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Practice Stock Trading with Candlestick Chart Patterns

Practice Stock Trading -  important advice to novices to the stock market. A great way to practice stock trading is to paper trade. This simulated trading provides great insight without risking any real money while you practice stock trading. There is one caveat to paper trading; play money is very different from real money. While it is wise to practice stock trading before putting your hard-earned bucks on the line, the emotional component is not as intense.

As your finger hovers nervously over the “submit” button to place your first trade, you experience a tightening in your stomach that is oddly exhilarating and yet unsettling. It is amazing how many thoughts go through your mind once you close your eyes, push that button and start watching your trade. “Please, please let this be a good trade”  “Maybe I should practice stock trading a bit more, I think I’m going to be sick”  “Is my trade running against me already!”  “Should I get out now or wait? Maybe I should turn this trade into a long-term hold and wait for it to go back up.”  “My wife is going to kill me!”  NOW you know why we recommend trading with candlestick charts. Take advantage of the emotional component that all investors experience and see it; Visually depicted  in the charts.  Japanese Candlestick charting dramatically increases the information conveyed into visual analysis. Each candlestick trading formation clearly illustrates the change of investor sentiment. This process is not apparent in standard bar chart interpretation. Capitalize on the emotional process other investors fall prey to  and practice stock trading with candlesticks.

We recommend you begin learning the 12 Major Candlestick Signals - Major in the sense that they occur in price movements often enough to be beneficial in producing a steady supply of profitable trades. Once comfortable with the major signals, expand on your training to include the Secondary signals, which do not occur as often as the Major Signals but are just as effective.

Trading the Unique Three River Bottom Pattern.


Description

The Unique Three River Bottom is a bullish pattern, somewhat characteristic of the Morning Star Pattern. It is formed with three candles. At the end of a downtrend, a long black body is produced. The second day opens higher, drops down to new lows, then closes near the top of the trading range. This is a Hammer-type formation. The third day opens lower but not below the low of the previous day. It closes higher, producing a white candle. But it doesn’t close higher than the previous day’s close. This pattern is a rare pattern.

Criteria

  1. The  candlestick body of the first day is a long black candle, consistent with the prevailing trend.
  2. The second day does a harami/hammer. It also has a black body.
  3. The second day’s shadow has set a new low.
  4. The third day opens lower, but not below the lowest point of the previous day. It closes higher but below yesterday’s close.

Signal Enhancements

1. The longer the shadow of the second day, the probability of  a successful reversal becomes greater. 

Pattern Psychology

After a strong downtrend  trend has been in effect, the trend is further promoted by a long body black candle. The next day prices open higher but the bears are able to take prices down to new lows. Before the end of the day, the bulls bring it back up the the top end of the trading range. The third day, the bears try to take it down again, but the bulls maintain control.  If the following day sees prices going up to new highs, the trend has confirmed a reversal.

 

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