Top critical review
19 people found this helpful
Perfect for the new trader's ego
on October 8, 2012
This was one of the first books I read on technical analysis, and I am certainly glad that I discovered it, since I think that it gave me a perspective on the markets that I would otherwise not have. I would say that this is the definitive source on candles, and belongs in every traders library.
The author, Steve Nison, starts off by introducing where and when candles developed by going through some interesting Japanese history. From there, he carefully goes through how candles are constructed, so that you have a firm foundation before moving on to the actual patterns.
When it comes to explaining patterns, this is where Mr. Nison's book really shines. Not only does he explain every major pattern known, but he gives numerous real life examples to drive the point home. At 320 pages, he gives the reader plenty of material, and leaves no stone unturned. Furthermore, he explains the reasoning or rationale behind the formations, and why they are bullish or bearish.
It is clear that Mr. Nison spent a tremendous amount of time researching his information from actual Japanese sources before writing his book. In this book, Steve Nison took knowledge that was once only available to those who could read Japanese, and made it available to you and me.
On the other hand, seven years after first reading this book, I now feel that there are some drawbacks to this book. Firstly, the book is very counter-trend in nature. What this means is that if a stock is rising in price, the author will look for candles to explain why it is topping and likely to head down; when a stock is falling in price, he will look for formations indicating that it will make a turn (just for you) and go the other way around. While this certainly appeals to novice traders who crave the satisfaction of being right, the reality is that professional traders go with the direction of the trend.
Furthermore, I feel that this book suffers heavily from hindsight bias. With the benefit of hindsight, anyone can isolate picture perfect examples of trend reversals. In reality, however, trends in motion tend to stay in motion, regardless of most candle formations. The fact is, while I have been able to identify scores of traders with excellent track records who follow trends, I have never been able to identify any trader with a solid track record who uses these techniques in a systematic way. This, in turn, is why I believe that Mr. NIsson does not trade himself, nor has any sort of track record of successful trading.
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