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| Profitable
Day Trading Using Candlestick Charts |
Day
trading, a trading technique popularized
to the general investing public in just the
past 5 to 7 years. This phenomenon resulted
from the severe market daily declines in 1987
and a few in the early 1990’s. The huge down
days made it impossible for investors to get
in communiqué with their brokers. So, it was
legislated that access to the markets had
to be available to everybody, thus the electronic
trading systems. Day trading blossomed in
the early to mid 90’s.
However, the original day trading techniques,
having electronic signals showing quick arbitrage
situations, producing huge profits, has disappeared
over the past two years. But day trading is
still very profitable when used with candlestick
signals. The old methods disappeared, but
new products were developed that made day
trading still viable. The exchanges set up
market index trading entities. The Spiders
for the S&P index, the Diamonds for the
Dow and the QQQ's for the Nasdaq. These highly
liquid trading entities make for excellent
trading vehicles for day trading.
Fortunately, candlestick signals clearly illustrate
the change in investor sentiment for any time
period; monthly, weekly, daily, hourly or
by the minutes. A minute chart is valuable
for the day trading technique. Combining stochastics
with candlestick signals, even on a minute
to minute basis, produces highly accurate
results. Day trading has a very viable platform
to work from when the signals and stochastics
coordinate.
Producing the right combination of time segments
can formulate low-risk, high potential day
trading setups. For example, the active day
trader may use the 1 minute, 3 minute and
10 minute charts to establish their trades.
The 1 minute, 5 minute and 15 minute chart
combination works extremely well. Other day
trading programs, set for two or three trades
per day, may use the 5 minute, 15 minute,
one-hour combination.
Combining multiple charts creates a basis
for catching the intraday trends. Day trading
in this manner requires getting in and getting
out of trades right at the reversal points.
The candlestick signals provide this information.
Day trading without a method to take advantage
of accurate reversal signals produces much
reduced profits.
Note in the following example that observing
all three charts may produce validity to a
day trade. Day trading becomes easier when
the visual roadmap can easily be determined.
Note how the one minute chart of the S&P,
a favorite of the day traders, keeps revealing
candlestick “buy” signals at the same support
area. Those signals would alert the candlestick
investor to the fact that buying was clearly
obvious every time the sellers brought the
S&P down to this level. Day trading these
“buy” signals would require some visual backup.
The five minute chart reveals the same factors.
Oversold stochastics. The shadows are all
showing support at that one level. The Spinning
Tops are demonstrating indecision. Now the
15 minute chart should be perused.
The 15 minute chart reveals the same. Oversold
stochastics and Spinning Tops. Signs that
the bottom is fairly near. The combination
of the three charts forewarns of a change
in direction. What is the magnitude of the
next move? Don’t know. But day trading the
S&P’s this way allows the day trader to
put the probabilities in his favor.
This day trading technique can be applied
to any trading entity that has sufficient
volume. Using the signals at the proper stochastic
period can produce consistent day to day profits.
Mr. Bigalow has traded the S&P E-Mini’s
for years. Use the forum, chat room or e-mail
the site to learn more about how to use candlesticks
with your own day trading program. |
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