Candlestick Analysis for Swing Traders

Swing trading candlestick analysis is generally defined by the weekly, daily and monthly charts.

Discover how to interpret institutional order flow or the “big money” quickly and with the confidence of seasoned professional.

Candlestick charting has become increasing popular over the last 20 years. Traders, investors and analysts have gravitated to the charting method as each bar provides a wealth of information.

For those not familiar with candlestick analysis, please review the NorthStar beginner swing trading manual to learn more.

Let’s start by thinking about the stock market in it’s simplest and most basic form, you have buyers and you have sellers. When there are more buyers than sellers, the stock goes up; however, when sellers are outnumber buyers, the stock goes down.

The biggest buyers and sellers in the stock market are institutions or “big money” such as mutual funds, hedge funds, insiders and sovereign funds.  The basic premise of trading is to analyze the back and forth between institutional “big money” buyers and sellers, then profit from it consistently.

Candlesticks provide vital information on all buyers and seller for a specific time period. That time period can be as small as 1 minute or as long as 1 year, depending on your needs at the time.

Candlestick Time Frame Analysis

Swing traders should focus on hourly, daily and sometimes weekly time frames, as institutions tend make decisions off larger time frames. Think about it this way, in a small lake you find small fish and in a big lake you find big fish. Institutions and “big money” are big fish, daily and weekly time frames are the big lakes.

Charting and reviewing candlesticks over past time periods, visually illustrates historical buying and selling of institutions in a particular stock. This information provides swing traders with a blueprint for where significant buying and selling may take place in the future. You want to know when the “big money” is getting into a stock and out of it.

At some point in time, that future becomes the present, so swing traders must utilize bar by bar analysis of candlesticks to identify buying or selling pressure. More importantly, determine how it applies to their swing trading strategy. If your edge is based on stocks breaking out, then you are focused big green candles that suggest significant buying by institutions through an important price or resistance level, suggesting the start of new trend.

Candlesticks can give you all the information you need about institutional “big money” buyers and sellers, but without a proper strategy to process the info and execute trades, you will likely fail maximize it’s potential.

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