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Vol4handoutsopt1 PDF
Vol4handoutsopt1 PDF
Western
Technical Tools
Founder www.candlecharts.com
and President: Candlecharts.com 212
Candlestick Western
Charting Charting
Techniques Tools
Trade Management
213
214
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
www.candlecharts.com 217
East + West = Greater Winning %
www.candlecharts.com 218
Candles plus…..
www.candlecharts.com 219
Candles plus Bollinger Bands……
www.candlecharts.com 220
Convergence of Clues
Open Interest
www.candlecharts.com 221
East and West = Higher Confidence
www.candlecharts.com 222
Candles look good- but what about m.a?
www.candlecharts.com 223
Crack and Snap with Volume
www.candlecharts.com 224
Founder www.candlecharts.com
and President: Candlecharts.com 225
www.candlecharts.com 226
Candles and the ADX:
The Perfect Fit
www.candlecharts.com 227
Stands for Average Directional Indicator
Shows how strongly a market is trending
Does not show direction of trend
www.candlecharts.com 228
Strong ADX with
prices in up trend. Strong ADX with
prices in down trend.
www.candlecharts.com 229
1
2
www.candlecharts.com 230
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
www.candlecharts.com 231
Use only on daily charts –
except for FX
Use only for entries
Lagging indicator
Slow to recognize a new trend
www.candlecharts.com 232
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
www.candlecharts.com 233
Common mistake- looking
at ADX level.
234
-.31
www.candlecharts.com 235
ADX:22.38
Slope = +2.08 ADX:27.56
14 Period
ADX:20.30
ADX:26.03
ADX slope
increasing What is the slope?
Strong uptrend?
.5 or more
www.candlecharts.com 236
ADX:18.26
-.31
Minimum: ADX:18.57
14 Period
ADX slope
+.25 or
less
Strict: 14
Period
ADX slope
decreasing
www.candlecharts.com 237
Chuck@smartstops.net
www.candlecharts.com 238
Candles and ADX - The Perfect Fit
Reversal candles
help pick top and
bottoms.
Increase % by not
going against
strong trends.
239
www.candlecharts.com 240
Minimum:
14 Period
ADX slope
+.25 or
less
Strict: 14
Period Do we have to measure the
ADX slope on this hammer?
ADX slope
decreasing
www.candlecharts.com 241
Minimum:
14 Period -.40 -.10
ADX slope
.25 or less
Strict: 14
Period
ADX slope
decreasing
www.candlecharts.com 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?
www.candlecharts.com 243
ADX : 27.98
ADX : 30.38
www.candlecharts.com 244
+.95
ADX:18.26
-.31
Minimum: ADX:18.57
14 Period
ADX slope
+.25 or
less
Strict: 14
Period
ADX slope
decreasing
www.candlecharts.com 245
Slope +.97
www.candlecharts.com 246
FOR BEAR CANDLE
REVERSAL SIGNALS
www.candlecharts.com 247
FOR BULL CANDLE ADX:
REVERSAL SIGNALS 1-31.97
2-32.67
3-32.48
• Step 1 – get candle 4-32.45
5-32.53
signal 6-30.23
6
• Step 2 – ADX shows
downtrend easing or no 1
trend: 4
3
ADX slope increases 2
by less than .25, and 5
better if slope is
negative
www.candlecharts.com 248
Founder www.candlecharts.com
and President: Candlecharts.com 249
Gravestone doji at resistance
www.candlecharts.com 250
Candles for reversals and Western for targets
Bearish engulfing
pattern at top of bull
channel
target
www.candlecharts.com 251
Swing Target
target
First
leg
www.candlecharts.com 252
East and West
www.candlecharts.com 253
Becoming a Confident Trader
www.candlecharts.com 254
Head and Shoulders
Head Right
Left Shoulder Shoulder
Neckline
Sell
signal
www.candlecharts.com 255
Three Buddha Pattern
256
Why we are here!
We got the reversal here with
candles ….
www.candlecharts.com 257
How Education Saves You $$$$
2 3
1
… New resistance
Old support
becomes…..
1- Bear Harami
2- Dark Cloud Cover
3- Bearish Engulfing Pattern
www.candlecharts.com 258
TASC Interview - Jan. 24, 2003 S&P at 860
1) Once the neckline’s
Head and support is broken, it
Shoulder top should become
resistance.
neckline Interview
259
STEVE’S FAVORITE
MEASURING TACTIC
260
“Box Range” Breakout
www.candlecharts.com 261
Box range breakout
Harami with
target bottom of
box
www.candlecharts.com 262
Box range Breakouts
www.candlecharts.com 263
East & West = Profits
www.candlecharts.com 264
Box range Breakout/ momentum trading
www.candlecharts.com 265
www.candlecharts.com 266
The Tools of the West with
the Light of the Candles
Scenario
1
Scenario
2
www.candlecharts.com 267
The Nison Candlestick Screener™
Using candles at support or resistance
for the high probability trades
www.candlecharts.com 268
The Nison Candlestick Screener™
www.candlecharts.com 269
The Nison Candlestick Screener™
www.candlecharts.com 270
The Nison Candlestick Screener™
www.candlecharts.com 271
The Nison Candlestick Screener™
2) What is this
candle line
hinting?
www.candlecharts.com 272
The Nison Candlestick Screener™
www.candlecharts.com 273
How education saves you $$$$
1) Is the £ at resistance?
Long term resistance zone
2) Are there any candle signals
showing hesitation?
www.candlecharts.com 274
The Value of Owning the Knowledge
www.candlecharts.com 275
The Value of Owning the Knowledge
www.candlecharts.com 276
The Nison Candlestick Screener™
www.candlecharts.com 277
The Nison Candlestick Screener™
Near support?
Any reversal signals yet?
www.candlecharts.com 278
The Nison Candlestick Screener™
www.candlecharts.com 279
The Nison Candlestick Screener™
“Market refreshed”
Near resistance?
Any reversal signals yet?
280
Using Measured Moves including:
Box range
Head and Shoulders
Swing Targets
281
Founder www.candlecharts.com
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?
www.candlecharts.com 283
Candles and Sectors
www.candlecharts.com 284
Why are Sectors important
Sectors account for 37-60%
of an individual stock’s performance
www.candlecharts.com 286
Check the stock’s sector
www.candlecharts.com 287
www.candlecharts.com 288
Bottom Up Sector Analysis
Although falling
window what is it’s sector
strongly hinting?
www.candlecharts.com 289
Bottom Up Sector Analysis
www.candlecharts.com 290
Bottom Up Sector Analysis
Buy ?
AMGN – Sept. 11
Biotech Sector
www.candlecharts.com 291
Bottom Up Sector Analysis
Buy
Sept.11
www.candlecharts.com 292
www.candlecharts.com 293
Setting up scanning pages for
Nison Sector Analyses
www.candlecharts.com 294
Scanning with Nison Candle Sector Analyses
STEP 1 – Scan Sectors
Aug. 16
www.candlecharts.com 295
Scanning with Nison Candle Sector Analyses
STEP 2 – Scan Component Stocks in Chosen Sector(s): Internets for this example
Aug. 16
www.candlecharts.com 296
Scanning with Nison Candle Sector Analyses
Aug. 16
www.candlecharts.com 297
Scanning with Nison Candle Sector Analyses
Aug. 16
www.candlecharts.com 298
ETFs
Popularity/Liquidity
www.candlecharts.com 299
Analyze and Trade ETFs like any other market
Bull sash
patterns
Hammers
www.candlecharts.com 300
Windows and ETFs
www.candlecharts.com 301
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 www.candlecharts.com
and President: Candlecharts.com 303
3
Trade Management
• “Market Chameleon”
• “Candles in Context”
• Risk-reward
• Exit Strategies
www.candlecharts.com 304
Adapting to the Market
www.candlecharts.com 305
Adapting to the Market
Looks good
anything
different?
www.candlecharts.com 306
Adapting to the Market
Target
www.candlecharts.com 307
Adapting to the Market
Sell here
www.candlecharts.com 308
Adapting to the Market
www.candlecharts.com 309
Adapting to the Market
www.candlecharts.com 310
Adapting to the market
Where’s
Where’s
support
support?
now?
www.candlecharts.com 311
Become a Market Chameleon
Bear
Stearns
Collapse
www.candlecharts.com 312
Candles in Context
Analyzing candle
signals within the
context of
surrounding
technical picture
www.candlecharts.com 313
Misinformation can cost you $$$
www.candlecharts.com 314
Same Signal- but how different the strategy!
www.candlecharts.com 315
Which is a Better
trading signal?
www.candlecharts.com 316
Candles in Context
Bearish
Engulfing
Pattern
www.candlecharts.com 317
Which is a better
trading signal?
Morning Star
Hammer
www.candlecharts.com 319
Always Check Risk – Reward
Do you have a
good
risk-reward?
www.candlecharts.com 320
Risk/Reward
www.candlecharts.com 321
Waiting for time to ripen
Classic bearish
engulfing pattern:
But what about
risk/reward aspect?
www.candlecharts.com 322
Trade Management Essentials
Adapting to the Market
Candles in Context
Importance of risk/reward
323
Founder and President: Candlecharts.com 324
Protecting
your Assets
www.candlecharts.com 325
Slide 115
326
www.candlecharts.com 327
Protective Stops keep you in the game!
Looks
promising at
the white
candles
www.candlecharts.com 328
How Education Saves you $$$$
Hammer
www.candlecharts.com 329
How Education Saves you $$$$
Hammer
www.candlecharts.com 330
Exit Strategies
Protective Stops
Time Stops
Trailing Stops
www.candlecharts.com 333
Don’t Stay Around
www.candlecharts.com 334
You’re Wasting Resources
www.candlecharts.com 335
www.candlecharts.com 336
Trailing Stops
www.candlecharts.com 337
“Golden” and “Dead” Crosses
Compares two moving averages
GOLDEN CROSS: shorter crosses above longer DEAD CROSS: shorter crosses under longer
www.candlecharts.com 338
Answer: 3 and 12 day
www.candlecharts.com 339
www.candlecharts.com 340
Trailing stops - letting the profits run
“I usually exit, it
Shooting
Star
Shooting
Star
Falling window
www.candlecharts.com 342
Letting Profits Run
Shooting star
www.candlecharts.com 343
Trailing Stops to let profits run
Now at target-
Doji warns of
caution. But you
want to let
profits run.
Potential Target
www.candlecharts.com 344
Trailing Stops to let profits run
doji
www.candlecharts.com 345
Exit Strategies
Protective Stops
Time Stops
Trailing Stops
346
Trading Journal
(setting up the Trade)
From Toni Turner’s Book- Short Term Trading in the New Stock Market - www.toniturner.com
Entry Price
Risk
Initial Target
www.candlecharts.com 349
Trading Journal - Analyzing the Trade
Entry Price
Risk
Initial Target
Exit Price
www.candlecharts.com 350
Trading Journal - Setting up the Trade
Entry Price
Risk
Initial Target
www.candlecharts.com 351
Trading Journal - Analyzing the Trade
Entry Price
Risk
Initial Target
Exit Price?
www.candlecharts.com 352
Trading Journal - Analyzing the Trade
Entry Price
Risk
Initial Target
Exit Price
www.candlecharts.com 353
www.candlecharts.com 354
Putting it all Together
Trading Checklist
Have VALID Candle signal (if not sure-
confirm 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
355