"Money-Making Candlestick Patterns: Backtested for Proven Results " Money-Making Candlestick Patterns: Backtested for Proven Results By: Steve Palmquist Price: $79.95 Data that took Steve Palmquist years to compile and interpret is now at your fingertips. In this breakthrough guidebook, Palmquist reveals the most effective candlestick patterns and indepth information on back testing for optimal success. Thorough and highly organized, this book teaches you to exploit every move the market makes with cutting-edge chart-reading techniques. Candlesticks are one of the most widely used technical tools in trading. Designed to provide detailed, at-a-glance information, these charts are integrated into almost every web site and charting software solution. But, despite their popularity, the definitions of these candlestick patterns are often vague and misleading. Now, for the first time ever, Steve Palmquist hands you the secrets for effectively using candlestick patterns in all market conditions. Data that would take years to compile and years to interpret is now at your fingertips. Based on intensive back testing and research, Money-Making Candlestick Patterns shows how to appropriately use the most popular candlestick patterns in bull, bear, and sideways trends. .................................................................... Built from PROVEN FACTS, not theory, you'll learn: Clear definitions of each selected pattern to remove guesswork and improve performance Exactly what you need to know about back testing to increase your wins and minimize your losses The impact of various market conditions on the most powerful patterns to remove surprises and increase profits Keys to eliminating common testing mistakes that can prevent you from making money The candlestick pattern that has shown triple ROI in back testing This book rigorously tests the assumptions inherent in standard candlestick pattern definitions. Each chapter breaks down the pattern to examine how parameters such as current volume, average volume, and price level will impact results. The definitions that most often produce profitable trades are identified and outlined with complete usage instructions for increasing your winning trade percentage. In this book, technician Steve Palmquist hands you his years of research. The information on back testing and the insight into your favorite patterns will give you a seasoned advantage in a fraction of the time. Thorough and efficiently organized, this book will allow you to use candlestick patterns to exploit every move the market makes. .................................................................... ABOUT THE AUTHOR: Steve Palmquist is a trader with more than 20 years of market experience who puts his own money to work in the market every day. Palmquist has shared trading techniques and systems at seminars across the country, presented at the Traders Expo, and published trading articles in Stocks & Commodities, Traders Journal, The Opening Bell, and Working Money. Palmquist also founded www.daisydogger.com, which provides trading tips and techniques, and is the publisher of The Timely Trades Letter, in which he shares his market analysis, trading setups, and trading tips twice a week. Palmquist holds a BSEE from Washington State University, and a Masters in Electrical Engineering from the University of Illinois. He has been involved in the management and development of communications systems, high-speed computers, test equipment, infrared vision systems, and color printers at companies such as Bell Laboratories, Integrated Measurement Systems, Flir Systems, and Tektronix. He holds 10 U.S. patents, is a father of four, and has a private pilot license with an instrument rating. Listen to Steve Palmquist's Trader Profile: http://www.traderinterviews.com/programs/permalinks/TI_02-07-08_StevePalmquist.htm EXCERPT FROM FOREWORD BY OLIVER L VELEZ: I have the distinct pleasure of learning from the thousands of traders who have participated in my courses and programs. It has shown me that the challenges I faced learning to trade are the same challenges that all traders face. As I read through Steve Palmquist's book, Money-Making Candlestick Patterns, I noticed that it zeroed in on one of the toughest obstacles to profitable trading—conquering the odds. The most successful traders I have met have put in the time needed to comprehend how important it is to know their winning trade percentage. To fully understand how probability comes into play, let's start with a definition. Webster's defines trading as: “to engage in frequent buying and selling of (as stocks or commodities) usually in search of quick profits.” Notice the key words that even Webster knew to include; “…in search of,” nodding to the fact that 'quick profits' are ever so elusive. To me, trading is “Using technical analysis to find a moment in time when the odds are in your favor. Then trading becomes a matter of your entry and management.” In other words, it is having the knowledge to know when the odds are in your favor, having the patience to wait for that moment, then having the discipline to handle the trade properly when it goes in your favor and also handle it properly when goes against you.” Let's dissect a little. The opening words are “using technical analysis.” Now, I know the Webster's definition would let you trade with fundamentals, but not mine. I have written extensively on this in my own books, but suffice it to say that the opening words are not a misprint. We begin our search on the charts. This is the only place where we find truth and useful information in the markets. Not from analysts, not from brokers, and not from accountants. Next comes “a moment in time.” How long is a moment in time? It depends on your time frame. For a core trader that moment may be a day, for a swing trader several minutes, for a day or scalp trader, perhaps only a few seconds. The point is that there is only one moment when that exact trade is proper. Any thing past that moment, and that trade is gone and if executed, wrong. Next, when are “the odds in your favor?” Well, that comes down to a matter of knowledge and technical patterns. We are looking for the exact moment when a stock “shows its hand” and gives away a key secret—letting you in when a pattern or sudden event develops that appears to be something other than just random noise. And it is at this critical point that Steve Palmquist has presented some of the most valuable research that I've seen in along time. Let me explain further. As you may know, charts of stocks, futures, indices, or any item that changes price over time can be drawn in a variety of ways. Line charts and bar charts are a couple of common ways. I use only Japanese candlestick charts and don't consider a chart complete without them. The main difference between Japanese candlestick analysis and Western bar chart analysis is that the Japanese place the highest importance on the relationship between the open and close of the same period, while Westerners place the importance on the close as it relates to the prior period's close. While all of this data may be available on a Western bar chart, it is difficult to see quickly. The candlesticks color each bar based on whether it closed above its open (white), or below it's open (black) so it is easy to tell who won the “battle” on that bar. Note that a candle may be closing under the prior candle and still be white, if it closed above its open. This could happen if the stock gapped down at open. Also keep in mind that as long as the underlying stock closes higher than the prior day's close, Western thought says it's positive; however, according to the Japanese view, this is not necessarily the case. If on an up day, the stock closes below its open, the Japanese would regard it as negative. The high and low of the day are then seen as “tails” that stick out above or below the colored body. These are also called “wicks' as in the wick of a candle. A long tail at the top of the candle shows the bears were able to move the stock significantly, as the stock closed well off its high. A long tail at the bottom of the candle shows the bulls were able to move the stock significantly, as the stock closed well off its low. The different shapes and colors that these candlesticks assume can help give an indication of what is happening with that stock. Several of these candlesticks in a row can give rise to possible patterns that often repeat, giving us tradable strategies. One of the most notable books on the subject is “Japanese Candlestick Charting Techniques” by Steve Nison. But, what is amazing to me, is that even learning from the father of candlesticks himself, you run the risk of misinterpreting the definitions of these candlestick patterns. Often vague in description, the same candlestick pattern can be used differently by different traders for very different results. What Steve Palmquist hands you is his detailed research into how to best define the most popular candlestick patterns for less ambiguity and more profitability. In chapter 1, he reviews the basic candlestick and the background into his testing methods. His knowledge on backtesting is vast and evident in the subsequent chapters on the bullish engulfing, bearish engulfing, hammer, hanging man, morning star, and evening star patterns. Each chapter breaks down the pattern to examine how different parameters impact results. In an organized and detailed manner, Steve presents the reader with the definitions that most often produce profitable trades. However, some of the most important information is presented in the last chapter. This is where Steve introduces you to how to use his research; by implementing his unique system of trading, one he calls Market Adaptive Trading. It is in this chapter that he really pulls all of his research together and gives you a way to put it to work immediately. Proving that some patterns work better under certain market conditions, Steve will show you how to use candlesticks most effectively by using only the highest probability setups; truly, the key to trading. To bring this full circle, let's finish dissecting the end of my personal definition of trading – “then it becomes a matter of entry and management.” In other words, here is where the psychology comes in to play. Once you learn how, the intelligence actually required to enter and manage a trade is minimal. The ability to do so; is rare. This is where you become your own worst enemy, and is the level that even the most astute traders seldom pass. You must have the knowledge to know; the patience to wait; and the discipline to handle. Even with all of this research, it is ultimately up to us, the astute traders, to manage the trade properly. The goal, of course, is to increase the winners and minimize the losers. This book prepares you to do just that. Here, Steve Palmquist gives you an immediate edge in the markets. Are you exploiting your edge on every trade you place? Do you even know what your edge is? The most experienced and successful market players know very well what their edge is and work to exploit that edge only if the opportunity arises. In the absence of a high odds opportunity, the successful market player will exercise patience and discipline and stay in cash. He or she does not become restless and trade (take risk) simply because they average three trades an hour, day or week (or five, or eight, etc.) and it is rapidly approaching the market closing time or weekend and they have placed no trades at all. Each day offers different odds. A successful market player with a proven edge will consider some of these events (which timeframe depends on your trading plan) to be opportunities and other events to be high risk setups only a sucker would play (or the novices, sheep, and dumb money). Can you know with certainty that your next trade is a winner or loser? You can't. You can only extrapolate probabilities from the current setup and your past results and statistics. The successful market player specializes in certain well defined strategies and also tracks his/her trades extensively and mines the data for information. This is the very essence of Money-Making Candlestick Patterns. And this is exactly why this book will remain a valuable tool on my bookshelf for years to come. ---Oliver L Velez, CEO Velez Capital Management, LLC Author of: Strategies for Profiting on Every Trade, Tools and Tactics for the Master Day Trader (with Greg Capra), and the Swing Trading Course Book