Advanced Western Technical Tools. Candlestick Charting Techniques. Western Charting Tools. Trade Management. and President: Candlecharts.

Transcription

1 Advanced Western Technical Tools Founder and President: Candlecharts.com 212 Candlestick Charting Techniques Western Charting Tools Trade Management

2 2 Western Technicals Enhance winning %s Using candles for new trade Price targets 215 A candle signal is normally not a sufficient reason for a new trade 216 East + West Confirmation Where a candle signal confirms a Western technical signal 217 2

3 East + West = Greater Winning % 218 Candles plus Candles plus Bollinger Bands 220 3

4 Convergence of Clues Open Interest 221 East and West = Higher Confidence 222 Candles look good- but what about m.a? 223 4

5 Crack and Snap with Volume The arrow points to a Snap and Crack. What does volume do to increase the likelihood of this technique working? 224 Founder and President: Candlecharts.com

6 Candles and the ADX: The Perfect Fit 227 Stands for Average Directional Indicator Shows how strongly a market is trending Does not show direction of trend 228 Strong ADX with prices in up trend. Strong ADX with prices in down trend

7 Some technical indicators, such as moving averages, momentum trading, work better in strongly trending markets. Some technical indicators, such as oscillators, work better in non trending markets. Traders check ADX to see if the technical indicator they use is in right trend environment 231 Use only on daily charts except for FX Use only for entries Lagging indicator Slow to recognize a new trend 232 7

8 Steve- Apple has recently gone from 120 to 150 and the ADX on a daily basis has not moved up. This is surprising. Comments? - Pete 233 Common mistake- looking at ADX level. Slope is the key Slope=change in ADX from yesterday to today. (today s ADX level-yesterday s ADX level) Greater the slope, stronger the trend ADX at ADX at What do we need to determine the slope on this day? ADX ADX Slope = =+2.07 Slope = =

9 14 Period ADX slope increasing.5 or more Slope = ADX:20.30 ADX:22.38 ADX:26.03 ADX:27.56 What is the slope? Strong uptrend? 236 Minimum: 14 Period ADX slope +.25 or less -.31 ADX:18.26 ADX:18.57 Strict: 14 Period ADX slope decreasing 237 Chuck@smartstops.net 238 9

10 Candles and ADX - The Perfect Fit Reversal candles help pick top and bottoms. Increase % by not going against strong trends Minimum: 14 Period ADX slope +.25 or less Strict: 14 Period ADX slope decreasing Do we have to measure the ADX slope on this hammer?

11 Minimum: 14 Period ADX slope.25 or less Strict: 14 Period ADX slope decreasing 242 ADX slopes 2.24, 2.53, 2.67 Bull shadows on descent. But based on ADX which of these is more likely a turn? Why didn t I put ADX numbers for these? 243 ADX : ADX : What candle patterns are at the dashed arrows? What is the ADX telling us? ADX :

12 +.95 Minimum: 14 Period ADX slope +.25 or less -.31 ADX:18.26 ADX:18.57 Strict: 14 Period ADX slope decreasing 245 Slope FOR BEAR CANDLE REVERSAL SIGNALS Step 1 get candle signal Step 2 ADX shows uptrend easing or no trend: ADX slope increases by less than.25, and better if slope is negative ADX:42.85 and so slope is

13 FOR BULL CANDLE REVERSAL SIGNALS ADX: Step 1 get candle signal 6 Step 2 ADX shows downtrend easing or no trend: ADX slope increases by less than.25, and better if slope is negative Founder and President: Candlecharts.com 249 Gravestone doji at resistance After the gravestone where is a potential target?

14 Candles for reversals and Western for targets Bearish engulfing pattern at top of bull channel target 251 Swing Target target First leg 252 East and West Doji as signal to exit

15 Becoming a Confident Trader 254 Head and Shoulders Left Shoulder Head Right Shoulder Neckline Sell signal Head and Shoulders Top 255 Three Buddha Pattern

16 Why we are here! We got the reversal here with candles. Compared to here with a classic western signal 257 How Education Saves You $$$$ New resistance Old support becomes.. 1- Bear Harami 2- Dark Cloud Cover 3- Bearish Engulfing Pattern 258 TASC Interview - Jan. 24, 2003 S&P at 860 1) Once the neckline s support is broken, it should become resistance. Head and Shoulder top 2) To get a target with the head and shoulders top we measure from the top of the head to the neckline. neckline Interview the heads and shoulders top on the S&P gives a target to near 775. A close over 870 would void this. Hammer

17 STEVE S FAVORITE MEASURING TACTIC 260 Box Range Breakout 261 Box range breakout Harami with target bottom of box

18 Box range Breakouts 263 East & West = Profits 264 Box range Breakout/ momentum trading

19 266 The Tools of the West with the Light of the Candles Scenario 1 Scenario The Nison Candlestick Screener Using candles at support or resistance for the high probability trades

20 The Nison Candlestick Screener Two simple questions Question 1- Is the market at support or resistance? Question 2- Are there any reversal candles? 269 The Nison Candlestick Screener 270 The Nison Candlestick Screener

21 The Nison Candlestick Screener 2) What is this candle line hinting? 1) Who s in control during this ascent? 272 The Nison Candlestick Screener Major resistance How education saves you $$$$ 1) Is the at resistance? 2) Are there any candle signals showing hesitation? Long term resistance zone

22 The Value of Owning the Knowledge Long term resistance zone 275 The Value of Owning the Knowledge 276 The Nison Candlestick Screener

23 The Nison Candlestick Screener Near support? Any reversal signals yet? 278 The Nison Candlestick Screener 279 The Nison Candlestick Screener Market refreshed Near resistance? Any reversal signals yet?

24 Using Measured Moves including: Box range Head and Shoulders Swing Targets The Candlestick Screener 281 Founder and President: Candlecharts.com 282 What are Sectors? Technically analyze sectors like any other market Can t trade sectors so why are sectors important to traders?

25 Candles and Sectors 284 Why are Sectors important Sectors account for 37-60% of an individual stock s performance This means you need to know what the sector is doing! 285 How can we use Sectors? Bottom Up: Stock to Sector Top Down : Sector to Stocks

26 Check the stock s sector Try to place new trades in direction of sector outlook If must go counter trend to sector, use to take profits Bottom Up Sector Analysis Biotech Sector- Aug 17 AMGN - Aug 17 Although falling window what is it s sector strongly hinting?

27 Bottom Up Sector Analysis 290 Bottom Up Sector Analysis Buy? AMGN Sept. 11 Biotech Sector 291 Bottom Up Sector Analysis Buy Sept

28 293 Setting up scanning pages for Nison Sector Analyses 294 Scanning with Nison Candle Sector Analyses STEP 1 Scan Sectors Banks Internets Biotech Aug. 16 Gold- Silver Semis Retail

29 Scanning with Nison Candle Sector Analyses STEP 2 Scan Component Stocks in Chosen Sector(s): Internets for this example Aug Scanning with Nison Candle Sector Analyses STEP 3 Do Analysis on Stock for Potential Trade Aug Scanning with Nison Candle Sector Analyses Aug

30 ETFs Exchange Traded Funds Track All Major Sectors and Indices Popularity/Liquidity Can Trade ETFs 299 Analyze and Trade ETFs like any other market Dark cloud confirming resistance Golden and Dead Crosses Bull sash patterns Hammers 300 Windows and ETFs

31 Sectors Important for stocks Can analyze with candles Bottom up trading Top down to filter Scan for best sectors Find best stocks in those sectors Analyze those stocks ETFs Ability to trade sectors Instant diversification 302 Founder and President: Candlecharts.com Trade Management Market Chameleon Candles in Context Risk-reward Exit Strategies

32 Adapting to the Market Being a Market Chameleon: As market conditions change, adjust your market stance. 305 Adapting to the Market Looks good anything different? 306 Adapting to the Market Target

33 Adapting to the Market Sell here 308 Adapting to the Market 309 Adapting to the Market

34 Adapting to the market Where s support now? Where s support? 311 Become a Market Chameleon Bear Stearns Collapse 312 Candles in Context Analyzing candle signals within the context of surrounding technical picture

35 Misinformation can cost you $$$? 314 Same Signal- but how different the strategy! 315 Which is a Better trading signal?

36 Candles in Context Dark Cloud Cover Bearish Engulfing Pattern 317 Which is a better trading signal? Hammer Morning Star 318 Candles in Context Morning Star Hammer

37 Always Check Risk Reward 1. What is your price risk? 2. What is your target? Do you have a good risk-reward? 320 Risk/Reward 321 Waiting for time to ripen Classic bearish engulfing pattern: But what about risk/reward aspect?

38 Trade Management Essentials Adapting to the Market Candles in Context Importance of risk/reward 323 Founder and President: Candlecharts.com Protecting your Assets 38

39 Slide 115 The race is not always to the swiftest, but to those who keep running Protective Stops keep you in the game! Looks promising at the white candles

40 How Education Saves you $$$$ Hammer Closed under support 329 How Education Saves you $$$$ Hammer 330 Exit Strategies Protective Stops Time Stops Trailing Stops Steve Nison s Candlecharts.com

41 332 If the market does not act as expected within about five sessions then consider exiting 333 Don t Stay Around What are you doing hanging around! You re wasting precious resources. Hammer and Bull Engulf Chart courtesy of Genesis FT

42 You re Wasting Resources Trailing Stops As the market moves in your direction stop is adjusted to help ride the trend

43 Golden and Dead Crosses Compares two moving averages GOLDEN CROSS: shorter crosses above longer DEAD CROSS: shorter crosses under longer 338 Answer: 3 and 12 day

44 Trailing stops - letting the profits run I usually exit, it corrects somewhat but then continues to go in the original direction after that. Shooting Star Falling window You sold at shooting star or falling window. A rally from a bull harami gets you nervous and you exit. But you re still playing with the market s money- so another option: trailing stop. 341 Trailing stops - letting the profits run Shooting Star Falling window Where you got nervous 342 Letting Profits Run Could take some or all profits here Shooting star Or use dead cross as your trailing stop and would thus exit here Buy and set protective stop

45 Trailing Stops to let profits run Now at targetdoji warns of caution. But you want to let profits run. Potential Target Buy and set protective stop 344 Trailing Stops to let profits run doji 345 Exit Strategies Protective Stops Time Stops Trailing Stops

46 Trading Journal (setting up the Trade) From Toni Turner s Book- Short Term Trading in the New Stock Market - Date, market, $ amount committed Why did you do the trade Entry Price Risk Initial Target Exit Price Analyze Trade Print out (or cut and paste) chart and make notes What did you do right/wrong Goal: Keeping emotions out of your trading Trading Journal - Setting up the Trade Entry Price Risk Initial Target Why did you do the trade?

47 Trading Journal - Analyzing the Trade Entry Price Risk Initial Target Why did you do the trade? Exit Price Analyze the trade 350 Trading Journal - Setting up the Trade Entry Price Risk Initial Target Why did you do the trade? Support from a few months ago 351 Trading Journal - Analyzing the Trade Entry Price Risk Initial Target Why did you do the trade Exit Price? Analyze the trade

48 Trading Journal - Analyzing the Trade Entry Price Risk Initial Target Why did you do the trade Exit Price Analyze the trade Putting it all Together Trading Checklist Have VALID Candle signal (if not sureconfirm with Nison candlestick recognition software) Does candle confirm Western signal (i.e. ADX, support/resistance, volume, or any of your favorites) Stock traders check sector Determine risk/reward (remember many of the candle signals can be used as a protective stop) Monitor trade (i.e. time or trailing stops, change in technical picture, etc) Use Trade Journal