Combining Candlestick Signals with Technical Indicators
Description: Steve will explain how to develop a trading plan by incorporating indicators such as stochastics, moving averages, Fibonacci numbers or trend lines into candlestick analysis.
When Steve Bigalow first started using candlestick analysis in the late 80’s, his trading was decidedly low-tech. He would call in his orders from a phone tied to the dashboard of his truck while driving to real estate renovation projects.
Fast forward twenty years. Bigalow long ago traded in the pick-up for a Mercedes SL500, and he has no time for house rehabbing anymore. He is now considered one of the top candlestick experts in the country. Along with luminaries like Steve Nissin and Greg Morris, he is among a group of teachers who helped bring the 400-year-old Japanese art to mainstream acceptance in the U.S. He consults regularly with money managers on how to apply candlesticks to their fundamental research and trading. Bigalow’s accomplishments have been great but not easy.
“I pretty much had to figure it out for myself,” Bigalow says, “because when I started there wasn’t a whole lot of information around at that time. In the early to mid 90’s a few books came out, which I was excited to see, but when I read them, they weren’t anything more than I already knew. They didn’t show you how to trade with candlesticks successfully.
“So that’s why I wrote my first book, Profitable Candlestick Trading: Pinpointing Market Opportunities to Maximize Profits , John Wiley & Sons, 2001 to take all the information that was out there on candlestick investing and consolidate it into what you really needed to know to make a successful trading plan.”
Like a bar chart, a candlestick line depicts the open, high, low and close. The body of the stick represents the range between the open and close. When the body is hollow, the close was higher than the open when the body is filled in, the close was lower than the open. Shadows, the thin lines above and below the body, represent the high and low of the day's trading range.
“The boxes have quite a bit of information built into them to tell you when a reversal is going on in a trend” Steve notes. He believes traders can build successful strategies by combining candlestick analysis with indicators such as stochastics, moving averages, Fibonacci numbers or trend lines.
Candlesticks were first brought to Bigalow’s attention by a friend who wanted to tap into Steve’s experience as a former stockbroker. “I didn’t do anything real aggressive with it for two or three months, but it kept bugging me to look at it,” Bigalow says. “Within that first year of study I started trading my commodity account based off of candlesticks, and while I did a lot better than I had been doing, it was a learning process. It took a lot of hard knocks to fight through the emotions of trading and learn the necessary discipline.”
Bigalow followed the first book with High Profit Candlestick Patterns: Turning Investor Sentiment into High Profits Profit Publishing, 2005. He developed a trading resource web site at www.candlestickforum.com that provides tools for beginning through advanced chartists.