As the very first to reveal candlesticks to the Western world in my book, Japanese Candlestick Charting Techniques, it’s very flattering to see how quickly and widely Japanese candlesticks have become. As attested by the many books on candlestick charting, as well as the fact that almost all technical analysis software and online technical analysis sites, have candlesticks as their default chart.
However, this popularity does have a downside in so far as those who teach candlesticks, while well-intentioned, very often give wrong information, or make up their own candlestick signals. The risk of this is that those who follow this wrong education can have their trading or investment portfolio severely damaged. The Japanese have a proverb “let one blind man lead another, and both will fall into the river”.
For example, there is one educator who has his favorite bullish candlestick signal. But the problem is that by the time the “so-called” candlestick signal is completed, it’s a really poor risk reward trading opportunity and a trader with the proper education would never place a trade based on the signal. The potential for loss is just too great.
Let’s look at another example. On Exhibit 1 we have a shooting star, which is a candlestick with a long upper shadow at least twice the height of the real body.
Now let’s look at Exhibit 2 that I took from a book on candlestick charting. Notice what he calls a shooting star. Obviously, it’s not because the upper shadow is not twice the height of the real body. And it’s really key to understand that the reason for the bearishness of a shooting star is that the long upper shadow is showing us the market is rejecting higher levels. That’s why the upper shadow needs to be at least twice the height of the real body. If somebody viewed the candle line in Exhibit 2 as a shooting star, they could have offset longs or even going short only to have the market continuing to rally because that was not a valid shooting star.
This is just one example of why it’s vital, that if you plan on using candlesticks for your trading or investing, that you be sure you’re getting the right education. That is why one of the slogans of our company is “Nison Candlesticks: Candlestick Training the Right Way”. Since my work is the foundation of all candlestick information, when you learn from us, you know you’re getting the correct education on how to successfully use candlesticks. As one of our customers so succinctly put it, “everyone quotes the master, so why not go to the master.”