I was wondering if anybody here actively uses Japanese candlesticks and can say how reliable they are or what would be a good way to approach them. Today the VIX formed what appears to be a hanging man... what are the odds of seeing vol come down for the remaining of the week? Thank you.
Japanese candlesticks are only one indicator, I also integrate moving averages, MACD, and bollinger bands into my charts. Although I do pay close attention to if a candlestick closes up or down looking for a doji star, etc.
I use candles everyday, and I was never too fond of the hanging man. I dont know, just looking at the candle it just seems bullish to me. When i see other patterns ( hammers, engulfings,etc) they make sense to me. Hanging man, not so much.
Highly recommend that you only use Japanese Candlesticks as either a confirmation signal, secondary strategy or in combo with something else. In addition, single candlestick lines aren't reliable in comparison to candlestick patterns. Lines versus Patterns Thus, most of the reliability issues or inappropriate application or flaw testing involves 1 - 3 intervals as a stand alone approach. Those that say it doesn't work approached Japanese Candlestick analysis via as a stand alone method concerning 1 - 3 intervals while ignoring the overall price action that the intervals are occurring within. My point is that most of those profitably using Japanese Candlesticks aren't using them as a primary method nor do they give any merits to single line analysis. As for the VIX...whatever you see...get confirmation from something else to validate what you see in the VIX. Further, Hanging Man lines (not patterns) require confirmation especially when it's not near any reaction highs or prior resistance levels. Last of all, you may find something useful from this old thread to help develop your understanding of Japanese Candlestick Analysis from the perspective of a few Hammer pattern sub-groups... http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880 Mark
Hammer is the same thing as hanging man except hammer occurs at the bottom. From my experience, the most decisive (and my favorite) reversal pattern is bearish engulfing. The reason hanging man is bearish is because you have futility occurring after a (preferably) long uptrend. The stock(or any underlying instrument) does not close far in relation to its opening. It does not matter whether it is a black or white candle in this case, what matters is that opening is near close with a pronounced shadow to the bottom. Falling star is good too.