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.
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.