Introduction: The Self-Fulfilling Prophecy

Traders relying on candlestick charts have a problem. Whether experienced retail investors or managers of institutional portfolios, one of their greatest challenges in chart analysis is creating and maintaining objectivity.

The tendency is to seek reversal and confirmation that agree with the initial belief. So once you spot an initial signal (such as momentum moving into the overbought range), the next step is to seek bearish confirmation. Upon finding a signal, or two or three signals that confirm the bearish reversal, traders take action—closing long positions or opening short positions based on the discovered bearish signals.

This is where the problem lies.

In seeking only bearish signals, do you ...

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