| Mechanical technical analytical systems are a product | | | | champs at spotting reversals which are in the |
| of the human desire for certainty. They are attempts | | | | process of happening, or are about to happen. Some |
| to reduce to physical certainty processes which are | | | | Candlestick pictures are clear as crystal. Others are |
| emotional, not physical. They try to jam the facts of | | | | less clear, but nevertheless throw off clues. Much of |
| one world, the world of emotion, which we cannot | | | | the time, no clear reversal pattern is evident. |
| see, into another world - the physical world which | | | | It really gets interesting - and fun - when a |
| surrounds us. The two are incompatible, which is why | | | | less-than-perfect reversal pattern emerges, or when |
| mechanical trading systems eventually fail, in spite of | | | | the clues are nevertheless somewhat tilted to the |
| the most advanced computers available. They work | | | | bullish side or to the bearish side. This, I think, is |
| in a parallel universe, and the two do not meet. | | | | where some Candlestick proponents do their clients a |
| Japanese Candlestick technical analysis does not | | | | disservice, in searching always for perfection or |
| suffer from the fundamental defects of a mechanical | | | | near-perfection in pattern formation. Certainly it is |
| system. Nevertheless, it does not operate in a | | | | essential to know and to be able to recognize the |
| vacuum. Its starting point is the physical universe - | | | | major patterns in their pure form. However, in my |
| the movements of stock prices and, in particular, the | | | | experience volumes of valuable and predictive |
| patterns which are left behind by price action. It then | | | | information are presented by unorthodox patterns |
| transfers that knowledge, through the eye, to the | | | | which are not shown in the standard textbooks but |
| most exquisite computer ever devised - the human | | | | which, nevertheless, reveal mountains of data |
| brain - which interprets the emotional, psychological | | | | regarding the underlying psychology of the market |
| underpinnings of stock price movements and | | | | and the next direction of trend. |
| produces estimates of the next direction of prices. | | | | So, why is it that proponents of mechanical trading |
| There comes to mind the Crash of 1987, which was | | | | systems remove from the analytical equation the |
| "unexpected" and "came out of the blue." It was no | | | | finest computer ever devised? It's a mystery to me. |
| such thing. Had Japanese Candlestick analysis been in | | | | There is nothing that can, or ever will, approach the |
| general use in those days, skilled observers would | | | | human brain in its ability to analyze the psychology of |
| have seen evidence of the psychology of the | | | | the market as revealed instantly in pictures - the |
| market and could have taken action to escape the | | | | Candlestick patterns. After all, the human brain is |
| worst of the decline. Yet, to this very day, experts | | | | working in its own world here - the world of human |
| who should know better are still trying to find | | | | emotion - which is a parallel universe to which |
| physical "reasons" for the Crash, but have found | | | | mechanical systems and observers who always |
| none - because there are none. | | | | search for physical, external "reasons" for market |
| Whereas mechanical systems denigrate the analytical | | | | action have no entry door. |
| capabilities of the human brain by excluding it from | | | | This is a world with respect to which the talking |
| the analytical process, Candlestick analysis, on the | | | | heads on CNBC have no clue. But it's there, it's real, |
| other hand, celebrates it. | | | | and I use it every day. You can, too. This is not |
| The eye, of course, is an extension of the brain. The | | | | rocket science, or anywhere nearly as intricate as |
| real beauty of Candlestick analysis is that it | | | | putting a lander on Mars. And it's so much fun to |
| empowers the brain to interpret the patterns which | | | | decipher the psychology of the market, and then to |
| are presented to it, recognizing that price action in | | | | base your own trading decisions on that knowledge. |
| the stock market reveals the emotions and | | | | Don't simply try to rely on the numbers. Rely on your |
| psychology of the traders who are participating at | | | | own eye and on your own brain! You have in your |
| the time. It is nothing less than a deconstruction of | | | | head the greatest computer of all. You can do this. |
| the traders' mood, from which reasonable conclusions | | | | The Candles are easy to learn and a joy to use. A |
| can be drawn about their next move. | | | | whole new world will open up for you, and you may |
| The Candlesticks live for reversals of trend. They are | | | | never knew it exists! |