How To Use Candlestick Charts For Price Confirmation

Most of the articles on this trading blog focus on how to trade technical chart patterns such as the cup and handle.

We’ve also penned mini-lessons on various topics, such as trading psychology, to help improve your swing trading success.

But one thing we do not often discuss on the Morpheus blog is candlestick charts.

Trading stocks exclusively based on candlestick chart patterns may work for some momentum traders.

However, too much focus only on candlesticks may cause traders to miss the “big picture” of the overall trend.

That’s why we combine reliable and longer-term chart patterns, such as stocks breaking out of a base, with candlestick charts.

The combination enables us to make sure we are trading in the right stocks, at the right time, while using candlesticks for price confirmation and assisting in fine tuning our entries/exits.

We also rely heavily on moving averages and volume for price confirmation.

Below is an excellent video from SchoolOfTrade.com that shows you three ways candlestick charts can help improve your entries/exits through price confirmation.

NOTE: The examples presented in the video are commodity charts, but technical analysis works the same for stocks and ETFs.

If you want to learn more about candlestick charts, here is an excellent web page that summarizes and displays the most popular candlestick patterns.

Of course, no article about candlestick charting would be complete without a suggestion to learn more directly from Steve Nison, the Godfather of Candlesticks.

What are your favorite candlestick chart patterns? Share your comments below.