Futures Analysis – Reading the Future with Japanese Candlesticks
The name is definitely appropriate; futures analysis rests on being able to predict future movements with a reasonable level of accuracy. For many people, bar charts are their tool of choice; it is familiar for sure but it leaves its users without valuable futures analysis information. When reading a commodity trading chart, the Japanese Candlestick signals provide users with a big advantage because they offer more information and predict trends that the bar chart simply can’t.
The history of Japanese Candlesticks
Japanese Candlestick signals were invented around 1700 as a method of futures analysis and developed over the past few hundred years while trading rice. The Japanese Rice traders analyzed reoccurring signals on their commodity trading chart when trying to pinpoint the exact times to get in and get out of rice trading. Futures analysis with these signals made the Honshu family immensely wealthy. The signals they identified are as effective today in as they were centuries ago.
Why Candlesticks are so powerful
Candlestick patterns are the only trading system for futures analysis that considers human emotion. Emotions will always be the same. Whether you are analyzing a stock trading chart or a commodity trading chart the same factors that have moved prices for centuries will still be in effect today. This is not anything new and the human psyche is very predictable when it comes to investment decisions. Candlestick charts give a visual representation of the investor’s sentiment to futures analysis.
For futures analysis, a commodity trading chart will show a distinct advantage over a stock trading chart. The trends in a commodity trading chart will be more consistent, lasting for longer periods of time. The outside influences on a commodity are dramatically less than those found in a stock price. That can be used to an investor’s advantage when using futures analysis for a commodity trading chart.
You will find through futures analysis that most commodities have fewer elements to affect the supply and demand than do stocks. Grains and some of the soft commodities might have weather affect supply and different currencies may be affected by each other. The British pound, the Eurodollar and the Swiss franc will usually trade the opposite direction of the US dollar.
The ability to analyze a commodity trading chart very quickly with Candlestick signals produces a huge advantage for being able to analyze what the equity markets would do. Crude Oil prices, the US dollar, Gold or any other commodity that could be affecting the direction of the equity markets can be seen and analyzed very efficiently using Candlestick signals.
There are 12 major candlestick signals that relate to trading commodities just as much as they do stocks and probably even more so! The bullish signals contained in them are just as powerful and effective as the bearish signals. Demonstrating when to get into a position is very important; however, what is more important is being able to analyze when to get out of a position. Commodity trading information comes to investors in different forms and different times. The analysis of that information can be interpreted dramatically different by investors. When the media creates euphoric buying at the top, it is hard for many investors to take profits. What if this is the position that is going to make the big money? Should I be buying? I don’t want to be selling with all this great Wall Street news around. Emotions such as there keep most investors from selling at the appropriate times.
In futures analysis it is important to avoid reacting based on emotions. This is why you should have trading rules, a trading plan, and follow the signals you find with candlesticks. Futures analysis with Japanese Candlesticks is a highly developed means of looking into the future.
Be sure to read more about futures trading and the futures markets in addition to learning about the multiple candlestick patterns available.
