Why technical analysis?



As a candlestick trader, your main focus should be technical analysis, not fundamental analysis. True, fundamental analysis might predict what a certain stock is worth now and what it should be worth a year from now. However, the mere fact that the stock should be worth a certain price is irrelevant to the market. The market does not care what price analysis suggests. What moves a stock price is the investor sentiment towards that stock. The perception is more important than the actual numbers. That is what makes the market dynamic. That is what creates demand and supply. It is only because some people perceive the stock price should be ‘X’ and others perceive that the stock is worth ‘Y’, that a constant dynamic exist in the market. Technical analysis studies this perception.

Candlestick charting is a tool, much like a Doctor’s X-ray machine, to detect the health of the market. All the people participating in any given market collectively influence that market. The key word here is ‘people’. And people are creatures of habit. They will keep doing the same thing over and over given the same situation. Most amateurs will panic when the stock is approaching a bottom and they start buying exuberantly when the stock is nearing its peak. This has been going on for ages and will continue to go on. As a candlestick trader, you are going to take advantage of this situation. By learning the language of the market, you will be able to notice the panic and exuberance. There is no better way to learn the language of the markets than candlestick signals. Remember these signals have been in existence for centuries and people have used to them to amass huge profits.

So, learn them thoroughly and practice reading the charts. Your time spent will be well rewarded.