There is always questions about the difference between candlestick analysis and price action trading. The answer is simple! Candlestick analysis is the ultimate price action trading strategy. Candlestick signals and patterns are the identification of price action. The candlestick signals are based upon human nature producing price actions that show a change of investor sentiment. Candlestick analysis enhances the ability to see a change of investor sentiment occurring and utilizing other indicators that would add credence to why and where a trend reversal was likely happening. A candlestick buy signal at technical levels everybody else is watching, such as moving averages, trend lines, Bollinger bands, Fibonacci numbers etc., improves the probabilities that a reversal is occurring. Adding the T line to the chart analysis dramatically improves the probabilities of a trend reversal and a trend continuation based upon the premise that the T line acts like a natural support and resistance level of human nature. The market indexes are currently illustrating indecision, based upon the nature of candlestick signals i.e. hanging man, shooting stars, Doji’s, spinning tops. When this type of price action occurs in the overbought or oversold condition, the Japanese rice traders have observed that this is usually where a change of investor sentiment is occurring. Candlestick analysis is the ultimate price action trading strategy. It defines what is occurring in investor sentiment based upon what prices are doing.
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Good Investing,
Stephen Bigalow
