Trading with Candlesticks

by Michael C. Thomsett

About ten years ago, I was invited by a local newspaper to participate in an eight week stock picking contest with seven other individuals, each with a different approach to stock picking, presumably to find the best money making stock trading strategy. As the author of a gambling book, Winning Pachinko: The Game of Japanese Pinball, I was to make use of a "gambler strategy". My result was less than spectacular (4^th out of 8, so top half, anyway), while the winner more than doubled his fantasy $100K using "Japanese candlesticks". He did so in about ten weeks of trading. So when I saw this book, I was anxious to see if I could become a candlestick convert, as it were. Unfortunately, this book is very good at teaching about candlesticks, but not very good at the “trading with candlesticks” part. In fact, every time I thought the author had given me an useful nugget or insight, the next paragraph would say, “Of course, it could be a false signal.” It’s second guess after second guess. But that’s not the worst part. The worst part is that the authors never draw any sort of correlation between their candlestick charts and what was going on in the real world. There’s nothing that reflects what the economy was doing at the time (was it a bear market? bull market? stagflated? irrationally exuberant?), and nothing about what the company itself was doing (changing CEO’s? releasing a new product? covering up a sex scandal?). Had there been anything at all that allowed a potential trader to put two and two together on his or her own, this book could have been really valuable. As it is, it’s nothing more than a treatise on one of many stock analysis tools, limiting its utility considerably. All in all, the book was informative, well written, and well thought out. It had lots of illustrative charts and graphs (some not all that useful, however), and it was organized well, progressing from easy single stick patterns to multiple stick patterns. There just wasn’t much meat on these relatively solid bones, resulting in my lukewarm three dollar sign rating.