How to Make Money Trading with Candelstick Charts [Dec 01, 2011] Sadekar, Balkrishna M.

What's "How to Make Money Trading with Candlestick Charts" about?

• Overview of Candlestick Charts: The book explains how Japanese rice traders have used candlestick signals for nearly four centuries to amass fortunes. It details how these signals are now applied globally across various financial markets.
• Step-by-Step Guide: It provides a step-by-step approach to making money using candlestick techniques, including recognizing major signals and understanding the market psychology behind them.
• Combining Techniques: The book discusses combining candlestick signals with Western technical analysis to exploit high-probability trades.
• Practical Trading Tips: It includes practical trading ideas, tips, and common mistakes to avoid, based on the author's extensive experience.

Why should I read "How to Make Money Trading with Candlestick Charts"?

• Proven Techniques: The book offers proven, market-tested candlestick techniques that have been refined over centuries.
• Comprehensive Learning: It is suitable for both new and experienced traders, aiming to provide systematic and consistent trading profits.
• Psychological Insights: Understanding the underlying market psychology revealed by each candlestick formation can give traders an edge.
• Avoiding Mistakes: The book highlights common trading mistakes and how to avoid them, enhancing the reader's trading acumen.

What are the key takeaways of "How to Make Money Trading with Candlestick Charts"?

• Major Candlestick Signals: Learn to identify and use major candlestick signals like Doji, Hammer, and Engulfing patterns effectively.
• Market Psychology: Gain insights into the market psychology that each candlestick formation reveals, helping to predict market movements.
• Technical Analysis Integration: Understand how to combine candlestick signals with Western technical analysis for better trading outcomes.
• Risk Management: Learn about stop-loss settings and how to cut losses effectively, which is crucial for successful trading.

How does Balkrishna M. Sadekar suggest using candlestick charts for trading?

• Signal Recognition: Sadekar emphasizes recognizing major candlestick signals and understanding their implications for market trends.
• Psychological Analysis: He suggests analyzing the underlying psychology of market participants as revealed by candlestick formations.
• Combining Techniques: The author advises combining candlestick signals with other technical analysis tools for more robust trading strategies.
• Mechanical Trading System: Sadekar promotes using candlestick charts to develop a mechanical trading system that minimizes emotional interference.

What are the major candlestick signals discussed in the book?

• Doji: Indicates indecision in the market and can signal a potential reversal when confirmed by subsequent price action.
• Hammer and Hanging Man: These are one-day reversal signals, with the Hammer indicating a potential bottom and the Hanging Man a potential top.
• Engulfing Patterns: Bullish and Bearish Engulfing patterns signal strong reversals when a larger candle engulfs the previous day's candle.
• Morning and Evening Stars: These are powerful three-day reversal patterns indicating potential trend changes.

How does the book explain the psychology behind candlestick formations?

• Fear and Greed: The book explains how fear and greed drive market movements, with candlestick formations visually representing these emotions.
• Market Sentiment: Each candlestick pattern reflects the sentiment of traders, providing insights into potential market reversals.
• Indecision and Confirmation: Patterns like Doji indicate indecision, while subsequent price action provides confirmation of market direction.
• Emotional Triggers: Understanding these psychological triggers helps traders anticipate market movements and make informed decisions.

How can candlestick signals be combined with Western technical analysis?

• Support and Resistance: Candlestick signals can be used in conjunction with support and resistance levels to identify high-probability trades.
• Moving Averages: The book discusses using moving averages as dynamic support and resistance levels, enhancing candlestick signal effectiveness.
• Trend Confirmation: Combining candlestick signals with technical indicators like stochastics can confirm trends and improve trade accuracy.
• Enhanced Analysis: This combination provides a more comprehensive analysis, increasing the likelihood of successful trades.

What are the stop-loss strategies recommended in the book?

• Signal Negation: Stop-loss points are set where the candlestick signal is considered negated, indicating a reversal of the expected trend.
• Logical Placement: Stops are placed at logical points, such as below the low of a Hammer or above the high of a Shooting Star.
• Risk Management: Effective stop-loss strategies are crucial for managing risk and preserving capital in case of signal failure.
• Dynamic Adjustments: Traders are encouraged to adjust stop-loss levels based on market conditions and signal confirmations.

What trading tips does Balkrishna M. Sadekar offer in the book?

• Risk-Reward Ratio: Always calculate the risk-reward ratio before entering a trade to ensure potential gains outweigh potential losses.
• Avoiding Emotional Trades: Do not let emotions turn a trade into a long-term investment; stick to your trading plan and exit when necessary.
• Volume Considerations: Avoid trading low-volume stocks, as candlestick signals are more reliable with higher trading volumes.
• Earnings Reports: Avoid taking positions before earnings reports, as fundamental news can disrupt technical analysis.

How can candlestick charts be used for longer-term trading?

• Weekly Charts: Investors can use weekly candlestick charts to identify longer-term trends and make informed investment decisions.
• Signal Consistency: The same candlestick signals apply to weekly charts, providing consistency in analysis across different time frames.
• Trend Monitoring: Regular monitoring of weekly charts helps investors stay informed about potential trend changes and market conditions.
• Long-Term Gains: By focusing on longer-term trends, investors can ride significant market movements and achieve substantial gains.

What are the best quotes from "How to Make Money Trading with Candlestick Charts" and what do they mean?

• "Buy into others' fears and sell into others' greed." This quote emphasizes the importance of contrarian trading, taking advantage of market emotions.
• "Candlesticks perform the function of the x-ray machine." It highlights how candlestick charts provide a deeper insight into market dynamics than traditional charts.
• "The market is much bigger than them and their egos." This reminds traders to remain humble and not let ego interfere with trading decisions.
• "The intention of this book is to teach you how to use these powerful candlestick techniques correctly and effectively." It underscores the book's goal of empowering traders with practical candlestick knowledge.

What is the author's background and expertise in candlestick trading?

• Founder of Profitable Candlestick Charting LLC: Balkrishna M. Sadekar is the founder of an educational company focused on candlestick charting and technical analysis.
• Technical Analysis Authority: He is a member of the Technical Securities Analyst Association, a leading authority in the United States.
• Engineering Background: With a Master's degree in Engineering, Sadekar combines technology with investor psychology in his trading approach.
• Experienced Trader: With over a decade of trading experience, he has trained both novice and experienced traders in applying candlestick techniques effectively.