Confirmation is the use of one indicator to bolster or support the conclusions reached by what a different indicator reveals has been introduced, but it is more than the verification of what appears to be taking place by seeing the same thing through a second indicator. Confirmation, especially for the timing of entry and exit, involves much more.
Candlesticks—including one-, two-, and three-session patterns—are reliable initial indicators for change in price patterns, especially reversal. So, for example, a day trader or swing trader can use candlesticks to improve timing. Relying on reversal days, NRDs, and volume spikes can be effective as a timing management tool, but when these are combined with candlestick analysis, the technique is far more powerful.
Candlesticks are not stand-alone indicators, but part of a wider system of confirmation between candlesticks and other technical methods.
In that sense, confirmation does include two or more independent indicators pointing in the same direction; but it also is made more effective by being put into action as a cross-disciplinary tool. So candlesticks, which are Eastern, are effectively employed with the traditional Western signals that chartists and day or swing traders rely upon. This can work in either direction. An initial indicator may be Eastern or Western and then be confirmed by the other side.
This makes candlestick charting very effective as part of a broader timing strategy. In addition to verification by way of two or more signals, the independent sources and theories of how those signals develop strengthen the confirmation.
The key to Western technical theories is the basic support and resistance that define the current trading range, and the way that price patterns approach these borders, break through them, continue or retreat, and create or lose momentum. Essential Technical Indicators summarizes the essential tools of technical analysis; remember, however, that these are going to be most effective when used along with candlestick chart patterns as forms of confirmation.
Copyright 2011 by Michael C. Thomsett. All rights reserved. John Wiley & Sons, Inc."
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