Demystifying the Candlestick Myth

For forex traders, stock traders, commodity futures traders, bond traders!

Since Steve Nison came up with his first book "Japanese Candlestick Charting Techniques" in 1991, forex traders stock traders, commodity futures traders all over the world have been awed and mystified by this centuries old charting tool! The ensuing interest for, and the widespread popularity of this trading tool was simply magical. Every Tom, Dick, and Harry dealing with any form of trading was scrambling for whatever available Candlestick tutorials, books, and lessons there are! Practically everyone in the investment industry was mesmerized by the simplicity and the seemingly promising trading results Candlestick will bring to its users!

It is a well accepted fact that the Japanese are regarded as one of the most efficient money managers and smartest trading partners in the world. The introduction/revelation of their purportedly 'secret' trading tools to the rest of the world would naturally lend an air of mysticism to the event!

But everyone wonders if the Japanese Candlestick Charting Technique is really a well-kept secret intentionally hidden from the rest of the world for centuries!?....Until, Steve Nison accidentally discovered it in the '90's!?

My answer is a categorical no! No, the Japanese Candlestick Chart was not a well-kept secret! Let us start uncovering the truth behind the mysteries and mysticism that shrouds Candlesticks by looking back at Japan's history.

Keep That Ego On Check – Else You'll Lose Your Shirt On Forex Trading

“E” is For Ego – The Biggest Stumbling Block of Most Forex Traders

Making money on online Forex Trading is actually easy! It is only the forex traders themselves who makes it rather difficult and complicated to win trades.

Consider this!

To make money trading the foreign exchange market, there are only 5 basic and simple rules to follow!  All of which are quite easy to understand.

One needs only to:

• 1. Buy low, sell high.
  2. Let profits run, cut losses quickly.
  3. Add to a winning position, never to a losing one.
  4. Go with the trend. (Don’t buck it!)

However, simple though, the above rules may seem to many, most forex traders I’ve known still continue to lose money on forex!

Instead of buying low and selling high, many forex traders find themselves buying high and selling low instead! In fact, a lot of them jump into the market for the wrong reasons.

Forex Market Outlook: Strong Rally in the Cards For US Dollar

The job market, which was bleeding since January 2008, seems to have hit the bottom, with the economy losing very few jobs in November. The retreat of the jobless rate should add to the comfort. In reaction, oil is climbing and the safe haven gold, which has been having a scintillating run in recent weeks, is giving back some ground.

The Labor Department’s monthly non-farm payroll employment report showed that the economy lost 11,000 jobs in November, notably lower than the 111,000 jobs shed in the previous month. . Economists had estimated a loss of 114,000 jobs. October’s job loss was initially estimated at 190,000. At the same time, the unemployment rate edged down to 10% in November from 10.2% in October. Average hourly earnings rose 0.05% to $18.74.

Friday’s Nonfarm payrolls really surprised investors. Analysts were expecting a decline in jobs by 130 thousand while the publication showed only a drop by 11 thousand! The news caused high volatility on the currency markets. The EUR/USD instantly tumbled all the way to $1.4945 and this was the first positive reaction of the dollar to better than expected macro news. Affected were also emerging markets’ currencies including the Złoty, which appreciated very quickly.

The employment situation in the US has been dire since the onset of the worst financial crisis in decades, even as other parts of the economy have shown signs of coming around. With Friday's data suggesting the jobs market may be on the mend, the Fed may be compelled to lift interest rates from near zero sooner than previously imagined. 
 
The Japanese yen was the most hurt currency after these data instead of the greenback this time as the greenback interest rate outlook has improved after the data. USD JPY closed the week well above 90 psychological level and in spite of the European currencies losing versus the greenback they could make new highs of the week versus the Japanese yen EURJPY close the week at 134.34, GBPUSD at 148.82 and CHFJPY at 89 

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The Dollar May Go Sideways Next Week! Possible Retracement Ahead.

The dollar has remained well bid against yen with the February candle forming a decisive confirmation of reversal pattern with a close above 97.50. The USDJPY is however showing a possible short term rebuff of the uptrend, as the February 27 candle has formed some sort of a Dark Cloud Cover signifying a market weakness and a possible near term slide.

I have however some misgivings about this since on the daily candlestick chart, the February 27 candle was an end of the month candle and had a long tail downwards which touched support at 96.55. Being an end of the month candle, the February candle tells us that some book squaring may have occurred last Friday which pushed the price to the 96.55 low.  The dollar however recovered after that to close at 97.50 although way off the day's high and opening price. What it tells us is that there were traders who took the dollar's dip to 96.55 as an opportunity to buy into the dollar against yen once more.

I see the dollar running sideways in the early part of March, maintaining an effective range of 96.55 on the low end and 98.75 on the high. I still maintain that the bullish outlook for the dollar is intact and it will be targeting the 108.00 level before a major pullback can be expected again.

Next week, we will see the unemployment numbers once more.  I doubt though that  the market will  even pay attention to them or simply shrug them off, and taking the dips caused by unimpressive future data as buying opportunities. At worst, unimpressive employment numbers will only drive the dollar sideways against the yen. Also next week, we will see treasury secretary Geithner testify on the treasury's massive budget. But again, the market will not look at the numbers, but will instead weigh President Obama's financial dream team's resolve to turn around the economy.