“IT’S IMPOSSIBLE TO TIME THE MARKET”
FIRST OFF, I NEED TO ASK YOU TWO QUESTIONS:
ARE YOU MOTIVATED TO LEARN SOMETHING NEW?
DO YOU HAVE THE DRIVE TO BECOME A BETTER TRADER?
If so, then this is made for you.
And If you are a student of Steve Nison’s superb works on Japanese Candlesticks,
then this is ESPECIALLY made for YOU –because you’ve already shown that you’re MOTIVATED!
This material does NOT compete with, or conflict with, “Japanese Candlesticks.” It is complementary to “Candlesticks.” It fully embraces “Candlesticks,” and then goes beyond.
Mr. Stupido Misses His Flight
(Nose in the book at the wrong time)
A true story: I was in O’Hare Airport in Chicago, sitting in the gate area, deep in thought, reading a book and waiting for the gate announcement of my flight. It did seem to be a long time in coming, although there were many gate announcements being made. I chanced to look out the window and saw a big red tail moving past. Oh, !%*@! That was my flight!
Has that ever happened to you? I have never felt so absolutely stupid in all my life. It happened because I wasn’t listening; because I wasn’t paying attention to the signals. And it was my own fault.
We’ve all had similar experiences in the financial markets. We’ve all felt the pain of watching a trend reverse and prices fly away while we find ourselves standing off to the side – or already suffering a loss because we didn’t get out soon enough. There goes that vacation at the beach, or the trip to Disney World that we had promised the kids. Or that new car, to replace the ten-year-old clunker that we’ve been patching together with sticky tape, a hope, and a prayer that it will stay in one piece for just a little while longer.
Libor – or was it “Lie-bor?”
We’ve all been there, and it’s no fun. Dreams go flying out the window. Money that we’ve been counting on for a particular purpose either doesn’t show up or is gone. We feel stupid, and ashamed of ourselves. How could we have been so dumb? “It can’t be me; it must be something else. It’s not me that’s wrong; the market is wrong. Oh, I know what it is – it’s the banks. It has to be the banks. They manipulate everything, and the little guy comes out on the short end of the stick, every time. Look at this “Libor” scandal, for instance.
I don’t really understand what “Libor” is, but I have a sneaky feeling that when the banks get together and finagle “Libor,” the rest of us wind up behind the eight-ball. Or it’s the hedge funds, with all of that “high frequency trading,” whatever that is. Some of these operators sound like scavengers, madly scurrying around for scraps of food, surviving on garbage. Or it’s the short sellers, manipulating the silver market to prevent prices rising to where they ought to be. The people with the money bags are conspiring against all the rest of us.” Sometimes we may feel that we’ve been knocked for a loop – or if the market was really nasty to us, as though we’ve been knocked flat on our back.
The Olympic Springboard Diver Hits The Water Flat On His Back. Ouch!
I’m not so sure about any “conspiracy” or “manipulating” theories. Maybe there’s some truth to them; maybe not. I tend to think that most of the damage that may happen to us in the financial markets is our own doing. For example, think for a moment about the young Olympic springboard diver from Germany who hit the water flat on his back. Did you see that video? What a terrible dive. What a smack! It had to hurt. Attendants at the pool moved quickly toward him to see whether he was all right. He was. Did you see what he did next? He pulled himself together, climbed out of the pool under his own power, walked to the wall, turned and bowed to the judges, and left. He had to be in a lot of physical and mental pain, but he bulled it through, he conducted himself with style and grace and dignity, and he lived to dive again another day.
The point is that he didn’t complain. He didn’t lodge a protest that the springboard wasn’t operating properly, or that it was set at the wrong height, or that the water in the pool was too hard. He knew and accepted that he hadn’t done something right, and that there was nobody but himself to blame. He knew, and knows, that he has some learning to do. No doubt he will dive again. He knows he has skills. He wasn’t afraid to “pull the trigger.” His problem was in execution.
The Olympic Diver Picked Himself Up. It’s The Same In The Financial Markets
When we’re knocked down, or land flat on our backs when we dive into the pool, we mustn’t give up and say that we will never trade again. We know that we have skills. We need to do better with execution.
The first part of execution lies in recognition of an opportunity, which in turn is composed of two separate recognitions: 1) a recognition that the best opportunities arise at the point of reversals of trend; and 2) a recognition that “what I’m looking at on this chart right now” is either a point of reversal of trend – or it isn’t.
How can we tell for sure whether it is – or isn’t? We can’t! Not “for sure,” anyway. But what we cando is to bring to bear all of the best tools that are available, to determine whether a reversal of trend is probable, and if so, HOW probable.
Please, Show Me The Picture!
I’d like to show you how easy this is. We don’t want to use numbers, or graphs, or anything that requires us to use a calculator. We do it in Pictures. Your eye loves Pictures! I will show you how to spot an impending Reversal of Trend, in any time frame in any financial instrument, with a reasonable probability of success. I will show you about the “magic” of the Japanese Candlestick method of price display – and the “magic” of “Candelaabra,” which is a logical extension of Candlesticks. The two of them, together, are extremely accurate in spotting Reversals, even before the patterns fully emerge. Your eye does the works!
Spotting Trend Reversals Is The Name Of The Game
We’ve often heard the term “It popped up right off the page.” That applies just as well to your computer screen. When you’ll look at the current price of the Dow, for example, and compare that with the current readings of the Indicators which I’ll show you, you’ll see how easy and obvious it is to spot Reversals in the making. The visual comparison is easy to make, too, because the price and the Indicators are shown on the screen at the same time. You don’t need two or three (or more) screens in order to look back and forth from the price screen to those which show the Indicators, because price and Indicators are shown together, on the same screen. You only need one! It all “pops up right off the screen.”
If you’re the kind of investor or trader who wants to be “spoon fed,” receiving and acting upon buy and sell recommendations which are issued by others, then this is not for you. On the other hand, if you have an inquisitive mind and have a desire to know and to understand what is going on, then this is right up your alley. Would you like to learn a simple system that is food for the brain and a feast for the eyes? And fun, too? Then come along with me, because you will love this. We are going to have a ball!
It Looks Like A Half-Eaten Ice Cream Bar (but no, it’s really The Basic Candlestick Price Bar)
The “Good Humor” Bar! “Fudgicles!” Do you remember those? I sure do. I remember the sound of the bells on the Good Humor truck when I was a kid. Nowadays, I think of this pattern not as an ice cream bar, but as the basic Candlestick price bar. Here it is, side by side with an Open-High-Low-Close price bar. These two bars display the same information. The only difference is that, in the Candlestick “edition” of the price bar, the price distance between the Opening price and the Closing price is “fattened-out.” This particular Candlestick price bar is called the “Classic Spinning Top.”
All other Candlestick price bars are a variation of it. It’s called a “Spinning Top” because it looks like a child’s spinning top toy. The “fattened-out” part is called the “Real Body.” The price areas above and below the Real Body are called “Shadows.” If the Closing price was higher than the Opening price, then the Real Body is not filled in; it is left “white.” But if the Closing price was LOWER than the Opening price, then the Real Body is filled in, or made “black.”
The “fattening-out” which results in the Real Body makes it easy to see what happened to the price during the lifetime of the price bar. You don’t have to get really close to the screen or to squint your eyes in order to see it.
A “Shooting Star” in the Sky (We saw some real ones not long ago)
Individual Candlestick price bars can be Trend Reversal Warning Patterns, all by themselves. This is one of my favorites. It’s called the “Shooting Star,” because it looks a lot like a real shooting star, up in the sky at night. (Okay, the right name probably is “meteor;” and if it lands, it’s a “meteorite.”)
Here you can see that the “Classic Spinning Top” isn’t a “Classic Spinning Top” anymore, because price action during the lifetime of the price bar resulted in a Real Body that is “out of kilter.” (Most of them are!) Here, the Real Body is at the bottom end of the total price range. On this particular market day, the price Opened at the top of the Real Body and Closed at the bottom of it. The “Shooting Star” pattern is called such if it appears at the top of a long price advance. It is a bearish warning, and it’s easy to see why: everything had been going great; prices had risen steadily; and then this “interloper” appeared – prices opened above previous prices, rose still higher to the top of the upper Shadow, but then closed below the Open and at the very bottom of the total price range of the day. It’s apparent that traders aren’t as bullish as they were. They’re not quite so sure of themselves anymore. They may be changing their minds!
Three or more individual Candlestick price bars in a row can be powerful Trend Reversal Warning Patterns, too
This is a three-bar reversal warning pattern called the “Morning Star.” It will appear at the bottom of a long downtrend. It’s called the “Morning Star” because it signals the start of a new day. The tall black Candle is the first of the three bars, and of course it represents a strong “down” day, continuing the long downtrend. But then the next bar has a tiny Real Body, located at or below the tall black candle. That little one is called the “Star.” So tiny!
Obviously, with such a tiny Real Body, the price distance between the Open and the Close was almost nothing, compared to the size of the Real Body of the tall black candle. Sellers, who had been so active and aggressive, were holding back now. Were they about to change their minds? The situation certainly was worth watching. Then, on the next day, a tall white candle appeared. Wow! What a surprise! The flow had gone completely in the opposite direction. The tall white candle signified a day of heavy buying. Were Shorts just covering their short positions, or perhaps was there more to it? The next days would tell the story. In any event, that three-bar Morning Star was a strong bullish warning of a possible Reversal of Trend.
Most, if not all, bullish Candlestick Reversal Warning Patterns have corollaries on the bearish side of things – that is, patterns which appear at the top of established uptrends. As one example, the “Evening Star” is a “mirror image” of the Morning Star, and has bearish connotations. All of the “standard,” or “orthodox,” Candlestick patterns have been widely documented in the literature.
Kids In The House
However, the Morning Star and the Evening Star have spawned a raft of “children,” in which the tall white candle and the tall black candle (or the tall black candle and the tall white candle) are separated by more than just a single small “Star” – there can be two “Stars” between them, or three, or four, or even more. The interesting part is that these “children” seem to have the same “DNA” as their parents – the same trend-reversal predictive ability. I have given these patterns names of their own.
One particular “unorthodox” Candlestick Reversal Warning Pattern is the “Tokyo Express,” which is a variation of the Morning Star. It contains two “Stars” between the tall black candle and the tall white candle, rather than just one. Apparently it possessed the bullish trend-reversal power of its “parent,” the Morning Star, because it ignited the Great Rally of 2009, which was the greatest countertrend rally ever seen!
Yes, it’s true that the “Tokyo Express,” all by itself in early March 2009, was a potent and credible signal of a probable reversal of trend, from Down to Up. But I was even more sure of a reversal at that time because I had my “Candelaabra” system working for me, too. It showed, with almost absolute certainty, that a trend reversal was about to happen. “Candelaabra” proved itself to be a marvelous working complement to “Candlesticks” alone.
What in the world is “Candelaabra?” Simply stated, it is a trend-reversal warning system that uses Candlesticks as its base, but goes on from there to show certain Indicators on the same page as prices; but the physical arrangement of the Indicators is such that the relationships between extreme readings in the price and in the Indicators, when the extremes occur at the same time, provide almost an absolute certainty of a trend reversal. I discovered this phenomenon almost ten years ago, almost (but not quite) by accident. I had been “massaging” groups of Indicators for several years, looking for a method of spotting Reversals in the making that would be as foolproof as possible. I had been tweaking, pushing, pulling, arranging, re-arranging – and one day I tried one more tweak – and it all fell into place.
I now had a complete system where everything worked together to produce hugely powerful Reversal signals that needed no interpretation because they were so obvious. Even now, about ten years later, Candelaabra constantly teaches me something new. Its power still surprises me!
Your Eye Loves It
Here again, we’re dealing with Pictures. There are no graphs or numbers or Point & Figure to contend with, or try to decipher. This is “Pattern Recognition 101.” The eye does the work! Nothing comes close to “Candelaabra” in spotting Reversals of Trend as they emerge – and probable Reversals of Trend even before they fully form. It is an essential tool for the trader who wants to catch a trend just as it is forming, or to get out of a position before it turns against him and empties his wallet.
The trader who has “Candelaabra” in his arsenal need never again be standing forlornly on the station platform, watching the train pull away without him. And conversely, the trader who has “Candelaabra” in his arsenal need never again stay in a losing trade long after the trend has turned against him, the unhappy result being an emptied wallet.
Some traders wait until a new trend has become “established” before climbing aboard. But what is there to prevent an “established” trend from turning 180 degrees the next day? I’ve never understood the logic of that approach. I’d much rather get aboard a trend when it is brand new if “the stars are in alignment,” or to get out of an existing position when the evidence tells me that the trend is shaping up to go against me.
That’s exactly what “Candelaabra” does. It tells you “when the stars are in alignment.” It fairly jumps off the screen. You can’t miss it. Your eye won’t allow you to miss it!
Can You Spot These “Stars In Alignment?”
I’ve marked them by a vertical line on this chart. The secret to the trend-reversal-spotting power of “Candelaabra” is to recognize visual cues such as this – the “Stars In Alignment” – when they appear in the present day, and in understanding what they portend. These particular “Stars in Alignment” seem to have occurred at extreme readings in the Indicators, don’t they? (Here’s a hint: the “Candlestick” price bar on that day [August 16, 2007] was a nearly perfect bullish “Hammer.”)
Do you see what happened to prices? On this chart, do you see another place where you could insert a vertical line – where the Indicators and the price are at extremes? If you do see it, mark it down, because you’re on the right track, and I may ask you to point it out later. (Hint: There really is another one)
“Candelaabra” Is My Trend-Reversal Recognition Toolkit
It completely changed my approach to the markets. I use it every day in everything I do. It applies equally to every financial market – individual stocks, the stock Indexes, Gold, Silver, all of the other commodities, the Bonds, and Forex. It is universal! It works identically in every market, in every time frame, from the shortest to the longest. The principles are identical throughout. It removes almost all of the guesswork about the timing of a trend reversal. Your eye tells you that a trend reversal is imminent when “all the stars are in alignment.” As I say – this is Pattern Recognition 101. Your eye does the work!
But “Candelaabra” Is Not For Everyone. You Need To Have a Curious Nature
Not everyone should have “Candelaabra.” It’s not suitable for the investor or trader who is not curious, who is not interested in learning something new and exciting. It is ideal for the investor or trader who is intellectually hungry, and is ready and willing to expend just a little effort to learn how it can spot Reversals. This is easy stuff, because your eye does the work.
Are You Up For It?
This is the single best system for spotting Reversals of Trend immediately upon completion of the Reversal patterns and even as they are in the process of emerging. Get aboard a new trend early, or get out of an existing trade as the trend is turning against you, before a lot of damage is done. No more “missing the boat” or “I wish I had gotten out long ago.”
Are you ready to quit making mistakes like that? Become a smarter trader!