Japanese Candlesticks
Successful Traders Specialize
It’s simply not possible to understand and stay in touch with everything that occurs in all the types of investment vehicles and markets across the world. While some traders have developed systems that allow them to trade in multiple venues (for instance, in different stock markets around the world), most traders specialize in a particular type of investment, and in a particular market. If you’re a beginning trader, I recommend focusing narrowly on a particular investment vehicle and market; learn all you can, about the market and about yourself, before you move into other investment types.
Successful Traders Take Losses in Stride
No one likes to lose. But losing is a fact of life for traders; the key is to limit your losses and maximize your successes. The only way a losing trade is truly a failure is if you aren’t willing to take the loss, without hesitation, and move on to find winning trades. By accepting that they’ve made a losing trade, and getting out of the position, successful traders focus on making money – not on being right all the time.
Candlestick Patterns:
So far, we’ve introduced: The Doji, Bullish and Bearish Engulfing, Hammers and Hanging Man, Piercing Pattern and Dark Cloud. Now I’ll introduce two more important candlestick patters:
Bullish Harami:
 The Harami is an often seen formation The pattern is composed of a two candle formation in a down-trending market. The body of the first candle is the same color as the current trend. The first body of the pattern is a long body, the second body is smaller. The open and the close occur inside the open and the close of the previous day. Its presence indicates that the trend is over. The Japanese definition for Harami is pregnant woman or body within. The first candle is black, a continuation of the existing trend. The second candle, the little belly sticking out, is usually white (unfilled), but that is not always the case. The location and size of the second candle will influence the magnitude of the reversal.
Criteria
- The body of the first candle is black; the body of the second candle is white.
- The downtrend has been evident for a good period. A long black candle occurs at the end of the trend.
- The second day opens higher than the close of the previous day and closes lower than the open of the prior day.
- For a reversal signal, further confirmation is required to indicate that the trend is now moving up.
Pattern Psychology
After a strong down-trend has been in effect and after a selling day, the bulls open the price at a higher than the previous close. The short’s get concerned and start covering. The price finishes higher for the day. This is enough support to have the short sellers take notice that the trend has been violated. A strong day the next day would convince everybody that the trend was reversing. Usually the volume is above the recent norm due to the unwinding of short positions.
Bearish Harami
 The Bearish Harami is the exact opposite of the Bullish Harami. The pattern is composed of a two-candle formation. The body of the first candle is the same color as the current trend. The first body of the pattern is a long body; the second body is smaller. The open and the close occur inside the open and the close of the previous day. Its presence indicates that the trend is over.
Criteria:
- The body of the first candle is white; the body of the second candle is black.
- The uptrend has been apparent. A long white candle occurs at the end of the trend.
- The second day opens lower than the close of the previous day and closes higher than the open of the prior day.
- For a reversal signal, confirmation is needed. The next day should show weakness.
Pattern Psychology
After a strong uptrend has been in effect and after a long white candle day, the bears open the price lower than the previous close. The longs get concerned and start profit taking. The price finishes lower for the day. The bulls are now concerned as the price closes lower. It is becoming evident that the trend has been violated. A weak day after that would convince everybody that the trend was reversing. Volume increases due to the profit taking and the addition of short sales.
Having insight into the effect of Haramis provides an opportunity to maximize returns. If all of your investment funds are being fully used, a Harami may reveal that one of the positions has stalled for a few days. An aggressive trader may want to move those funds to a better trade, and then come back after a few days to reinvest once the position is moving.
The above can be found at http://candlestickforum.com/PPF/Parameters/16_523_/candlestick.asp
Successful Traders Set Goals
Successful traders tend to be incredibly goal-oriented. Why? Most people perform at their best when they’re reaching for a clear goal. And there are three basic qualities that make up a clear goal:
The goal must be realistic. If your goal is to double your money every day, it sounds great – but it’s not realistic.
The goal must be attainable. Just like with a realistic goal, an attainable goal must be within your current capabilities. The best goals are short-term goals; make your first goal a small one, and then continue to increase your goals as you experience success. World-class sprinters don’t start by thinking of winning the Olympics.
The goal must be measurable. Goals that aren’t precise, and can’t be quantified or measured, aren’t really goals at all. If your goal is to be wealthy, that’s great… but what does “wealthy” mean? Our guess is that your definition of “wealth” will change as your net worth increases. If you can’t define your goal, and measure your progress towards it, then you have no way of assessing your progress or of making changes to your techniques and strategies that allow you to reach your goal.
Candlestick Patterns:
So far, we’ve introduced: The Doji, Bullish and Bearish Engulfing, Hammers and Hanging Man, Piercing Pattern, Dark Cloud and Bullish and Bearish Harami. In today’s article, we I’ll introduce: Morning and Evening Star patterns.
 The Morning Star: is a bottom reversal signal. Like the planet Mercury, the morning star, it foretells that brighter things - sunrise, is about to occur, or that prices are going to go higher. It is formed after an obvious downtrend. It is made by a long black body; usually one of the fears induces days at the bottom of a long decline. The following day gaps down. However, the magnitude of the trading range remains small for the day. This is the star of the formation. The third day is a white candle day. And represents the fact that the bulls have now stepped in and seized control. The optimal Morning Star signal would have a gap before and after the star day.
The make up of the star, an indecision formation, can consist of a number of candle formations. The important factor is to witness the confirmation of the bulls taking over the next day. That candle should consist of a closing that is at least halfway up the black candle of two days prior.
Criteria
- The downtrend has been apparent.
- The body of the first candle is black, continuing the current trend. The second candle is an indecision formation.
- The third day shows evidence that the bulls have stepped in. That candle should close at least halfway up the black candle.
Pattern Psychology
A strong downtrend has been in effect. The sellers start getting panicky. There is a large sell-off day. The next day as the selling continues, bulls are stepping in at the low prices. If there is big volume during these days, it shows that the owner-ship has dramatically changed hands. The second day does not have a large trading range. The third day the bears start to lose conviction as the bull increase their buying. When the price starts moving back into the trading range of the first day, the sellers diminish and the buyers seize control.
 The Evening Star pattern: is a top reversal signal. It is exactly the opposite of the Morning Star signal. Like the planet Venice, the evening star, it foretells that darkness is about to set or that prices are going to go lower. It is formed after an obvious uptrend. It is made by a long white body occurring at the end of an uptrend. usually when the confidence has finally built up. The following day gaps up, yet the trading range remains small for the day. Again, this is the star of the formation. The third day is a black candle day and represents the fact that the bears have now seized control. That candle should consist of a closing that is at least halfway down the white candle of two days prior. The optimal Evening Star signal would have a gap before and after the star day.
Criteria
- The uptrend has been apparent.
- The body of the first candle is white, continuing the current trend. The second candle is an indecision formation.
- The third day shows evidence that the bears have stepped in. That candle should close at least halfway down the white candle.
Pattern Psychology
A strong uptrend has been in effect. The buyers can't imagine anything going wrong, they are piling in. However, it has now reached the prices where sellers start taking profits or think the price is fairly valued. The next day all the buying is being met with the selling, causing for a small trading range. The bulls get concerned and the bears start taking over. The third day is a large sell off day. If there is big volume during these days, it shows that the ownership has dramatically changed hands. The change of direction is immediately seen in the color of the bodies
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