a bearish position at that time. Others will wait even longer. And some will do nothing, and the opportunity will evaporate.

Another one of the Japanese Candlestick Charting Techniques involves seizing upon a bullish opening such as occurred on March 6, 2009. Doji patterns and Spinning Top patterns had erupted after a very long downtrend. In concert with other indicators, the time appeared ripe to enter into a Long position, which seemed to be foolhardy at that time because, up to that point, price action in the major Indexes had been almost unremittingly Down. However, once again knowledge of the key Candlestick trend reversal patterns overcame some traders’ natural resistance; and those who did make the jump into Long positions were rewarded by a dramatic change in immediate trend and a very long and profitable rally in a bear market.

The point is this: being aggressive and striking “while the iron is hot” when strong reversal patterns appear is one of the more aggressive Japanese Candlestick Charting Techniques that can be very profitable. One of the keys is knowing by heart the 15 or so most reliable reversal patterns, and acting on them when they present themselves to you.

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The use of candlestick patterns to analyze the way that the market is going has become more and more prominent in recent years, as it becomes clear that the user-friendly way that the data is displayed is backed up by a tendency to accurately foreshadow future moves in the market. By reading candlestick patterns we can say that a stock is exhibiting signs of a likely future recovery, or a potential drop. This is because not only does it demonstrate what a stock has done on a given day, but also how the stock went about it.

The real strength of candlestick patters as a measure of stock behavior is in its simplicity. Over any given day, the amount of data which is accrued can be quite overwhelming, and in the final analysis not all of it is important. What any stock trader needs to know about a stock’s behavior on a given day is pretty simple and straightforward.

One must know how the stock opened and how it closed. It is also instructive to have an idea of the stock’s highs and lows. This is a marker for both the level and the durability of trader confidence in a stock.

The patterns which are created by the daily collation of candlestick diagrams will hint at what the stock is likely to do on the following day, and going forward for days or even weeks. Where a stock has been in decline for days on end, the data will be clearly represented as a series of black bars huddled closely together and usually with short lines at the top and bottom. Any discrepancy from this tendency can be clearly seen, and thus the reason for the stock’s under-performance can be accurately analyzed, leading to an increased level of confidence in future predictions.

If a stock has been performing quite well during the course of the day, but closes low, then this can often mean that there is justification for predicting that with a fair wind it might well start to rise.

Depending on the trader’s knowledge of the stock, they may well have an alternative explanation for this performance. What the candlestick patterns do for the trader in this respect is give a sound graphical backdrop to fortify or challenge their own instincts and conclusions. It is for this reason that stock traders put such store by analyzing past candlestick patterns.

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Behind every successful trader lies a very solid forex trade system. A system that are able to profit on each and every month. These traders have trained for very long period of time and have developed something that not everyone is having. This is the thing that can make one become a successful trader.

That will be patience and discipline. So many people are lack of patience and discipline that research showing that 90% of the forex traders are losing money. They tried the system to found out that it does not work and they tried to change the method of trading every time they tried to trade. A professional trader will follow the forex trade system strictly throughout a period of time. They will determine the success rate of the system and decide on whether to improve it or use it.

There is never a forex trade system that can perform 100% winning rate trades.

There are bound to have a few losing trades here and there. A good solid system will minimize the loses and rides the profits. It will have a good risk management system that can make every trade profitable.

Trading with emotions is a killer. A person holding a winning trade could be overtaken by greed and lose the trade. He holds the winning position and expecting it to rise and get an even bigger profit which in the end causes him to lose because the price has moved enough and reversed.

It is the same for fear. A person who is fear of losing more will continue to hold a losing position and hope it can break even or even win. This will cause the trader to lose more money as the money continues to move.

A person can be having one of the most solid forex trade system in the world, but 2 simple things will kill the trader and simply just make the system useless.

That will be greed and fear. Opposite of this is what I have told you about successful trader and their qualities that they trained for so long. That is patience and discipline.

Please note that this video is for training purposes and any dates are therefore not applicable or current

Steve Nison, the leading authority on candlestick charts and best-selling author with over 20 years industry experience, shares his groundbreaking approach to candlesticks for traders looking to spot opportunities in the Forex market using FX Options.

Harry S Dent provides a brief outlook for 2012. For further information on the outlook of Harry Dent, follow this link to view a free video interview: hsdent.com Copyright © 2012 HS Dent Publishing, All Rights Reserved