Are Japanese Candlesticks really that useful for trading the markets?

Photo by Traxer on Unsplash

Are Japanese Candlesticks really that useful for trading the markets?

Some centuries ago, in ancient Japan, Munehisa Momma became one of the richest men of his time and country. He did it by trading -mainly- in the rice market.

He had an unfair advantage: a proprietary way (developed by himself) to chart prices. When that technology was introduced to the West, thanks to the books of Steve Nilson, it was known as “Japanese Candlesticks”. It was said that by studying them, one could get some of that ancient “unfair advantage” over traders unaware of such marvels from the East.

In the United States and England, some traders began to adapt the Candlestick technique and improve it even further. They could see how those patterns, once so esoteric and mysterious, could become really useful tools in forecasting market movements with a very high degree of success.

These traders found new ways to combine candlesticks with other technical indicators and chart formations, utilizing these tools to create their own unique strategies for trading. Their techniques enabled them to identify entry points, manage risk, and exit trades with ease.

As the years went by, more and more traders began using Japanese Candlesticks as an integral part of their trading toolkit, adapting and improving upon the techniques that had been developed by Munehisa centuries ago. And in this way, they were able to consistently reap the rewards of successful trading in today’s dynamic markets.

But, as those graphics became more and more known to western trades, some (or all) of its magic began to fade. The reason for it: when a Candlestick pattern is forming, there are already thousands upon thousands of traders using complex software to anticipate them and trade accordingly, thus eroding any possible edge the participants on that particular market could have.

But hold on, my dear reader, because I´ll guide you to ways to effectively trade any market with a high probability of success.

Stay tuned!