Vol 4 Handouts Opt 3

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:
Advanced Western and Trade Management with Candlesticks

Volume 4 of the Nison Educational Series
Advanced
Western
Technical Tools
Founder www.candlecharts.com
and President: Candlecharts.com
Candlestick
Charting
Techniques
212
Western
Charting
Tools
Trade Management
213
214

2
Western Technicals
Enhance winning %s
Using candles for
new trade
Price targets
215
A candle signal is normally not a

sufficient reason for a new trade
216
East + West Confirmation
Where a candle
signal confirms a
Western technical
signal
www.candlecharts.com
217

East + West = Greater Winning %
218
Candles plus..
219
Candles plus Bollinger Bands
220

Convergence of Clues
Open Interest
221
East and West = Higher Confidence
222
Candles look good- but what about m.a?
223

Crack and Snap with Volume

The arrow points to a Snap and Crack. What
does volume do to increase the likelihood of this
technique working?
224
225
226

Candles and the ADX:

The Perfect Fit
Stands for Average Directional Indicator
Shows how strongly a market is trending
Does not show direction of trend
Strong ADX with

prices in up trend.
227
228
Strong ADX with

prices in down trend.
229

2
230
Some technical indicators, such as moving averages,

momentum trading, work better in strongly trending
markets.
Some technical indicators, such as oscillators, work

better in non trending markets.
Traders check ADX to see if the technical indicator

they use is in right trend environment
Use only on daily charts

except for FX
Use only for entries
Lagging indicator
Slow to recognize a new trend
231
232

SteveApple has recently gone from 120 to 150 and the ADX on a daily basis
has not moved up. This is surprising. Comments? - Pete
233
Common mistake- looking

at ADX level.
Slope is the key
Slope=change in ADX from

yesterday to today.
(todays ADX level-yesterdays
ADX level)
Greater the slope, stronger

the trend
234
-.31
ADX 22.04
ADX at 20.96
Slope = 24.11-22.04 =+2.07
ADX 24.11
ADX at 20.64.
What do we need to
determine the slope
on this day?
Slope = 20.64-20.96 = -.32
235

ADX:22.38
Slope = +2.08
14 Period
ADX slope
increasing
.5 or more
ADX:27.56
ADX:20.30
ADX:26.03
What is the slope?

Strong uptrend?
Minimum:
14 Period
ADX slope
+.25 or
less
-.31
236
ADX:18.26
ADX:18.57
Strict: 14
Period
ADX slope
decreasing
237
Chuck@smartstops.net
238

Candles and ADX - The Perfect Fit

Reversal candles
help pick top and
bottoms.
Increase % by not
going against
strong trends.
239
240
Minimum:
14 Period
ADX slope
+.25 or
less
Strict: 14
Period
ADX slope
decreasing
Do we have to measure the

ADX slope on this hammer?
241
10

Minimum:
14 Period
ADX slope
.25 or less
-.40
-.10
Strict: 14
Period
ADX slope
decreasing
242
ADX slopes
2.24, 2.53, 2.67
Bull shadows on descent. But

based on ADX which of these is
more likely a turn?
Why didnt I
put ADX
numbers for
these?
243
ADX : 27.98
ADX : 30.38
What candle patterns are at

the dashed arrows?
ADX : 31.80
What is the ADX telling us?
244
11

+.95
Minimum:
14 Period
ADX slope
+.25 or
less
-.31
ADX:18.26
ADX:18.57
Strict: 14
Period
ADX slope
decreasing
245
Slope +.97
246
FOR BEAR CANDLE

REVERSAL SIGNALS
Step 1 get candle
signal
Step 2 ADX shows
uptrend easing or
no trend:
ADX slope
increases by
less than .25,
and better if
slope is
negative
ADX:42.85
and 41.02
so slope is
-1.83
247
12

FOR BULL CANDLE

REVERSAL SIGNALS
ADX:
1-31.97
2-32.67
3-32.48
4-32.45
5-32.53
6-30.23
Step 1 get candle

signal
Step 2 ADX shows

downtrend easing or no
trend:
ADX slope increases
by less than .25, and
better if slope is
negative
1
3
2
4
5
248
249
Gravestone doji at resistance
After the gravestone

where is a potential
target?
250
13

Candles for reversals and Western for targets

Bearish engulfing
pattern at top of bull
channel
target
251
Swing Target
target
First
leg
252
East and West

Doji as signal to exit
253
14

Becoming a Confident Trader
254
Head and Shoulders
Left Shoulder
Head
Right
Shoulder
Neckline
Sell
signal
Head and Shoulders Top

255
Three Buddha Pattern
256
15

Why we are here!

We got the reversal here with
candles .
Compared to here with

a classic western signal
257
How Education Saves You $$$$

1
New resistance
Old support
becomes..
1- Bear Harami
2- Dark Cloud Cover
3- Bearish Engulfing Pattern
258
TASC Interview - Jan. 24, 2003 S&P at 860

1) Once the necklines
support is broken, it
should become
resistance.
Head and
Shoulder top
2) To get a target with the

head and shoulders top
we measure from the top
of the head to the
neckline.
neckline
Interview
the heads and shoulders top on the

S&P gives a target to near 775. A close
over 870 would void this.
Hammer
259
16

STEVES FAVORITE
MEASURING TACTIC
260
Box Range Breakout
261
Box range breakout
Harami with
target bottom of
box
262
17

Box range Breakouts
263
East & West = Profits
264
Box range Breakout/ momentum trading
265
18

266
The Tools of the West with

the Light of the Candles
Scenario
1
Scenario
2
267
The Nison Candlestick Screener

Using candles at support or resistance
for the high probability trades
268
19

Two simple questions

Question 1- Is the market at support or resistance?
Question 2- Are there any reversal candles?
269
270
271
20


2) What is this
candle line
hinting?
1) Whos in control during

this ascent?
272
Major resistance 2.00-2.01
273
How education saves you $$$$

1) Is the at resistance?
2) Are there any candle signals
showing hesitation?
Long term resistance zone
274
21

The Value of Owning the Knowledge
Long term resistance

zone
275
The Value of Owning the Knowledge
276
277
22

Near support?
Any reversal signals yet?
278
279
Market refreshed
Near resistance?
Any reversal signals yet?
280
23

Using Measured Moves including:
Box range
Head and Shoulders
Swing Targets
The Candlestick Screener
281
282
What are Sectors?

Technically analyze sectors like any other market
Cant trade sectors
so why are sectors important to traders?
283
24

Candles and Sectors
284
Why are Sectors important

Sectors account for 37-60%
of an individual stocks performance
This means you need to

know what the sector is doing!
285
How can we use Sectors?
Bottom Up: Stock to Sector
Top Down : Sector to Stocks
286
25

Check the stocks sector
Try to place new trades in direction of sector outlook
If must go counter trend to sector, use to take profits
287
288
Bottom Up Sector Analysis

Biotech Sector- Aug 17
AMGN - Aug 17
Although falling
window what is its sector
strongly hinting?
289
26

290
Buy ?
AMGN Sept. 11
Biotech Sector
291
Buy
Sept.11
292
27

293
Setting up scanning pages for

Nison Sector Analyses
294
Scanning with Nison Candle Sector Analyses

STEP 1 Scan Sectors
Banks
Internets
Biotech
Aug. 16
Gold- Silver
Semis
Retail
295
28


STEP 2 Scan Component Stocks in Chosen Sector(s): Internets
for this example
Aug. 16
296

STEP 3 Do Analysis on Stock for Potential Trade
Aug. 16
297
Aug. 16
298
29

ETFs
Exchange Traded Funds
Track All Major Sectors and Indices
Popularity/Liquidity
Can Trade ETFs
299
Analyze and Trade ETFs like any other market
Dark cloud confirming resistance

Golden and Dead Crosses
Bull sash
patterns
Hammers
300
Windows and ETFs
301
30

Sectors
Important for stocks

Can analyze with candles
Bottom up trading
Top down to filter
Scan for best sectors

Find best stocks in those sectors
Analyze those stocks
ETFs
Ability to trade sectors

Instant diversification
302
303
3
Trade Management
Market Chameleon
Candles in Context
Risk-reward
Exit Strategies
304
31

Adapting to the Market
Being a Market Chameleon:

As market conditions change,
adjust your market stance.
305

Looks good
anything
different?
306
Target
307
32

Sell here
308
309
310
33

Adapting to the market

Wheres
support
now?
Wheres
support?
311
Become a Market Chameleon
Bear
Stearns
Collapse
312
Candles in Context
Analyzing candle
signals within the
context of
surrounding
technical picture
313
34

Misinformation can cost you $$$
314
Same Signal- but how different the strategy!
315
Which is a Better
trading signal?
316
35

Candles in Context
Dark Cloud Cover
Bearish
Engulfing
Pattern
317
Which is a better
trading signal?
Hammer
Morning Star
318
Candles in Context
Morning Star
Hammer
319
36

Always Check Risk Reward

1. What is your price risk?
2. What is your target?
Do you have a
good
risk-reward?
320
Risk/Reward
321
Waiting for time to ripen

Classic bearish
engulfing pattern:
But what about
risk/reward aspect?
322
37

Trade Management Essentials

Candles in Context
Importance of risk/reward
323
Founder and President: Candlecharts.com
324
325
Protecting
your Assets
38

Slide 115
The race is not always to the

swiftest, but to those who keep
running.
326
327
Protective Stops keep you in the game!
Looks
promising at
the white
candles
328
39

How Education Saves you $$$$
Hammer
Closed under support
329
How Education Saves you $$$$
Hammer
330
Exit Strategies
Protective Stops
Time Stops
Trailing Stops
Steve Nisons
Candlecharts.com
331
40

332
If the market does not act

as expected within about
five sessions then consider
exiting
333
Dont Stay Around
What are you doing hanging

around! Youre wasting
precious resources.
Hammer and Bull Engulf
Chart courtesy of Genesis FT
334
41

Youre Wasting Resources
335
336
Trailing Stops
As the market moves
in your direction
stop is adjusted to
help ride the trend.
337
42

Golden and Dead Crosses

Compares two moving averages
GOLDEN CROSS: shorter crosses above longer
DEAD CROSS: shorter crosses under longer
338
Answer: 3 and 12 day
339
340
43

Trailing stops - letting the profits run
I usually exit, it
corrects somewhat
but then continues
to go in the original
direction after that.
Shooting
Star
Falling
window
You sold at shooting star or

falling window. A rally from a
bull harami gets you nervous
and you exit. But youre still
playing with the markets
money- so another option:
trailing stop.
341
Trailing stops - letting the profits run

Shooting
Star
Falling window
Where you got nervous
342
Letting Profits Run
Could take some

or all profits here
Shooting star
Or use dead cross

as your trailing
stop and would
thus exit here
Buy and set
protective stop
343
44

Trailing Stops to let profits run
Now at targetDoji warns of

caution. But you
want to let
profits run.
Potential Target
Buy and set

protective stop
344
Trailing Stops to let profits run
doji
345
Exit Strategies
Protective Stops
Time Stops
Trailing Stops
346
45

Trading Journal
(setting up the Trade)
From Toni Turners Book- Short Term Trading in the New Stock Market - www.toniturner.com
Date, market, $ amount committed

Why did you do the trade
Entry Price
Risk
Initial Target
Exit Price
Analyze Trade
Print out (or cut and paste) chart and make notes
What did you do right/wrong
Goal: Keeping emotions

out of your trading
347
348
Trading Journal - Setting up the Trade
Entry Price
Risk
Initial Target
Why did you do the trade?
349
46

Trading Journal - Analyzing the Trade
Entry Price
Risk
Initial Target
Exit Price
Analyze the trade
350
Trading Journal - Setting up the Trade
Entry Price
Risk
Initial Target
Support from a few months ago
351
Entry Price
Risk
Initial Target
Exit Price?
Analyze the trade
352
47

Entry Price
Risk
Initial Target
Exit Price
Analyze the trade
353
354
Putting it all Together

Trading Checklist
Have VALID Candle signal (if not sureconfirm with Nison candlestick
recognition software)
Does candle confirm Western signal (i.e.
ADX, support/resistance, volume, or any
of your favorites)
Stock traders check sector
Determine risk/reward (remember many
of the candle signals can be used as a
protective stop)
Monitor trade (i.e. time or trailing stops,
change in technical picture, etc)
Use Trade Journal
355
48

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Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

Advanced Western and Trade Management with Candlesticks

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

A candle signal is normally not a

East + West Confirmation

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

East + West = Greater Winning %

Candles plus Bollinger Bands

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

East and West = Higher Confidence

Candles look good- but what about m.a?

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

Crack and Snap with Volume

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

Candles and the ADX:

Stands for Average Directional Indicator

Shows how strongly a market is trending

Does not show direction of trend

Strong ADX with

Strong ADX with

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

Some technical indicators, such as moving averages,

Some technical indicators, such as oscillators, work

Traders check ADX to see if the technical indicator

Use only on daily charts

Use only for entries

Slow to recognize a new trend

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

Common mistake- looking

Slope is the key

Slope=change in ADX from

Greater the slope, stronger

Slope = 24.11-22.04 =+2.07

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

What is the slope?

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

Candles and ADX - The Perfect Fit

Do we have to measure the

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

Bull shadows on descent. But

What candle patterns are at

What is the ADX telling us?

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

FOR BEAR CANDLE

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

FOR BULL CANDLE

Step 1 get candle

Step 2 ADX shows

Gravestone doji at resistance

After the gravestone

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

Candles for reversals and Western for targets

East and West

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

Becoming a Confident Trader

Head and Shoulders

Head and Shoulders Top

Three Buddha Pattern

Steve Nisons Candlesticks Re-Ignited Advanced Workshop:

Why we are here!

Compared to here with

How Education Saves You $$$$

TASC Interview - Jan. 24, 2003 S&P at 860

2) To get a target with the