According to American psychologist Dr Van Tharp in his book "Trade Your Way to Financial Freedom", the most important factor to be successful in your trading career is to know how to understand the current market psychology. For him there are three major ingredients to trading: System, Money Management and Psychology. In the pie chart, the System is 10%, Money Management is 30% and the remaining 60% is psychology.
For me the only way to trade base on the market psychology is to use candlestick charting.
Candlestick charting is one of the most powerful tools a trader can use to quickly assess the mood of the market. Better yet, it can be use to accurately predict turning points in any tradable market.
Look at the chart below:
If you can anticipate the market reversal, then you can enter at the exact moment before its huge move.
Candlestick Trading for maximum profit is a very good trading ebook for both newbies and professional traders. It comes with some online videos showing some actual trading on how to properly trade using the candlestick patterns. What I like most of this ebook is how the author clearly states and identify the different conditions/setups to accurately identify a valid candlestick pattern. You can have a high probability of success using his trading technique.
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