By Steve Palmquist
Marketplace Books, Inc.
239 pages, $79.95
Japanese rice traders in the 18th century utilized candlestick patterns as a reliable way to predict future demand. Today, market traders draw from approximately 60 candlestick patterns to predict market trends. Of those 60, traders consider twelve as major patterns. Steve Palmquist identifies six of those twelve as money-making patterns in his book, Money-Making Candlestick Patterns.
Palmquist begins with a simple history of the candlestick patterns and then quickly moves into describing the visual characteristics of the patterns, explaining what the predictive qualities are, and how to utilize those qualities to define potential trends. To support his conclusions, and to his credit, he describes in some detail the backtesting he utilized to verify that the six patterns can predict future trends with a high degree of success. Throughout, his reasoned approach and objectivity give comfort to those who are wary of magic bullets and guaranteed gains. He simply states, "Backtesting ... is not a guarantee of future performance." He emphasizes the fundamental truth of all trading, "There is no magic to trading. It is about putting the odds on your side." This is the essence of his book - if a trader can recognize any of these six candlestick patterns in certain formations on a chart and a trader has solid knowledge of the market environments in which each of these patterns produce the best results, a trader will have the odds on his or her side. Palmquist succeeds in clearly identifying and explaining the patterns in certain formations on the chart and, as well, he lucidly explains how each of the six trading patterns performs in various market environments. All of his work leads the reader to a practical end. Palmquist defines in detail his trading strategy and how the trader can put that strategy to work immediately.
This strategy, which Palmquist refers to as "market adaptive trading" (MAT), consists of four distinct steps. They are:
- Develop, test, and understand several trading patterns;
- Understand basic market statistics;
- Use trend lines on the NASDAQ chart, and;
- Write down your daily plan.
Palmquist explains each of these steps in detail and he goes to great lengths to identify possible variations in the development of the patterns in different market conditions. Of course, not all variations are identifiable in different market conditions, but for those he presents in the book, Palmquist explains how to exploit those variations utilizing his strategy.
Money-Making Candlestick Patterns is another book in a long line of books professing a way to make money at trading. Unlike so many of those books, though, Palmquist's writing style is fluid and easy to follow. His logical and ordered approach to discussing the somewhat abstract notion of trading with candlestick patterns transforms the abstract into the concrete, and his detailed discussion of MAT and how he applies it to his trading gives the reader practical and applicable trading information. Additionally, his overall sensibility regarding the fundamental truth about trading-successful trading is about putting the odds in your favor-flows throughout the book, and, if the reader gets nothing from the candlestick patterns Palmquist puts forth as money makers, this fundamental truth alone, if digested and truly understood, is worth the price of the book.
Review Date: July 2009