V.11:4 (169-173): Candlesticks And Intraday Market Analysis by Gary S. Wagner and Bradley L. Matheny

Candlesticks And Intraday Market Analysis by Gary S. Wagner and Bradley L. Matheny

Can the much-ballyhooed candlestick method be helpful in intraday trading? To find out, Gary Wagner and Brad Matheny went through one day's trading via candlesticks for one contract and came up with some intriguing results.

Traders who understand the candlestick technique are now placing greater emphasis on these patterns when making trading decisions. Many of these traders have discovered the useful factor present in candlesticks not generally found in other oscillators or indicators: candlesticks actually depict the ongoing relationship between the bulls and bears. Candlesticks show the opening price and the closing price in relation to the opening (see sidebar, "The candlestick method") and the high and low for the time period compared to the open and close. The result is a portrait of the struggle for domination and the eventual victor, the bulls or the bears. Thus, each candlestick pattern can indicate any notable trait or tendency for any market explored using candles. In addition, candlestick analysis can be applied over any period, whether weekly or daily or even intraday.

INTRADAY TRADING

When trading any market on an intraday candlestick basis, the investor would be prudent to select a number of varying time segments because of the different speeds by which results can become known. For example, a five-minute Standard & Poor's candlestick chart would predict and confirm a reversal before a 20-minute S&P candlestick chart would. As a result, selecting the most accurate (and timely) time/price ratio can be difficult. It would be best to select many different time/price ratios for your charts and then isolate which would work best for your needs.

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