The Candlestick Forecaster

Samurai Edition

User Manual

THE CANDLESTICK FORECASTERÒ software constitutes a CD having copyrighted computer software accompanied by a copyrighted user manual in which all copyrights and ownership rights are owned only by Highest Summit Technologies Sdn Bhd (HST).

HST grants to you a non-exclusive license to use a copy of The Candlestick Forecaster software on a single computer and the terms of this grant is effective unless violated.

You may call and discuss with us by telephone any questions about the installation and use of The Candlestick Forecaster software by calling our office at (603) 245-5877, fax us at (603) 245-6792 or email us at [email protected]. We reserve the right to discontinue technical support at anytime without notice to you.

You are not entitled to sub-license, rent, lease, sell, pledge or otherwise transfer or distribute the original copy of The Candlestick Forecaster software. Modification, disassembly, reverse engineering or creating derivative works based on the software or any portion thereof is expressly prohibited. Copying of the manual is also prohibited. Breach of these provisions automatically terminates this agreement and subjects you to further legal implications.

The Candlestick Forecaster is warranted for ninety (90) days from the date of purchase to be free of defects in materials and workmanship under normal use. To obtain replacement of any material under this warranty, you must return the inaccurate CD or copy of the manual to us within the warranty period or notify us in writing within the warranty period that you have found an inaccuracy in The Candlestick Forecaster software and then return the materials to us. This limited warranty covers the original user (the purchaser) and HST makes no other express warranties.

ANY AND ALL IMPLIED WARRANTIES RELATING HERETO ARE LIMITED IN DURATION TO THIS NINETY-DAY WARRANTY PERIOD. REPLACEMENT OF CD OR THE MANUAL IS YOUR EXCLUSIVE REMEDY AND SOLE MEASURE OF RECOVERABLE DAMAGES.

THE CD AND THE MANUAL IS LICENSED “AS IS” WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. HST DOES NOT WARRANT THAT ANY FUNCTIONS CONTAINED IN THIS PACKAGE WILL MEET YOUR MANUAL REQUIREMENT OR THAT

WE SHALL HAVE NO LIABILITY TO YOU OR ANY THIRD PARTY REGARDING THE CANDLESTICK FORECASTER SOFTWARE IN WARRANTY, CONTRACT, AND TORT OR OTHERWISE. IN NO EVENT WILL HST BE LIABLE FOR ANY DIRECT, INCIDENTAL, SPECIAL, INDIRECT, GENERAL OR CONSEQUENTIAL DAMAGE OR LOSS OF ANY NATURE (SUCH AS DAMAGE TO PROPERTY, DAMAGES RESULTING FROM INACCURACY, INCOMPLETENESS, SOFTWARE INSTABILITY, CLAIMS FROM USER OR THIRD PARTIES LOSS OF PROFITS OR FINANCIAL INJURY TO PERSONS) WHICH MAY ARISE IN CONNECTION WITH THE USE OR INABILITY TO USE THE PROGRAM OR MANUAL. THIS CLAUSE SHALL SURVIVE FAILURE OF ANY EXCLUSIVE REMEDY.

IMPORTANT NOTE Investments involve risks, including possible loss of principal and other losses. This program is designed to provide a training tool for the understanding of technical analysis of the financial markets. It is licensed to the End-User with the understanding that HST is not engaged in rendering any investment or other professional advice. If investment or other professional advice is required, the services of a competent professional person should be sought. HST will not be responsible for any losses or lost profits resulting from investment decisions based on the use of this program, information obtained through use of this program, or otherwise.

The laws of Malaysia govern this agreement. In the event a provision of this Agreement shall be held unenforceable, it shall be deemed severable from the remaining provisions and shall in no way affect the validity or enforceability of this Agreement.

CHAPTER 1: INTRODUCTION WELCOME ………………………………………………………… 1 DOCUMENT CONVENTIONS ……………………………………. 3

CHAPTER 2: GETTING STARTED HARDWARE REQUIREMENTS …………………………………... 5 PRE-INSTALLATION CHECK LIST ………………………………. 6 INSTALLING THE SAMURAI ……………………………………. 7 LAUNCHING SAMURAI FROM WINDOWS ……………………. 7 CANDLESTICK FORECASTER MAIN SCREEN ………………... 8 SETTING THE PROGRAM DEFAULT …………………………… 9 ACCESSING SAMPLE DATA …………………………………….. 10

CHAPTER 3: OVERVIEW TRADING WITH CANDLESTICK ANALYSIS …………………... 11 WHAT CANDLESTICKS REPRESENT? ……………………. 14 SAMURAI CANDLE TOOLS …………………………………….... 17 THE CANDLE BOX ………………………………………….. 17 THE ANALYSIS WINDOW …………………………………... 18 THE CANDLEWATCHÔ …………………………………….. 19 THE CANDLEVISIONÔ ……………………………………... 20 PROFIT TESTING MODULE ………………………………… 21 TRADER'S LOG ………………………………………………. 22

CHAPTER 4: NAVIGATING THROUGH SAMURAI MOVING AROUND IN SAMURAI ……………………………….. 23 THE MENUS ………………………………………………………... 24 THE FILE MENU ……………………………………………... 25 THE DISPLAY MENU ………………………………………... 25 THE OPTIONS MENU ………………………………………... 26 THE QUICK ARROW MENU ………………………………... 26 THE CANDLEWATCHÔ MENU ……………………………. 27 THE CANDLEVISIONÔ MENU …………………………….. 27 THE DOWNLOAD MENU ……………………………………. 28 THE WINDOWS MENU ……………………………………… 28 THE HELP MENU ……………………………………………. 29 KEYBOARD SHORTCUTS ………………………………………... 30 SPEED BUTTONS ………………………………………………….. 31 RIGHT MOUSE BUTTON POP-UP MENUS ……………………… 32 BEGIN ANALYSIS ……………………………………………. 32 CHART OPTION ……………………………………………… 33 LIBRARY OPTIONS ………………………………………….. 34 TECHNICAL INDICATORS …………………………………. 35

CHAPTER 5: GATHERING & MODIFYING DATA DAILY DATA UPDATES ………………………………………….. 37 MANUAL ENTRY FROM DISK …………………………………... 38 EDIT SPECIFIC PRICE DATA ………………………………. 38

CHAPTER 6: MANIPULATING CHARTS LOADING CHARTS ……………………………………………….. 39 CHANGING THE FILE TYPE ……………………………………... 39 GROUPING …………………………………………………………. 42 SETUP CHART TABS ………………………………………... 42 CHANGING THE APPEARANCE OF THE CHART ……………... 44 TECHNICAL INDICATORS ………………………………… 45 LIBRARY SETTINGS ………………………………………… 46 CHART OPTIONS …………………………………………….. 47 DIRECTORY SETTINGS …………………………………….. 48 COMPRESSING DATA …………………………………………….. 49 CHANGING THE INDICATORS DISPLAYED ON YOUR SCREEN.. 51 DISPLAYING TECHNICAL INDICATORS ………………… 51 STOCHASTIC OSCILLATOR …………………………... 52 MOVING AVERAGES …………………………………... 53 RSI – RELATIVE STRENGTH INDEX …………………. 54 RMI – RELATIVE MOMENTUM INDEX ……………… 55 WILLIAMS PERCENT RETRACEMENT ………………. 56 DISPLAYING VOLUME ………………………………… 57 LEGENDS ………………………………………………… 58 SAVING CUSTOM PAGES AND PRINTING CHARTS …………. 59 SAVING CUSTOM PAGES …………………………………... 59 PRINTING CHARTS ………………………………………….. 60 KEEPING NOTES WITH TRADER'S LOG ……………………….. 62

CHAPTER 7: ANALYZING CHARTS MANIPULATING THE CANDLE POINTER ………………………. 63 ANALYZING A CANDLE …………………………………………. 63 USING CANDLEWATCHÔ ……………………………………….. 65 SELECTING FILES TO WATCH ……………………………. 66 STARTING THE CANDLEWATCHÔ ………………………. 68 THE CANDLEWATCHÔ REPORT …………………………. 70 USING CANDLEVISIONÔ ………………………………………... 72 STARTING THE CANDLEVISIONÔ ……………………….. 73 CANDLEVISIONÔ FLAGS ………………………………….. 76 WHAT ARE CANDLEVISIONÔ FLAGS? ……………... 76 EXPLANATION OF VISION FLAGS …………………... 77 DEMARK SEQUANTIAL FLAGS ………………………. 79

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. WHY VISION FLAGS ARE IMPORTANT ……………… 80 WHEN TO USE VISION FLAGS ……………………….. 80 PROFIT TESTING MODULE ……………………………………… 81 SETTING THE OPTIONS …………………………………….. 82

CHAPTER 8: TECHNICAL SUPPORT CANDLE ASSIST …………………………………………………... 85

APPENDIX CUSTOM PAGES …………………………………………………... 87 MAIN MENU AND HOT KEYS FUNCTIONS …………………… 88 NEW TOOL BAR FUNCTIONS …………………………………… 89 EXTENDED PATTERN GROUPS .………………………………… 93 CONFIRMATION …………………………………………….. 93 CONTINUATION ……………………………………………... 95 A BUY SCENARIO ………………………………………. 96 CONFLUENCE ………………………………………………... 98 CLUES AND SUGGESTION FROM CANDLESTICKS ………….. 100 THREE LINE NEW PRICE BREAK ……………………………….. 102 THREE LINE NEW PRICE BREAK TRADING RULES ……... 103 TOM DEMARK SEQUENTIAL PATTERNS ……………………... 105 THE SETUP …………………………………………………… 105 TAKAHIRO HIKITA PATTERNS …………………………………. 107 TRENDING CANDLE/BODY REVERSAL PRINCIPLE …………. 108 A TRENDING CANDLE (TC) ………………………………... 108 A BODY REVERSAL (BR) …………………………………... 109 AN UPWARD TREND ………………………………………... 110 A TREND REVERSAL ………………………………………... 111 A BULLISH TREND ………………………………………….. 112 A BEARISH TREND ………………………………………….. 113 GAP IN TREND ……………………………………………….. 114 TREND-STOP LEVEL ………………………………………... 115 VALID TC/BR ………………………………………………… 115 ADVANTAGES AND PROPERTIES OF THE TC/BR SYSTEM …... 116 TRADING TIPS WITH THE TC/BR SYSTEM ……………………. 118

GLOSSARY BASIC CANDLE FORMATIONS ………………………………….. 121 RECOGNISING DAILY CANDLE PATTERNS …………………... 122 THE EMPTY (WHITE OR RED) POLE LINES .…………………... 122 PATTERN DESCRIPTION …………………………………………. 122 PATTERN INTERPRETATION ……………………………………. 125 FULL (BLACK) POLE LINES ……………………………………... 128 PATTERN DESCRIPTION …………………………………………. 128 PATTERN INTERPRETATION ……………………………………. 130 THE LINE AND STAR CANDLE ………………………………….. 133

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. PATTERN DESCRIPTION …………………………………………. 133 PATTERN INTERPRETATION ……………………………………. 134 MULTIPLE CANDLE PATTERNS ………………………………… 137 PATTERN DESCRIPTION …………………………………………. 137 PATTERN INTERPRETATION ……………………………………. 142

WELCOME TO THE CANDLESTICK FORECASTER SAMURAI

Candlestick charting was probably first used to describe the price movements of the Japanese rice market in mid of 1700s, Although some believe the chart may have been developed a century later for use in the silver market in Yokohama. Any charting technique endeavors to convey numeric information in graphical format. Candlestick charts accomplish this with typical oriental elegance, conveying a great deal of information clearly and succinctly. By using Candlestick charts, traders can grasp patterns and price movements at a glance.

The Candlestick Forecaster SamuraiÔ (which we will refer to in this User’s Guide as Samurai) has been specifically designed to work in Windows 95/98/2000. It has been meticulously crafted to give you the optimum in speed and efficiency without sacrificing the accuracy of the program’s BUY/SELL recommendations.

The Candlestick Forecaster SamuraiÔ is an advanced pattern recognition system that filters Western technical oscillators and other mathematical algorithms into its analysis to produce simple, easy-to-understand messages about future market price moves. This program reads over 25 different type of data files to easily integrate with your existing trading software. In computer vernacular, Samurai is a highly advanced, pre-trained expert system that incorporates fuzzy logic based reasoning systems.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Highest Summit Technologies began developing this program in 1990 and has continued to provide high quality software tools specifically designed to incorporate Japanese candlestick price patterns to an ever growing population of savvy traders.

This program contains a patter library that consists of over 1300 complex price patterns and technical indicator’s patterns. These patterns, and this program’s ability to identify them, will be your key to success when trading.

You will quickly learn to identify each variation of the price patterns and what each pattern means to you by reading the indicator windows that appear during the analysis of a chart. These window will present all of the relative information regarding the specific pattern that was found and any particular trading information relevant to the pattern and the market, including protective stop loss levels.

Other features included within this program will assist you be saving countless hours of analysis work each day. The CandleWatchÔ and CandleVisionÔ features are designed to quickly automate your daily scanning and back-test your entire database of markets/stocks for price formations, buy and sell signals, and other signals.

The following is a list of terms, signs, and styles used throughout the Candlestick Forecaster Samurai User’s Guide.

CONVENTION DESCRIPTION

Samurai Refers to the Candlestick Forecaster SamuraiÔ Edition

Windows Operating system / platform: Microsoft Windows 95/98/2000

Click To locate the item of reference, move the mouse pointer to the specified item and single click on the item with the left mouse button.. (In general, all references to the mouse button are intended to indicate the left button unless otherwise specified.)

Double-click To locate the item of reference, move the mouse pointer to the specified item and double click on the item with the left mouse button.

HARDWARE REQUIREMENTS

The Samurai has been developed using the latest application development tools for Microsoft WindowsÔ 95/98/2000. Therefor, this software application will take full advantage of your computer’s resources.

Ideally, the Samurai should be run on a Pentium processor but will operate on lesser systems. The minimum recommended hardware requirements to properly operate The Samurai are as follows:

IBM (or 100% IBM Compatible) computer system with: 133Mhz (or better) processor 16 Megabytes of RAM 10 Megabytes of available hard drive space VGA or SVGA Monitor

Additional Peripherals: Any Windows supported printer

Although the suggested minimum hardware requirements may exceed your computer’s capabilities, The Samurai may still operate properly on your computer. It may react a bit slower though, because of reduced processing speed and available RAM.

If you believe your computer system does not include the required hardware to run this program, contact your local computer dealer to inquire about upgrading your system. In most cases, an upgrade of the processor and RAM is all that is required. If your computer is an old model, it may be in your best interest to look into a new computer system.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Often, upgrading these older systems can be more costly than purchasing a new system from your computer dealer. Also, some computer dealers will take your old system in partial trade for the new system.

PRE-INSTALLATION CHECK LIST

You should know a few things before you begin installing this program to help you along. These items will assist you in a smooth installation and easy operation of the program in the future.

First, this program will require approximately 15 megabytes of hard disk space to completely install. Use the Window Explorer or My Computer to verify that your hard disk has adequate available disk space. If your hard disk does not have enough free disk space, you may need to delete some files to make enough available disk space to install this program. If your hard disk does have enough free disk space, then you may continue.

Next, insert the installation CD into your CDROM drive. The installation will start automatically. If it does not start, please select RUN from your Windows Start Menu, and run the SETUP.EXE file inside this CD. The installation process is normally quick and painless. The installation process (described on the following pages) has been designed to allow you to follow the on-screen prompts and should be self- explanatory. However, if you feel uncomfortable, STOP and call the technical support department at +603-245-5877 (Malaysia).

The installation of Candlestick Forecaster Samurai will take approximately five to ten minutes, depending on your system resources.

INSTALLING WITH WINDOWS 95/98/2000

1. Insert the Samurai installation CD into CD-ROM drive. 2. Autorun will start the installation program for you. (There are some cases where your computer does not start the Autorun function. If that happens, please select RUN from your Windows Start Menu, and run the SETUP.EXE file inside this CD.)

LAUNCHING SAMURAI FROM WINDOWS

As with all Windows programs, the Samurai installation program will create a program group, which contains the icon to start the Samurai program. Follow the instructions below to load and execute the Samurai program.

LAUNCHING FROM WINDOWS 95/98/2000

1. Click on START button. 2. Click on the PROGRAMS item. 3. Click on the CANDLESTICK FORECASTER item. 4. Click on the Candlestick item with the icon below:

Samurai puts a great deal of information on the screen for you. The following illustration gives you an overall idea of where things are and what they look like.

Before you begin using this program’s advanced features, you are required to complete a simple setup procedure that tells this program where to find your data files and what preferences you may have for the western technical and chart settings

1. Click on the OPTION menu items. 2. Click on SETUP DEFAULT OPTIONS, or press CTRL-D. 3. Once the Default Settings screen appears, click on the DIRECTORY SETTINGS tab.

4. Click on the File type that matches your data files and then use the directory box to select the proper data directory.

Note: You may setup as many types of data files as you wish. If you have more than one type of data file, you should continue to setup all of them before you continue using this program. If you are using ASCII files, remember to include the Default File Extension you wish to use.

ACCESSING SAMPLE DATA

The program also comes packed with some sample data (Metastock format) which you can use to familiarize yourself with this program. These sample data are located in the C:\CSFWIN\SAMPLES directory.

TRADING WITH CANDLESTICK ANALYSIS

Japanese Candlestick Analysis presents a short term leading indicator for market reversals. Because of the fact that candlesticks most accurately identify the short-term reversals of any market, this technique best adapts to traders who are typically looking for short-term moves. The candlesticks often identify market reversals a few days before most Western technical oscillators. This means Candlesticks should provide you with an edge over other traders who are not using them. This software has been designed to automate the analysis of complex price patterns so you won’t need to spend countless hours completing the process yourself. The unique method the Samurai uses of prompting you with detailed analysis for each price pattern allows you to continually learn the different price formations and their meanings. With time and study on your part, you will be able to instantly recognize hundreds of complex price patterns on your own.

The Samurai program also incorporates Western technical indicators into its analysis so that you can better estimate the probability of each price pattern’s occurrence. If the Samurai tells you that one pattern may have a greater chance of success than another, it is taking into account certain conditions, which exist with the Western indicators. In the Samurai, you may choose to enable or disable the visual display of each technical indicator, but the program will continue to utilize all the indicators in its analysis. It will simply do so in the background, unobtrusively.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Changing the technical indicator settings will affect the analysis results. Sometimes, traders prefer to trade the long-term trend of individual markets, thus they may change the technical indicators to match their trading style. If they then decide to trade the short-term trend, the long-term indicator settings will require modification. The Samurai handles these changes by storing your preferred technical settings in a unique file that is continually used for the specific market or issue. Thus, when you change the technical indicator to your preferred settings, you should store them in a Custom Page so that they can be retrieved for future use. You can always change these settings if you decide to and re-save them back to the Custom Page when finished, or you can revert to the default settings for the technical indicators.

If you are more of an intermediate or long term trader, this program allows you to compress any daily chart into a weekly or monthly chart. This provides you with the ability to better identify the long-term trend reversals that often mature into drastic price movement. Remember, candlesticks can be applied to any time frame (daily, weekly or monthly). Even after a day chart has been compressed to a weekly chart, the candlesticks will accurately predict the market reversals as clearly as if it were a daily chart. It is best to use both the daily and weekly charts to identify key market reversals. Sometimes this program may not find a signal on a daily chart, yet a clear signal will be found within the weekly to balance the price activity over time ratio by using the daily and weekly charts.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. The Samurai is totally unique from its competition because of the extended candlestick patterns that are included within its libraries. The developers began coding all of the common candlestick patterns into the library from the very beginning of this software product’s evolution. In an attempt to make it as fluid as possible, the developers included these extended pattern groups because they were designed to present the user with patterns or information about the current trend with every new trading session. These extended pattern groups are detailed in Appendix.

The candle “body” is a rectangular box drawn between the session open and close prices. Vertical lines extending from the top and bottom of this box or body reach to the session high and low prices. These lines are sometimes referred to as “shadows” or “tails”. If the trading session closed higher than the previous session (in other words, an “up” day), the candle body is represented with a particular color. Usually, “up” days are represented with white or unfilled candle bodies. “Down” days, in which the session closed lower than the previous session, are filled with another color, generally black.

As you can see from the above illustration, traders can quickly grasp a great deal of information about a trading day from even a single candle. The color of the candle body tells us whether the bulls or the bears took charge of any given trading session. The size of that body tells us how decisively that particular battle was won. The smaller the candle body the more balance the power struggle between buyers and sellers.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. There are a few basic candle formations, illustrated by a single candle, which are worth describing at this point. The significance of each formation and the patterns that may evolve around these formations are detailed in Appendix.

When opening and closing prices are the same (or almost the same for practical purposes) for any given session, the candle takes on a particular formation known as a doji (do-gee). This easily recognized formation represents a true balance or equilibrium between bulls and bears.

Another important formation to look for is the Hammer (or the Hanging Man, depending upon which direction the market is headed). This formation is represented by a long shadow/tail, underneath a fairly small candle body with no/almost no, shadow above the body. Following a price decline, this pattern represents the increasing strength of the buyers. (The price opened near the high, sold off during the session, but closed near the high again).

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. The Hanging Man follows a price up-trend. in this case, the length of the tail represents the efforts of the sellers to bring the price down. The price still closes near the open, but the tail serves as a warning signal of a potential shift in direction.

As you can readily see, even a cursory familiarity with candlestick charting is extremely useful to traders. Various combinations of candles quickly provide an in-depth price analysis. Coupled with Western technical indicators, candlestick analysis becomes an invaluable weapon in the trader’s arsenal.

THE CANDLE BOX

The CandleBoxÔ is a formidable piece of the Samurai arsenal. This interactive window displays an image of the candle itself (color, size of body and shadow), and all of the price and technical indicator data for any individual candle on the active chart. There is no need to actually select a particular candle, you simply need to position the mouse pointer over the candle you want to analyze, and the CandleBoxÔ will display the relevant information. As you move the mouse pointer from candle to candle, the information in the CandleBoxÔ will change to reflect the new position.

The bottom of the CandleBoxÔ contains the Signal and Flag Bar. This feature is tied directly to the CandleVisionÔ feature and is described in detail in Chapter 7.

The Analysis Window is one of the strongest features of the Samurai. Unlike the CandleboxÔ, which displays the raw numerical data, the Analysis Window provides you with expert interpretation of what those number means. The Analysis Window is as close as you can come to having a trading expert sitting besides you explaining each trading day to you!

To analyze a single trading day on your chart, simply click on the day you want this program to analyze, and click on the button below or by pressing Function number 6-(F6) key. The Analysis Engine will scan the selected location for all patterns and display them to you, one by one.

The CandleWatchÔ is a unique feature that allows you to select and scan any combination of your data files for trading signals, in an automated process. The CandleWatchÔ is specifically helpful for investors that track large numbers of stock or commodities. This feature allows you to save thousands of hours of analyzing individual charts for effective candlestick patterns.

The CandleWatchÔ feature will scan your entire database for current or past signals. The CandleWatchÔ will produce a report of all, or any particular signals you wish to view. These reports provide you with an easy means of identifying specific buy or sell signals, as well as a means of creating a hard copy of past signals that you can refer to. The CandleWatchÔ also reports other types of signals, such as bottom, tops, bullish or bearish reversals and breakout signals. Therefor, you can often find stocks or commodities generating effective trading signals days before the big price move happens.

Ideally, you would complete a “Daily CandleWatchÔ” scan each day for the stock issues and/or commodity contracts you wish to track. After the CandleWatchÔ function has finished scanning your selected files, you need to generate a few reports to what patterns could be found. From these you will attempt to isolate the individual candlestick signals, which are presenting you with the best potential for a profitable trade. Remember, the daily Watch is more likely to generate intermediate to long term signals.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. You may create as many file lists as you want, with as many or as little of your database files as you want. But, you must have at least one list of files to watch before you can begin a CandleWatchÔ.

CANDLE VISIONÔ

The CandleVisionÔ is a feature of Samurai, which allows you to scan or back-test all, or a specific portion of historical price chart for price patterns contained within the program libraries. This feature is commonly used to quickly scan an area of price activity you might want to study, to back-test trading signals for profitability, or to get a quick detailed glance on the chart’s pattern activity.

The CandleVisionÔ feature uses your Western Technical settings and Library Option settings when completing its analysis. So, you may want to make sure these values and options are set accordingly for the test before you start.

CandleVisionÔ allows you to automatically search a block of historical data for any type of candlestick pattern. This feature also builds a complete database of all the information and text messages generated by our copyrighted libraries which is useful when attempting to back -test the candlestick patterns accurately predicted market reversals, test for profitability and more.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. CandleVisionÔ includes many different types of reports which allows you to review any pattern found or condition that might have affected the result of a signal. A unique fact about the CandleVisionÔ is when it completes its task, it associates different types of colored makers to each candlestick. These market will appear in the Signal and Flag Bar of the CandleBoxÔ and will assist you in instantly digesting the results of the historical scan for patterns.

PROFIT TESTING MODULE

The Profit Testing Module allows you to test all of the candlesticks, and other signals that were included in the CandleVision, for profitability.

After you have completed a CandleVision on a particular chart, you can open the Profit Testing Module and determine which trades were winners (or losers). This module has several variable factors which can be controlled by the user that will make the profitability analysis as accurate as possible for each individual trader and each individual chart.

The user can control the following variables:

1. Dollar Per Point Movement § Since many traders watch both stocks and commodities, this number will vary depending upon which chart is being analyzed. For a Futures chart, this number would reflect the number of contracts traded (Dollar amount for a price move from $1 to $2.). For a stock chart, this number would reflect the number of shares traded.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. 2. Commission Per Trade § This number reflects the dollar amount paid per trade. For Options trader, this would be the amount paid per round turn.

3. Slippage Per Trade § This number reflects the percentage of slippage allowed per trade.

As you can see, the Profit Testing Module will make calculating profits and losses easy, even for those traders that dislike doing mathematical calculations. You can easily plug in the variables and let your computer do the work.

Another feature of the Profit Testing Module is the reporting options. You can choose to have the results of the analysis reported in the form of a written report, which can be put to print, or in the form of a graph, or both.

TRADER’S LOG

The Trader’s Log is a word processing utility embedded directly into the Samurai program. This utility, which functions exactly like a standard word processor or text editor, allows you to document your thoughts and analysis of individual charts without leaving the program.

MOVING AROUND IN SAMURAI

There are a number of ways to move around within Samurai. The Main Menu, located at the top of the screen, allows you to access all the program features easily. There are also keyboard shortcuts associated with many of the menu features. Once you have become familiar with the program, you will probably find that keyboards shortcuts become second nature.

We have also included a Right-click pop-up menu, which allows additional control of the program. The pop-up menu contains many of the options within the main menu, so you can access most features from either menu. Below the main menu you will see two series of icons called Speed Buttons (Shortcut Buttons). These Speed Buttons will take you directly into certain Samurai functions, without having to go through the main menu. All of the buttons include hints. When you move the mouse pointer over a button and wait a few seconds, the hint will appear telling you what the button does.

Samurai uses a standard WindowsÔ menu format as the principle means of navigating through the program. As with other Windows applications, you can access all of the program’s features from within the menu structure. Simply click on the menu, pull the mouse down through the list of available selections and click on the function you want to use.

Sometimes you will see a symbol, pointing off to the right, alongside a particular menu selection (as you can see alongside the Open File Type selection of the File menu in the upcoming example). This indicates that there are additional menu items associated with this selection. Simply slide the mouse pointer in the direction of the arrow, until you see the additional menu choices and click on the selected once.

Alongside many of the menu items, you will see the symbols for the keyboard shortcuts for that particular action.

Advanced and power users of the Samurai may find that manipulating the menus, sub menus and drop down menus is overly time consuming. Besides simple keyboard shortcuts, which may require that you memorize more procedural details than you can to, we have also included a series of Speed Buttons to facilitate your work.

The File menu allows you to locate and specify types of files to open, close, print charts and to modify the actual price data fields contained in those files.

THE DISPLAY MENU

The Display menu is used to manipulate some of the visual options of the chart. With this menu you can turn on and off any of the Western Technical indicators, the volume display and the CandleBoxÔ. You can also compress a chart to Daily, Weekly, Monthly or Yearly data from the Display menu and to request the Analysis Results (which is the same as pressing F6).

The Options menu allows you to organize your thoughts and to customize your charts. You can modify certain aspects of the chart you are viewing and to save those specifications to “Custom Pages”. You can arrange charts on Chart Tabs, access your Trader’s Log, setup your directories and default options.

THE QUICK ARROW MENU

The Quick Arrow menu allows you to display BUY and SELL arrows on chart base on P.I. System Trader library.

As we stated earlier, CandleWatchÔ is the feature which allows you to scan through all selected data for trading signals each day. CandleWatchÔ can be performed as often as you wish, but it is highly recommended that you perform this function daily. You can select a set of charts to scan and save, modify or delete the chart list from this menu as well as beginning the CandleWatchÔ itself and generating custom reports. This is explained in more detail in Chapter 7 - Analyzing Candles.

THE CANDLEVISIONÔ MENU

CandleVisionÔ is the function, which allows you to back-test all or some of your historical price charts for patterns identified by the extensive Samurai libraries. (For more details, see Chapter 7 - Analyzing Candles)

This menu allows you to setup and initiate your specific download software by setting the User Defined menu option. This allows you to initiate your download software directly from the Samurai without having to exit or minimize the program.

THE WINDOWS MENU

This menu gives you control over the arrangement of windows on your screen. You can arrange the windows vertically, horizontally, or you can cascade them so that they overlap, thus allowing you to put more charts on the screen. These functions are duplicated exactly in the Speed Buttons (See Speed Button discussion).

THE HELP MENU

This menu will direct you to the user manual of Candlestick Forecaster. By clicking at Contents, you will be able to open and read the manual in help file format.

While developing the Samurai program, we retained many of the old keystrokes you may be familiar with from the DOS application. For example, F6 still brings up the analysis windows, F8 turns on or off Stochastic and F9 turns on and off Moving Averages. However, there have been some changes made, so you will still need to learn a few of the differences between the DOS keystrokes and the Samurai keystrokes.

Keyboard shortcuts are specified next to the particular menu item they are associated with. This way, you don’t really have to memorize the shortcuts. You will always have a reference in the menus of the Samurai program.

FUNCTIONS SHORTCUT KEY Save Custom Page F3 Stop Level F5 Analysis Results F6 Volume F7 Show Stochastic F8 Show Moving Average F9 Show Williams % Retracement F10 CandleBoxÔ Window Ctrl + B Setup Default Option Ctrl + D Edit Chart Data Ctrl + E Indicator Window Ctrl + I Show RMI Ctrl + M Open Chart Ctrl + O Profit Testing Ctrl + P Show RSI Ctrl + R Setup Chart Tab Ctrl + T Begin Vision Ctrl + V Begin Watch Ctrl + W

In order to facilitate your ability to move around in Samurai, we have incorporated a number of Speed Buttons. These buttons are located directly below the main menu.

The graphical depiction on these buttons represents the task that the button performs. However, if you find that any button’s function is unclear, you can position your mouse pointer over each button and a balloon message will appear describing its function.

Click once on the button and you will bypass the menu and go directly into the specified function.

Another convenient means of getting around in Samurai is via the right-mouse button pop-up menu. This menu can be accessed any time you are not actively engaged in another Samurai function. (For Example, you cannot access the pop-up menu from within the Directory Settings function). Simply click the right mouse button and the menu below will appear on your screen.

BEGIN ANALYSIS will take you directly into the analysis window.

CHART OPTION has the following sub-menu which will pop-up when you drag the mouse pointer down to Chart Options.

As you can see, from this menu you can access all of the various options for viewing, customizing and saving your charts.

This menu gives you the ability to determine which library of patterns and analysis techniques Samurai will apply to the chart(s) you select. More information on each these library options can be found in the Appendix of this User’s Guide.

TECHNICAL INDICATORS has the following sub-menu which will pop-up when you drag the mouse pointer down to technical indicators.

This menu shows you which indicators will be represented on your charts(s).

NOTE: The select file options also has a sub-menu as shown here.

CANDLEVISIONÔ has the following, which will pop-up when you drag the mouse pointer down to Candle Vision.

For the time being, Samurai does not have it’s own data update utility, user have to look for their own end-of-day data from nearest database provider. To make things running faster, we have included a utility to call up your data downloading software. All you have to do is just enter the location of your exe file to execute. And the program will remember it for you.

To setup, follow these steps:

1. Click on DOWNLOAD menu. 2. Click USER DEFINED. 3. Click SETUP.

To execute your downloader software, follow these steps:

1. Click on DOWNLOAD menu. 2. Click USER DEFINED. 3. Click LAUNCH NOW.

EDIT SPECIFIC PRICE DATA

You can manually edit the specific price data on your charts.

1. Click on the FILE menu. 2. Click on EDIT CHART DATA.

The following window will appear, displaying the Date, Open, High, Low, Close and Volume numbers for each candle on your chart. Use the directional arrows at the bottom of the window to move from candle to candle. You can then position your pointer on any of the price fields, click the mouse button and edit the entry. You can also create new candles by clicking on the Add New button on the right side of the window.

LOADING CHARTS

After you have finished setting your default file type and directory settings, you can start loading your charts.

NOTE: Remember that since the Samurai can read many types of data files, you must still tell this program what type of files you wish to open every time you change file types. After you have selected an initial file type, the program remembers your selection and will assume you are opening the same type of file unless you tell it differently.

CHANGING THE FILE TYPE

1. Click on the File menu item. 2. Click on OPEN FILE TYPE. 3. Select the desired file type from the available options.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. 4. A standard file directory window will appear. Use the DRIVE and DIRECTORIES boxes to move about your hard drive(s) to find the directory where your data files are located.

NOTE: You may have files in multiple directories. If this is the case, you can move between directories by clicking on the DIRECTORY box. If you are using Metastock, Worden Brothers or Telescan files, Samurai knows how to handle these files types and will only display files in the files list box when you have chosen a directory that contains one of these specific file types.

5. Once you have located your data file directory, you will see a listing of all the files in that directory in the box under FILE NAME. Double click on the file you wish to open. (Or you may single click on the file and then click the OK button.)

NOTE: Large data files may take some time to completely load and display. If you have selected a file to download and the Samurai appears to be doing nothing, it is probably completing the calculation of the Western technical indicators and preparing the chart for display. Be patient with large data files.

Samurai contains a tabbing feature which allows you to group charts on the screen according to any parameters you wish, and then to switch from one group to another by clicking on the appropriate tab at the bottom on your screen.

SETUP CHART TABS

Chart tabs, located at the bottom of the screen, provide you with a means to group your charts and to navigate among the opened charts on your screen. You can have a varying number of charts per tab (dependant on screen size, number of pixel, etc.), but for ease of viewing, it is recommended that you limit the number of charts per tab to 4.

These tabs are used to control your page layouts. You may have up to 255 individual tabs. Whenever you want, you can add, delete or modify existing tabs through the SETUP CHART TABS option.

1. Click on the OPTIONS menu. 2. Click on SETUP CHART TABS, or press CTRL + T. Samurai will bring up the TAB CONTROL window (see example on next page), which will allow you to make any modifications you wish to your chart tabs.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. 3. Click on FINISH after you complete each modification. 4. Click on OK button when you have made all the changes you wish to make.

You can now click on a chart tab at the bottom of your screen and then open the chart that you want to include in that group.

When viewing a chart, you may wish to control some of the Chart Options, such as colors, number of bars on the screen, the Western Technical Settings and the Library Settings. All of these settings are contained within the Samurai Setup Default Options screen (the same screen you used to setup your default directories). Samurai will bring up the tabbed notebook window that contains the default settings. Use the tabs on the top of this window to move between the different default options. Once you have finished, click on OK to store your settings for this particular chart, or click on the small box labeled DEFAULT to apply your settings to all of your charts.

1. Click on the OPTIONS menu (or click on the speed button below).

2. Click on SETUP DEFAULT OPTIONS (or press CTRL + D).

When the CSF SAMURAI SETTINGS window appears, you will notice the screen is a tabbed dialog box containing four tabs, each of which allows you to change specific chart options.

This tab provides control of the Western Technical indicator settings.

This tab provides control of the interpretive library options, which are used within the analysis of a chart.

This tab provides control of the chart and candle color scheme, the number of points per screen, the grid lines and grid style.

This tab provides control of the default directory settings, which tell the program where to look for your data.

When you have finished making changes on each page, click on the OK button.

Compressing a chart is required when you want to view a Weekly, Monthly, Yearly or 3 Line Price Break chart. (See “Beyond Candlesticks” by Steve Nisson (Wiley, 1994), for more information on the Three Line New Price Break chart.) The compression feature will take the entire daily price chart and build a new price chart based on your selected type of compression. Variable compression allows you to convert a daily chart into a candlestick chart where each single candle represents a number of trading days other than one day per candle. For example, a variable compression of 3 would create a candlestick chart where each single candle represents 3 trading days combined.

1. Click on the DISPLAY menu. 2. Click on COMPRESS CHART.

The COMPRESS CHART menu will require you to select the compression type that you wish to use, If you choose VARIABLE, you will be required to input the number of days you wish to compress to.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Samurai will compress and bring up the new chart. Now you can use any of the program’s features to analyze the compressed chart in the same way as you would on a daily chart.

DISPLAYING TECHNICAL INDICATORS

1. Click on the DISPLAY menu. 2. Click on TECHNICAL INDICATORS.

You will then see a submenu listing all the Technical Indicators. Use your mouse to click on any of the indicators to toggle them on or off.

The Stochastic oscillator command toggles the stochastic oscillator graph on and off. For information on setting the Stochastic oscillator values, see Setup Technical Settings.

Displaying stochastic oscillator:

1. Click on Display menu. 2. Click Technical Indicators. 3. Click Show Stochastic. OR Press on the speed button with the word STO OR Press on the F8 keyboard key.

Stochatic oscillator toggled on

The Moving Averages command toggles the Moving Averages graph on and off. For information on setting the Moving Averages values, see Setup Technical Settings.

Displaying Moving Averages:

1. Click on Display menu. 2. Click Technical Indicators. 3. Click Show Moving Averages. OR Press on the speed button with the word M.A OR Press on the F9 keyboard key.

Moving Averages toggled on

The Relative Strength Index command toggles the RSI graph on and off. For information on setting the RSI values, see Setup Technical Settings.

Displaying Relative Strength Index:

1. Click on Display menu. 2. Click Technical Indicators. 3. Click Show RSI. OR Press on the speed button with the word RSI OR Press on the Ctrl+R keyboard key.

RSI toggled on

The Relative Momentum Index (RMI) command toggles the RMI graph on and off. For information on setting the RMI values, see Setup Technical Settings.

Displaying Relative Momentum Index:

1. Click on Display menu. 2. Click Technical Indicators. 3. Click Show RMI. OR Press on the speed button with the word RMI OR Press on the Ctrl+M keyboard key.

RMI toggled on

The Williams % R (retracement) command toggles the Williams % R graph on and off. For information on setting the Williams % R values, see Setup Technical Settings.

Displaying Williams % R:

1. Click on Display menu. 2. Click Technical Indicators. 3. Click Show Williams % Retracement. OR Press on the speed button with the word WillR OR Press on the F10 keyboard key.

Williams % R toggled on

After you have loaded a chart, you can use the DISPLAY menu to turn on or off the VOLUME display.

1. Click on the DISPLAY menu. 2. Click on VOLUME.

Volume toggled ON

Volume toggled OFF

If you click on either Indicator Window when they are displayed at the bottom of the screen, you will toggle the legend on and off. You may find that the legend tends to take up too much space on your screen to leave on all the time. Toggle it on when you need to look at the information and then toggle it back off.

Legend displays the last value of current indicator.

SAVING CUSTOM PAGES

After you have loaded a chart and set the chart options to your preferences for this particular chart, you can choose to save this chart’s individualized settings to a Custom Page. This custom page can include the visual, technical indicators and library settings. Then, each time you call up that specified chart, the same settings will be applied.

1. Set the chart options as described in Chapter 6, Manipulating Charts. 2. Click on the OPTIONS menu. 3. Click on CUSTOM PAGES. 4. Click on SAVE CUSTOM PAGE, or press F3.

The Custom Page file will be saved for future use. If you want to change these settings in the future, simply change the values and resave the Custom Page.

If you want to delete the currently saved custom page, choose REMOVE CUSTOM PAGE and the file associated with the custom setting (not the actual data), will be deleted.

Printing charts from Samurai is handled in the same manner as any other Windows application. Go to the FILE menu and select PRINT SETUP. Make sure that the appropriate printer, paper size and page orientation are selected.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Once you have completed the Print Setup, go to the FILE menu and select PRINT. The Samurai will then print the active chart with the name of the chart at the top of the page.

Under the OPTIONS menu, you will find a feature called TRADER’S LOG. This is a text editor, which you can access directly from within Samurai that will allow you to keep personal notes about each chart.

Trader’s log functions like any other Windows compatible text editor (i.e. Notepad), and comes with it’s own set of speed buttons to facilitate your work.

MANIPULATING THE CANDLE POINTER

The Candle Pointer is the vertical bar that allows you to point to individual candles. This bar can be moved to different candles by pointing to a candle with the mouse pointer and click, or by using CTRL + LEFT ARROW or CTRL + RIGHT ARROW.

Note: You can only point to one candle at a time per chart.

ANALYZING A CANDLE

Samurai has two analysis features, the Analysis Window and CandleBoxÔ. The Analysis Window displays the findings of the Samurai’s Candlestick Pattern Recognition Library, while the CandleBoxÔ shows price and technical indicator information. Here, we are going to deal with the Analysis Window.

When you have moved the pointer to a candle that you wish to analyze, there are several different ways that you can ask the Samurai to interpret it for you.

1. Move the pointer to the candle that you wish to analyze. 2. Click on the DISPLAY menu. 3. Click on ANALYSIS RESULTS, or press F6.

1. Move the pointer to the candle you want to analyze. 2. Click with your RIGHT mouse button. 3. Click on START ANALYSIS.

The quickest way to bring up the Analysis Window is to simply click on the speed button below.

The Analysis Window for the specific candle you have selected will appear. If you select OK, the Analysis Window will move forward to the next candle pattern found. If you click CANCEL, the analysis will not continue.

The Analysis Window is one of the strongest features of the Samurai. It provides you with a wealth of information as well as an easy-to-understand description of what that information means. The Analysis Window is like having your own personal trading expert!

USING CANDLEWATCHÔ

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. The CandleWatchÔ should be used each trading day. Every day the market’s activity will potentially produce new trading signals that the Samurai can identify. Therefor, a daily CandleWatchÔ is required to keep you up to date with the markets activity quickly and easily.

Remember that daily candlestick analysis is usually very short term. When a signal is generated from a daily CandleWatchÔ , you should expect the signal to mature in 3 to 7 trading days. Anytime before the expected 3 to 7 days have expired, a new signal may form that cancels the previous signal. For example, let’s say a buy signal formed on 1st January 1996, this would mean that we should expect this market to continue going higher for about the next 3 to 7 trading days. We would buy long positions and watch the trade. Next, on 5th January 1996, a sell signal forms. We’re about 4 days into our last trade and we may have seen some profit from it, but now we are seeing a sell signal that cancels the previous buy signal. At this point, we should get out of our long positions and go short. The market is expecting that this sell signal will mature within the next 3 to 7 trading days.

The SELECT FILES option, found by clicking on the WATCH menu, allows you to create and maintain the list of historical data files you want the CandleWatchÔ to track each day. You must complete this task before you can execute a CandleWatchÔ. The list of file names CandleWatchÔ will look at must correspond to your existing historical database list. If you make any changes to the historical database, you must re-select the files for the CandleWatchÔ so both lists of files are identical.

The instructions on the next page will walk you through the process of selecting the files for the CandleWatchÔ .

1. Click on the WATCH menu. 2. Click on SELECT FILES. 3. Click on CREATE.

The SELECT FILES window will appear. This screen allows you to choose selected files to be added to a new group, which you will later run a Watch for.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Click on the file that you want to include in your CandleWatchÔ and then click on the > button. If you wish to include all the files that are in the Source List, then click on the >> button.

Note: To remove a file from the Destination List and return it to the Source List, repeat the above procedure using the buttons with the left pointing arrow.

4. When you are finished, click on OK.

This will bring up the window shown on the next page where you will be asked to give your new group of files a unique name. You can set up as many groups of files as you wish, but each group must have a different name. Be sure to choose a file name that will tell you what is included in that group.

Once you have named your watch file, click on OK.

Now that you have completed the SELECT FILES procedure, you can begin the actual CandleWatchÔ .

1. Click on the WATCH menu. 2. Click on BEGIN WATCH. 3. The OPEN WATCH FILE screen (shown below) will appear. Select which watch file you want to include in your analysis.

4. When you have finished selecting the Watch file to include in your analysis, click on OK. 5. Now the WATCH OPTIONS screen will appears.

Note: Because you are able to put in a date other than today’s date, you can tell the Samurai to run a CandleWatchÔ for any day in the past. This feature allows you to take a vacation and be secure in the knowledge that you will be able to generate a CandleWatchÔ Report when you get back home for each day that you were gone. This feature is useful to anyone who likes to keep a compete history on hard copy to look back on.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Samurai will now begin executing the CandleWatchÔ . A progress indicator window will appear to show you approximately how far into the analysis you are. The CandleWatchÔ may take some time to complete, especially if you are watching many counters. You may cancel the CandleWatchÔ at any time if you do not wish to continue.

THE CANDLEWATCHÔ REPORT

Once you have completed a CandleWatchÔ , you can prepare a report to put all the information obtained through this analysis into black and white.

1. Click on the WATCH menu. 2. Click on CUSTOM REPORTS.

When the CUSTOM REPORTS window appears, you will need to choose which signal type you want to include. Use the mouse to click on the radio button next to each signal that you wish to include. When you have finished, click on the OK button.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Now the Samurai will begin preparing the CandleWatchÔ Report. The number of signals you have chosen to include and the size of your watch files will determine how long this procedure takes. Be patient if the report does not instantly appear on your screen.

Once the report appears on your screen, you have the option of reviewing it right away or putting it to print to be viewed later. Be aware that these reports can run into many pages of printed material for each report. If you prefer, you can save these reports to your hard drive or to a floppy disk.

Click on this speed button to save the current report. Click on this speed button to open a saved report.

Note: These files are not saved as text files, therefor, can only be opened in the Samurai program. Not in a text editor.

Once you have loaded a chart, you may wish to execute the CandleVisionÔ feature to back-test an area of price data or to quickly report the types of trading signals that are found within a given time period. The CandleVisionÔ will allow you to quickly scan a single chart for pattern formations and create a detailed database of all trading signals found while scanning. The report generated from this database can be viewed on screen or put in print.

CandleVisionÔ is a tool that can be used to identify what types of candlestick patterns form over time that are consistent predictors of future price moves. Many times, with the use of the CandleVisionÔ features, traders will identify a few candlestick patterns that have a high degree of accuracy and thus present exceptional trading possibilities.

Another CandleVisionÔ feature called Profit Testing will test all the candlesticks and other signal for profitability.

To use CandleVisionÔ , you must first open the chart that you want to run a vision for. Click on the candle that will represent the ending date for the CandleVisionÔ .

1. Click on the VISION menu. 2. Click on BEGIN VISION.

This will bring up the BEGIN VISION window where you will be prompted to enter the number or trading sessions to include in the CandleVisionÔ . The number that you input will be the number of trading days prior to the candle where you placed the pointer. The CandeVisionÔ will look only at the time frame that you specified. (For instance, if you want to look at the period from 01/01/1996 through 01/31/1996, place the pointer on the candle for 01/31/1996 and enter 23, the number of trading days between these two dates, in the Begin Vision window.)

The status window shown below will appear on your screen while CandleVisionÔ is doing the analysis.

The status window will disappear when the CandleVisionÔ has finished and be replaced with the Custom Report window. Here you will need to choose which signals and pattern types you wish to have included in the report. Simply click in the small radio button next to each signal that you want the signal to be shown. When you have finished, click on the OK button. If you are analyzing a large number of trading sessions, it may take some time for the program to prepare the report and display it on screen. Be patient. When the report is shown on screen, you can either review it right away or print it for review in the future. Be aware that large reports will require many printed pages. The bottom right of your screen will tell you how many pages the report consists of.

WHAT ARE CANDLEVISIONÔ FLAGS?

CandleVisionÔ flags are visual markers that appear in the Signal and Flag Bar of the CandleBoxÔ after you had run a CandleVisionÔ. These flags can be a variety of different shapes and colors. Each color/shape combination has a specific meaning as described on the next two pages. (See the Appendix of this User’s Guide for more detailed explanations of the various flags). As you move your mouse pointer from candle to candle on the chart, you will see the flags associated with each candle appear in the bar at the bottom of the CandleBoxÔ. Only those candles that were included in your CandleVisionÔ analysis will show flags. For example, of you ran a 10 days Vision, only the most recent 10 day’s candles will have flags associated with them even though your chart may have 90 days worth of data showing on it.

The following is a brief explanation of the various flags and the location where they can be found in the Signal Bar of the CandleBoxÔ. For more detailed explanations, see the Appendix of this User’s Guide.

GREEN Ù Represents where BUY and BUY CONFIRMATION signal have formed.

GREEN · Represents BULLISH REVERSAL signal has been formed.

GREEN = Shows the WESTERN TECHNICAL OSCILLATORS have issued BULLISH signal.

RED Ú Represents SELL and SELL CONFIRMATION signals have formed.

RED = Shows the WESTERN TECHNICAL OSCILLATORS have issued BEARISH signals.

BLUE · Shows a DOJI STAR REVERSAL pattern has formed.

BLUE + Shows a DOJI CANDLE pattern has formed.

GREEN (1-13) The green numbers ranging from 1 to 13 represent OVERSOLD or BULLISH CONFLUENCE signals. When these flags begin to appear, you should watch for a BUY signal to form shortly after.

RED (1-13) The red numbers ranging from 1 to 13 represent OVERBOUGHT or BEARISH CONFLUENCE signals. When these flags begin to appear, you should watch for a SELL signal to form shortly after.

These Vision Flags are one more way the Samurai has of presenting the analysis results to you.

CandleVisionÔ flags allow you to quickly view what types of candlestick patterns, and other trading signals, could be found on a specific trading day. The result is a clear representation of the Samurai’s ability to identify profitable trades. Also, the CandleVisionÔ flags are an excellent means for any trader to become more familiar with an individual chart. Once you have gotten a feel for the meanings of the different flags, you will be able to simply point to a candle on any chart that you have run a CandleVisionÔ for and look in the Signal and Flag Bar of the CandleBoxÔ to understand what that particular candle means. You will be able to clearly see where each buy and sell signal formed without having to look at each candle on the chart and interpret it’s meaning on your own.

WHEN TO USE VISION FLAGS

Use the CandleVisionÔ and the Vision Flags whenever you want to quickly review the trading signals for any individual chart. Often times you will find that the CandleVisionÔ flags present precise signals where you thought there might not be any signal.

Also, the CandleVisionÔ flags are an ideal means of performing detailed analysis on trading systems such as the Tom DeMark and Geert Strubbe systems which are forward from propagated. (This means that they work forward from sometime in the past toward today rather than working form today backwards). Each time a chart is loaded, the Samurai identifies each instance where the patterns of the Sequential and TC/BR systems are found for each data point on the entire chart. This is the only way to ensure that this analysis is correct and accurate.

PROFIT TESTING MODULE

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. One of the Samurai’s most powerful tolls is the Profit Testing Module. After you have run a CandleVisionÔ , you can run a profitability test for the trades, which occurred during the period for which you ran the Vision.

STARTING THE PROFIT TESTING MODULE

1. Click on the VISION menu. 2. Click on PROFIT TESTING.

OR Click on the speed button

This will open up the Profit Testing Module and display the screen shown below.

Click on the OPTIONS button to bring up the following screen.

On this screen you will need to enter the dollar per point value, the amount of commission you are charged per trade, and the percent allowed per trade for slippage.

Once you have entered these values, click on OK. This will return you to the first Profit Testing screen. You are now ready to run a profitability test.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Click on the TEST button and wait a few seconds while the Profit Testing Module performs the profitability analysis. The status bar on the button of this screen will show you the progress of the analysis.

Once the analysis has been completed, the result will show on the screen. (See the illustration on the following page.)

From this point you can choose to produce a report by clicking on the REPORT button. This report will look very similar to a CandleWarchÔ report. You can choose to print this report or save it to disk for viewing later in the same way that you would print or save a CandleWatchÔ report. (See page 70-71, THE CANDLEWATCHÔ REPORT.)

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. You can also choose to have the Profit Testing Module present the profitability analysis in the form of a graph by clicking on the GRAPH button. This will bring up a graph similar to the one shown below.

CANDLE ASSISTÔ

As a registered user of this software program, you are entitled to request assistance from our Technical Support department. Our technical support staff includes computer programmers, traders and often the actual developers of this software program. In the event that we can not assist you with a problem, we will attempt to find someone who can assist you, such as your data vendor, software developer or hardware technician.

Technical Support Hours: 9:00 AM to 5:00 PM (GMT +8) Monday through Friday. (Special appointments can be scheduled before of after normal business hours if needed).

Technical Support Phone Numbers: Phone : 603-2455877 (8 lines) Fax : 603-2456792

Technical Support on the Internet: Internet Address: http://www.highestsummit.com e-Mail: [email protected]

Technical Support by Mail: Highest Summit Technologies Sdn Bhd 161A, Jalan Maharajalela, 50150 Kuala Lumpur, Malaysia.

Malaysia Office: CyberJaya Office: U.S. Office: Highest Summit Cyberview Project Office, 1507 N. Cahuenga Blvd, Technologies Sdn Bhd 63000 Cyberjaya, Hollywood, Calif. 90028 161A, Jalan Maharajalela, Selangor D. Ehsan, (Cahuenga & Sunset 50150 Kuala Lumpur, Malaysia. Blvd.) Malaysia.

CUSTOM PAGES

The version 2 build provides you some new features, as well as a new GUI layout and look. We have designed the program to make it easier for you to use, a swell as new hot keys to trigger frequently used functions. The custom page feature will allow you to load the last set of charts loaded in the prior session. This will speed the use and analysis of the program, and make it helpful to you, the trader.

Custom Pages: This option allows the user to define any number of pages with any number of charts to be displayed on screen on a page. This function will load the users last saved configuration of pages and charts.

Samurai uses a standard Windows menu format as the principle means of navigating through the program. As with other Windows applications, you can access all of the program’s features from within the menu structure. Simply click on the menu and, while keeping the mouse button depressed, pull the mouse down through the list of available selections until the one you want is highlighted. When you release the mouse button, the highlighted selection is activated. Sometimes you will see a carrot symbol, pointing off to the left or right, alongside a particular menu selection (as you can see alongside the Open file Type selection of the File menu in the upcoming example). This indicates that there are additional menu items associated with this selection. Simply slide the mouse pointer in the direction of the arrow, while keeping the mouse button depressed, until you see the additional menu choices. While still holding the mouse button down, position the pointer over the appropriate menu item. When that item is highlighted, release the mouse button to activate your selection. Beside the menu items, you will see the symbols for the keyboard shortcuts for that particular action. Advanced and power users of the Samurai may find that manipulating the menus, sub menus and drop down menus is overly time consuming. Besides simple keyboard shortcuts, which may require that you memorize more procedural de-tails than you care to, we have also included a series of Speed Buttons to facilitate your work.

Open Chart This button is a shortcut to FILE-OPEN CHART. It brings up open dialog depending on which file type you last opened.

Compress Chart This button is the shortcut of DISPLAY-COMPRESS CHART. It will bring up Chart Compression Form for you.

Print This function allows you to print the active chart.

Technical Settings This button will bring you to the Technical Indicators setting page. From there you can set the Western Technical Indicators value.

Chart Options This button will bring you to the Chart Options setting page. From there you can change the chart appearance according to what you prefer.

Show Bars/Candles This option allows the user to display data as either a Western bar chart, of Japanese candlestick chart.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Increase Bars on Chart This option allows the user to define the number of candles displayed on screen on a single chart. This function will put candles closer together to display more candle per chart.

Decrease Bars on Chart This function will put candles farther apart to display less candles per chart.

Analysis Results This button brings you to the analysis window. By pressing on a single candle and pressing this button will brings up the analysis result for that particular candle.

Begin CandleWatchÔ This button will execute the CandleWatchÔ.

Begin CandleVisionÔ This button will execute the CandleVisionÔ.

Profit Testing This button will direct you to the Candlestick Forecaster sub- module called Profit Testing Module where you can test the particular chart for profitability.

Trader’s Log This button brings up another sub-module of Candlestick Forecaster, which functions like a Notepad that allows traders to take their own notes.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. CandleBoxÔ This button brings up the CandleBoxÔ, which will show you the prices/value of each candle and Western Technical Indicators.

These three buttons will arrange charts in a tab by cascade/tile vertically/tile horizontally.

Help This function opens the help file for Candlestick Forecaster

Show Stochastic This option allows the user to display the Stochastic lines on the chart. To toggle back to a candlestick chart without this display, click STOK icon again.

Show Moving Average This option allows the user to display the Moving average lines on the chart. To toggle back to a candlestick chart without this display, click MA icon again.

Show R.S.I This option allows the user to display the Relative Strength Index line on the chart. To toggle back to a candlestick chart without this display, click RSI icon again.

Show R.M.I This option allows the user to display the R.M.I indicator on the chart. To toggle back to a candlestick chart without this display, click the R.M.I icon again.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Show Williams % Retracement This option allows the user to display the Williams %R on the chart. To toggle back to a candlestick chart without this display, click the WillR icon again.

Show MACD This option allows the user to display the MACD lines on the chart. To toggle back to a candlestick chart without this display, click MACD icon again.

Show Bollinger Bands This option allows the user to display Bollinger bands on the chart. To toggle back to a candlestick chart without this display, click the BB icon again.

This option allows the user to compress a daily chart to either a weekly or monthly chart. There are times when patterns may be found in a weekly or monthly chart, although no pattern is found in a daily. To use this function, first have a daily chart loaded on the screen. Then click either the weekly or monthly icon. The chart will now compress to the desired time frame. To return to a daily chart just click the daily button.

CONFIRMATION

The confirmation pattern group is designed to re-issue any buy, sell, top, bottom or reversal signal. This group also assists conservative traders by providing them with a signal which is more likely to mature into a profitable trade by eliminating some of the inherent risk that is present with the more aggressive signals. Within this program, any signal that has not been confirmed is considered an aggressive signal.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. Aggressive signals typically include more risk and are designed to issue an entry price level that is often within the first 5% of the expected future price move. When acting upon these aggressive signals, we recommend that you use a protective stop to attempt to limit your initial risk within the trade. Confirmation signals will toggle a “CONSERVATIVE” trade and generally provides the user with a higher degree of probability that the predicted trade will mature into an effective and profitable trade. But the user must understand that he/she will be giving up a little bit more than the aggressive trader because of the delayed entry and exit signals.

The continuation pattern group picks up where the confirmation group leaves off. The continuation patterns provide detailed information about a price move that has been predicted by a previous candlestick pattern. As the trend continues to move in the predicted direction, the continuation signals track the trend and the conditions of the Western technical oscillators so that the trader can be aware of these conditions. When the trend begins, the continuation patterns will inform you to stay long or short and continue to trail your protective stop, so that you can maintain the actualized profit and protect yourself from the unforeseen reversals. When the trend is beginning to stagnate, or consolidate, the continuation patterns will warn traders that the trend could begin to reverse; stay with your current position and trail your protective stop, so that we can maximize the potential profit for this trade. Continuation signals can range from 3(three) to 15 (fifteen) candles in length.

The example below will illustrate how you would use the Confirmation and Continuation signals.

Assume that the current price of the market you have been tracking has slowly, and diligently, been moving lower over the past 9 weeks. The first thing that you should realize is that this market is exhibiting signs that the average trend move is more of a long-term trend. Knowing this, you should remember to constantly monitor a daily and a weekly chart for this market. Often times, when a chart exhibits a long-term trend average, the weekly chart will produce the best candlestick signals. The long-term trend is more defined and easier to understand. Also, the weekly chart tends to filter-out the incorrect short-term buy and sell signals that are likely to form within the daily chart. Today, within the daily chart, you find and Engulfing Bullish Line (Buy Signal). First, identify if the market has begun to form a bottom yet, or determine if this could be a warning sign of what might be in the future. If the market has already begun to form a bottom, in the form of a rounded bottom or consolidation, near a previous major support price level, then you might consider taking an aggressive stance and buy into this market. You should also remember to place a protective stop so that if the market continues lower tomorrow you will have attempted to limit your losses. A conservative trader would wait to see a confirmation signal of the Engulfing Bullish Line on the next cycle or trading. This confirmation signal would be your entry signal. You would still place a protective stop near the lows of this buy signal to help prevent unwanted losses. From this confirmation signal onward, you would expect to see continuation signals appear if the market begins to rally. If expected trend matures and rallies, the continuation signals will keep you informed on the conditions that the Western technical oscillators are exhibiting and begin to warn you when its expects the trend to reverse. If the market continues to consolidate or trade lower, you should re-evaluate your position and look for other pertinent signals.

In this example the market had shown signs that it recently entered a long-term bearish trend. Because of this, your are

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. recommended to continually monitor the weekly chart because it will more clearly identify the overall trend and is likely to produce a greater chance for profitable trading. If the markets you choose to trade do not exhibit these types of long term trend moves, or your are primarily a short/intermediate term trader, you should focus your analysis on daily charts. The daily charts are ideal for catching the short-term trend reversals. As a rule of thumb, you should always remember to keep a proper perspective of price movement over time. To do so, we recommend constantly tracking both daily and weekly charts for signals.

In the case of a sell signal or reversal signal, you should use the same techniques to initiate your position and to protect your interests and money. The only difference is that you might weigh the different Western technical oscillators and candlestick patterns uniquely for each scenario.

Confluence is a term that we use a little differently that the standard Webster’s definition. Within this program, the term Confluence means to have agreement with other patterns, or to aid in confirming other patterns. So typically, you would watch for Confluence patterns to form before during and after the buy or sell patterns are found. You can interpret these signals as a warning sign of what might be in this markets future because these patterns commonly appear over a broad time frame after the market has made a substantial move.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. An example of when to place more emphasis on these patterns is when to but or sell signal is found at the same time that a confluence pattern forms that is indicating same potential trend move. For example, an Engulfing Bearish Line (Sell Signal) and a Crossing Bearish Stochastic oscillator (Bearish Confluence). In this example, it shows a greater potential for a bearish price move in the future.

All of these advanced patterns group work together with the classic candlestick patterns and the Western technical oscillators to produce a very fluid and informative trading system. These patterns also assist you by warning when the current trend is exhausting and about to reverse. They become an integral part of this program ability to predict upcoming events and are essential to maintain profitable trading positions after the initial buy/sell signals have formed.

To provide you with a little more about the benefits of candlestick trading and to assist you in applying this technique to the markets/stocks that you trade, the following is a series of hints and suggestions that you may choose to follow when trading:

I. Candlesticks are short term leading indicators that typically predict market reversals right preceding a change in trend. II. Candlesticks work best with stocks and commodities that have good trading volume and good trading range (i.e. active issues). We do not recommend that you give as much weight to a trade if the market is very thinly traded – your signals as they will not be a reliable. In these instances, we recommend that you compress the daily chart to a weekly chart to compensate for the low volume. This will smooth and not exaggerate the overall trend. This will result in a longer term trading approach to trading this type of thinly traded market. It would probably be helpful for you to spend some time looking at how well this program could identify the major reversals before you put any real money into trading this market. III. When you have identified a stock or commodity that is exhibiting signs of overall long term trend, you should use the weekly chart to assist in identifying major market reversals. Remember that the weekly chart will filter out many of the incorrect short term reversal signals within a daily chart and present a clearer picture of the actual price trend.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. IV. Always watch for Doji’s, Hangman, Hammers and Shooting Stars (or Inverted Hammers). These single candle types have proven to be very reliable reversal indicators. Remember to wait for confirmation before acting on these signals. If you do not wait for confirmation, this aggressive stance within the market will increase both your risk and reward; protective stops are therefore part of any highly defined strategy.

The “Three Line New Price Break” chart is a variation of the standard candlestick chart and is very similar to the “Point and Figure” chart. The purpose of this chart is to assist in eliminating the potential short-term reversal signals that are common on a Daily candlestick chart. This type of chart was developed to be easy to understand and use by generating few signals with a much higher probability of success. We have found that this style of charting is very effective for stocks of commodities that exhibit an intermediate or long-term trend capacity (such as Soybean Oil, Wheat, Oats, Bonds and some currencies). Most “Blue Chip” stocks or highly liquid commodities (such as the SP 500, OEX or Gold) do not produce the best result using this type of charting. By using the Candle Vision, you are able to test the signals that are generated to determine the effectiveness of this charting technique for individual stocks or commodities.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. When using this charting method to trade, there are a few simple rules and phrases that may assist you in making proper trading decisions. These rules and phrases are direct translations from Japanese to English. Most of this information came directly from Seiku Shimizu’s book titled “The Japanese Chart of Charts”. He goes into great detail to explain how to effectively trade with the “Three Line New Price Break” chart. The following detailed information will assist you in understanding most of the common terms and trading techniques for using the “Three Line New Price Break” chart:

§ Three Line New Price Break Trading Rules:

One should not trade on the first turn (the first line that indicates a reversal in direction), but should wait for the second line. If the second line is the same color as the first turning line, then one should buy or sell the market respectively. This technique is very important to understand in order to maximize the effectiveness of entry and exit positions. “Black Shoes” and “Red Necks” after a change in price direction, are an indication that the current price trend is likely to continue. As Mr. Seiki Shimizu discloses, buying or selling the market typically occurs when “Black Shoes” or a “Red Neck” appears. (Remember Rule # 2)

A red or black “Sweater and Pants” occurs when the turning line breaks above or below the previous four (4) new price lines. The “Sweater and Pants” formation can also occur when a series of consecutive large range lines appear within a defined trend.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. A “Red Hat” or “Chip Hat” occurs at the ceiling of a market and can be identified by its small size after a sizeable bullish price advance and a black line that follows the “Red Hat”. The “Red Hat” is symbolizing the decreased ability of the buyers to advance the current price. This decreasing strength might sometimes warn of a possible reversal.

“False Movement” occurs when a single turning line is drawn and no follow-through of the trend is seen. No second or third line of the same color following the first turning line would indicate this lack of follow-through. A recovery of the initial trend normally occurs after a “False Movement” line.

One should not rely on just the chart alone, but look at the fundamental and news-related information that may have caused a new line to be drawn.

§ Two of the most common phrases used with this charting technique:

1. If a neck pops out the red sweater and pants with black shoes, then buy. (Formation 1-4-5) 2. If the feet come out of the black pants while wearing a black sweater and a red hat (“chip”), then sell. (Formation 3-2-1)

We suggest using this effective charting technique with a standard Daily or Weekly candlestick chart.

Sequential is a market timing technique developed by Thomas R. DeMark. Thomas R. DeMark has been developing technical systems for the better part of 20 years. His methods have been incorporated, and used successfully, by such great traders as George Sorros and Paul Tutor Jones. He has been an advisor to such financial barons as Leon Cooperman and Lawrence Tish. Thomas R. DeMark has shaped the investment strategies at some of the largest trading houses of the world. His systems of pattern recognition blend perfectly with Japanese candlestick technical analysis. And as such, we are pleased to introduce this technique into our existing library, which will create a more dynamic and profitable outcome. This technique actuality is a unique complex pattern. This technique determines exhaustion of a current trend thereby defining a pivot or reversal point. When terse pivot points are found with a candlestick pattern the probability of success is greatly enhanced.

§ The Setup

Sequential begins with a countdown, which will eventually reach number nine - (9). To calculate the first part of sequential (“Making a Nine”), we first compare the current day’s close to the close of sessions prior. If the current close is higher the DeMark sequential count becomes one (1). On the following cycle, that close is compared to the close of four (4) sessions ago. If the close is higher, the DeMark sequential count moves to two (2). This will continue until nine - (9) consecutive cycles are made.

If the nine- (9) consecutive higher closes are made, this completes a pattern termed “Making a Nine”. This pattern is called an “Intersection”. At this point, Tom DeMark believes that one of two things will happen:

1. If the sell setup is complete, the market will reverse at this point. 2. If the market continues to trade higher and breaks through the intersection, we then begin a “Countdown”

The “Countdown” is composed of comparing the current day’s close to the close of two sessions prior. This countdown does not need to be in consecutive order (day after day). Once a total of thirteen (13) closes greater than the high two days earlier occurs, a sell signal is generated.

One can apply the following rules to combine the DeMark Sequential with Japanese candlestick patterns. During a defined trend, when the sequential count reaches eight (8) or nine - (9), look for bullish reversal and buy signals during a down trend or bearish reversal and sell signals during down trend. If the current trend remains intact. Look for candlestick patterns such a bullish or bearish continuation begins the sequential countdown to thirteen (13). This indicates that the trend has crossed through the “Intersection” and will continue. When the count reaches thirteen (13), one should find candlestick patterns indicating a reversal and act accordingly with great confidence.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. The contained information was derived from the works of Thomas R. DeMark, His recently published book “The New Science of Technical Analysis” published by John Wiley & Sons, is a milestone achievement. We wish to personally than Tom DeMark for his input, as well as, permission to incorporate his dynamic techniques into this trading application.

TAKAHIRO HIKITA PATTERNS

Takahiro Hikita is one of the foremost authorities on Japanese trading techniques including the Sakata Five, what we in the west call candlestick chart and patterns. In Yokohama, Japan, he has been researching these patterns for over forty years. Takahiro Hikita has been using the Candlestick Forecaster Master, along with the programs he has personally developed for the Macintosh called the KABUTO SUPER POWER. He has been kind enough to make offer his knowledge and wisdom.

The Trending Candle / Body Reversal Principle is a pattern recognition system discovered, analyzed and presented by Mr. Geert Strubbe, owner of Runatec Technician of Japanese Candlestick Charting and is a European distributor for the Candlestick ForecasterÔ. Our sincere thanks to Mr. Strubbe for allowing us to benefit from his knowledge and expertise.

I. A Trending Candle (TC)

We have a Trending Candle (TC) when the total length of the body of the candle is larger than the total length, including shadows (high-low), divided by two.

In formula form: ABS (open-close) > (high-close) / 2

Another way of defining the TC is: the total length of the body of the candle must be larger than the sum of the shadows.

The first definition is handy for use in a formula and the second one makes it easier to understand visually.

A Body Reversal is formed on the day prices close past the body of the previous candle.

A BR down takes place when today’s close is lower than the opening price of the previous white candle or the close of the previous white candle.

A BR upwards takes place when today’s close is higher than the opening price of the previous black candle or the close of the previous white candle.

The closing price of the last candle is below the body of the previous candle. The size of the body is of no interest.

Instead of comparing the latest (or any) candle with the candles just before it, we now compare the Trending Candles in the chart to get buy and sell signal.

Let’s say the first candle is white TC. Then the trend stays upward for as long as the closing price of one of the next candles stays above the opening price of the first white TC. If one of the following candles is also a white TC, it one takes over from the previous TC and the trend-stop level goes up to the downside of the body of the last TC.

We continue this process until we have a close under the body of the last white TC.

Above, we have three white Trending Candles. The trend-stop level keeps going up from the bottom of the body of the first TC to the bottom of the second TX and up again to the bottom of the body of the last white TC.

A Trend Reversal occurs when there is a Body Reversal of the last Trending Candle that was defining the current trend. If the BR is caused by a TC then we have a trend-change from up to down or vice versa. The new trend-stop level will then be the opening price of the Trending Candle making the Body Reversal.

If the Body Reversal is caused by a candle that is not a Trending Candle then the trend changes to neutral. A new trend starts with the appearance of the next TC that follows.

The example above shows that the principle is NOT sensitive to time. Only when the price has made a sufficient move do we get the reversal.

When we have a bearish trend, a Trending Candle only takes over from the previous Trending Candle if it closes higher than the previous TC.

Example: The TC at point B does not take over from the TC at point A because the TC at point B does not close below the close at point A.

When we have a bearish trend, a Trending Candle only takes over from the previous Trending Candle if it closes lower than the previous TC.

Example: The TC at point B does not take over from the TC at point A because the TC at point B does not close below the close at point A.

When there is a gap after the Trending Candle then we move the trend-stop level from the opening price of the TC to the bottom of the gap if we are in an up-trend or the top side of the gap if we are in a down-trend.

When the current TC forms a gap with the previous candle then we move the trend-stop level from the opening price of the TC to the bottom of the gap if we are in an up-trend or the top side of the gap if we are in a down-trend.

Let’s look at the same example. The TC at point A makes a gap with the previous candle. The trend-stop level moves from the opening price of the TC to the bottom of the gap marked by the line.

The trend-stop level can not be moved lower during a up-trend. The trend-stop level can not be moved higher during a downtrend.

If we did not have these rules, then the trend-stop level would move up from point A to point B and then on to point C. This would be unlogical. When we have black TC’s moving upward, the trend-stop level stays at point A.

IX. Valid TC/BR

To have a valid TC/BR, it is sufficient that the close of the current candle is equal to or past the opening price of the last TC defining the current trend.

1. There are no formula in the system. This makes it simple to use and follow. Your analysis can be made very swiftly and accurately. All you need to remember is the trend-stop [rice to make your decisions. All signals are given because of the price reaching or exceeding certain levels, not because of the result of a formula.

2. The system is not affected by time. If the price doesn’t move, then the indicator doesn’t move. This is something other indicators, based on formulas, have great difficulty with. Sometimes a trend change can take weeks, at other time, a few days. No formula can cover this problem.

3. Compared to the “break system”, it has the advantage of recognizing the importance and influence of the opening price and the color of the bodies. A break line only looks at the close of each trading session. When we have a bullish trend and one day the price opens much lower, due to certain news factors, but by the closing bell recovers most of the losses then a break line will make a turn. The TC/BR system will not generate a sell signal because we still have a white candle.

4. The TC/BR system does not have an “oversold” or “overbought” level. This is considered an advantage. It means the system can be used with equal effectiveness in long bull or bear markets.

5. The system will generate re-entry points. Something that’s unique and of great use for futures and options traders.

7. The system incorporates the importance of the gaps (windows). Gaps have proven in the past to function as support and resistance levels, a property only candlestick analysis can exploit.

8. The key element in the candlestick analysis is the search and deduction of turning points. All these patterns have the element of countering or overlapping built into them. The TC/BR system follows the same principles but uses them to compare the different TC’s in the chart.

1. Short-term traders can use all the signals given on one chart. With every “trending Candle Takeover” you can add to existing positions. At the point where you get the Body Reversal you either close out all the existing positions if the BR is made by an average candle or close all and revere if the BR is made by a trending Candle in the other direction.

2. For those that like to have some confirmation of the signals, the weekly chart will be very effective if used with the TC/BR system. Using TC/BR system, you look for the buy and sell signals in the weekly chart. Once you have a signal, you enter the market on the first signal given in the weekly chart moving in the same direction. New positions can then be taken as described in point 1. If the last candle in the weekly does not make a “Takeover” or TC/BR, then do not take on new positions. This way you stay out of a sideways moving market.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. If you use the weekly chart for confirmation, you should place the trend-stop at the opening price of the last TC in the weekly chart. As soon as you get a close in the daily chart past the trend-stop level set by the weekly chart, you should close all existing positions. This is a very effective trading system for stock and options traders who like to use spreads.

3. If you put signal flags on the screen, you will notice a wave pattern in the market. By comparing the bottoms and tops made between the reversal points, you get extra confirmation about the current trend or a trend change. If the tops keep going lower, then the main trend stays bearish. If the bottoms keep going higher, then the main trend stays bullish. This is logical and what the flags, generated by the TC/BR system, do is make is clear where the reversal points are and make the waves better defined. Buy signals given by a bullish TC/BR that follows a higher bottom are very effective. The same is true for sell signals given by a bearish TC/BR that follows a lower top.

BASIC CANDLE FORMATIONS

A candlestick chart is simply a collection of single candlesticks relating price movement over time. Each candlestick represents a given time frame’s price movement, or trading session. Almost like pieces to a puzzle, the smaller pieces relate to the larger picture.

There are three basic candle types: I. A white, or empty, candle indicates that the closing price was higher than the opening price for the trading session. II. A black, or full, candle indicates that the closing price was lower that the opening price for the trading session. III. A doji occurs when the opening and closing prices were equal, or very close to equal.

The chart below shows these three basic candle types.

O = OPEN H = HIGH L = LOW C = CLOSE

Candlesticks or bars can be defined as a cycle with open, high, low and close. The gap between OPEN and CLOSE is called REAL BODY. When the market closed below open, the real body is usually filled with black color and called as BLACK CANDLE. The opposite way, when the market close above open, it will not be filled with any color (white) or possible fills with red and called WHITE CANDLE. Line between HIGH to the real body and CLOSE to the real body are called SHADOW.

THE EMPTY (WHITE OR RED) POLE LINES

§ PATTERN DESCRIPTION

SHORT WHITE LINE This candle is created when the close is greater than the open with a less than average daily range. The close should be equal or less than the low and the close should be equal to or greater than the high.

WHITE SPINNING TOP This candle is created when the close is greater than the open with a less than average daily range. The open should be about one third greater than the low and the close should be about one-third from the high.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. WHITE LOWER SHADOW This candle is created when the close is greater than the open during an average or large range. The close must be equal to or less than 5% of the high. The lower shadow must be at least equal to, if not greater than the length of the body.

WHITE UPPER SHADOW This candle is created when the close is greater than the open during a less than average range. The upper shadow must be at least equal to, if not greater than the length of the body.

WHITE UMBRELLA LINE This candle is created when the close is greater than the open during an average or large range. The close must be equal to or less than 5% of the high. The lower shadow must be at least twice the length of the body. This formation is called a hammer if it occurs at the bottom of the market or hanging man if it is found at the top. It can be recognized by the tight opening and closing ranges.

LONG WHITE LINE This candle is created when the close is greater than the open during a greater than average range. The close must be near to, but not equal to the low.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. LONG “MARUBUZO” WHITE LINE This candle is created when the close is greater than the open during a greater than average daily range. The close must be equal to the high and the open must be equal to the low.

LONG “OPENING BUZO” WHITE LINE This candle is created when the close is greater than the open during a greater than average daily range. The close must be near to but not equal to the high and the open must be equal to the low.

LONG “CLOSING BUZO” WHITE LINE This candle is created when the close is greater than the open during a greater than average daily range. The close must be equal to the high and the open must be near to but not equal to the low.

INVERTED WHITE UMBRELLA LINE This candle is created when the close is greater than the open during a large range. The open must be equal to, or more than 5% of the low. The upper shadow must be at least twice the length of the body.

SHORT WHITE LINE Candlestick Signal: Moderate candle. Proper action: Look at pattern, this candle could dorm into a star if gapped above or below prior candle.

WHITE SPINNING TOP Candlestick signal: Uncertain direction. Proper action: Look at pattern, this candle could form into a star if gapped above or below prior candle.

WHITE LOWER SHADOW Candlestick signal: Moderate candle. Proper action: Look at pattern, this candle could form into a star if gapped above or below prior candle.

WHITE UPPER SHADOW Candlestick signal: Moderate candle. Proper action: Look at pattern, this candle could form into a star if gapped above or below prior candle.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. WHITE UMBRELLA LINE Candlestick signal: This candle is called a hangman or hammer, a strong candle, use if it’s apart of an advanced pattern. Proper action: This candle can issue a buy or sell signal, if you have confirming candle the following day. Wait for confirmation signal.

LONG WHITE LINE Candlestick signal: Ideal if found in bullish continuation pattern. Proper action: Excellent candle if found with engulfing bullish or piercing line advanced pattern.

LONG “MARUBUZO” WHITE LINE Candlestick signal: Ideal if found in bullish continuation pattern. Strongest white line. Proper action: Excellent candle if found with engulfing bullish or piercing line.

LONG “OPENING BUZO” WHITE LINE Candlestick signal: Ideal if found in bullish continuation patter. Proper action: Excellent candle if found with engulfing bullish or piercing line advanced pattern.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. LONG “CLOSING BUZO” WHITE LINE Candlestick signal: Ideal if found in bullish continuation pattern. Also called a belt hold line. Proper action: Excellent candle if found with engulfing bullish or piercing line advanced pattern.

INVERTED WHITE UMBRELLA LINE Candlestick signal: This candle is called a shooting star or inverted hammer, a strong candle, use if it’s a part of an advanced pattern. Proper action: This candle can issue a buy or sell signal if you have a confirming candle in following day. Wait for confirmation signal.

§ PATTERN DESCRIPTION

SHORT BLACK LINE This candle is created when the close is less than the open with a less than average range. The close should be equal or less than the low and the close should be equal to or greater than the high.

BLACK SPINNING TOP This candle is created when the close is less than the open with a less than average range. The open should be about one third less than the high and the close should be about one third greater than the low.

BLACK LOWER SHADOW This candle is created when the close is less than the open during an average or large range. The open must be equal to, or no less than 5% of the high. The lower shadow must be at least equal to the length of the body.

BLACK UPPER SHADOW This candle is created when the close is less than the open during an average or large range. The close must be equal to or no greater than 5% from the low. The upper shadow must be at least equal to the length of the body.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. BLACK UMBRELLA LINE This candle is created when the close is less than the open during an average or large range. The open must be equal to or no more than 5% more than the high and the lower shadow must be at least twice the length of the body. This formation is called a hammer if it occurs at the bottom of the market or hanging man if it is found at the top. It can be recognized by the fairly tight opening and closing ranges.

LONG BLACK LINE This candle is created when the close is less than the open during a much greater than average range. The close must be near to but not equal to the low and the open must be near to but not equal to the high.

LONG “MARUBUZO” BLACK LINE This candle is created when the close is less than the open during a much greater average range. The close must be equal to the low and the open must be equal to the high.

INVERTED BLACK HAMMER This candle is created when the close is less than the open during a much greater average range. This candle is characterized by a tight opening and closing range, found at or near the bottom of the candle.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. LONG “OPENING BOZU” BLACK LINE This candle is created when the close is less than the open during a much greater average range. The close must be near to but not equal to the low and the open must be equal to the high.

LONG “CLOSING BOZU” BLACK LINE This candle is created when the close is less than the open during a much greater average range. The close must be equal to the low and the open must be near to but not equal to the high.

§ PATTERN INTERPRETATION

SHORT BLACK LINE Candlestick signal: Moderate candle. Proper action: Look at pattern, this candle could form into a star if gapped above or below prior candle.

BLACK SPINNING TOP Candlestick signal: Uncertain direction. Proper action: Look at pattern, this candle could form into a star if gapped above or below prior candle.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. BLACK LOWER SHADOW Candlestick signal: Moderate candle. Proper action: Look at pattern, this candle could form into a star if gapped above or below prior candle.

BLACK UPPER SHADOW Candlestick signal: Moderate candle. Proper action: Look at pattern, this candle could form into a star if gapped above or below prior candle.

BLACK UMBRELLA LINE Candlestick signal: This candle is called a hangman or a hammer, a strong candle. Use if it’s part of an advanced pattern Proper action: Wait for confirmation if no advanced pattern is found.

LONG BLACK LINE Candlestick signal: Ideal if found in a bearish continuation pattern. Proper action: Excellent candle if found with engulfing bearish or dark cloud cover advanced pattern.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. LONG “MARUBUZO” BLACK LINE Candlestick signal: Ideal if found with bearish continuation pattern. Strongest black line. Proper action: Excellent candle if found with engulfing bearish or dark cloud.

INVERTED BLACK HAMMER Candlestick signal: This candle is called a shooting star or inverted hammer, a very strong candle, use if it’s a part of an advanced pattern. Proper action: This candle can issue a buy or sell signal if you have a confirming candle at the following day. Wait for confirmation signal.

LONG “OPENING BOZU” BLACK LINE Candlestick signal: This candle is called a shooting star or inverted hammer, a very strong candle, use if it’s a part of an advanced pattern. Proper action: This candle can issue a buy or sell signal if you have a confirming candle at the following day. Wait for confirmation signal.

LONG “CLOSING BOZU” BLACK LINE Candlestick signal: Ideal if found with bearish continuation pattern. Strong black line. Proper action: Excellent candle if found with engulfing bearish or dark cloud. Also called a belt hold line.

§ PATTERN DESCRIPTION

FOUR PRICE DOJI LINE This candle is created when the open, high, low and close are all equal.

GRAVESTONE DOJI LINE This candle is created when the open, low and close are all equal and below the high.

LONG LEGGED SHADOW DOJI This candle is created when the open and close are equal during a larger than average range. The body line (open and close) must be at the mid-range of the high and low.

DRAGONFLY DOJI LINE This candle is created when the open, high and close are equal during an average or larger daily range. The body line (open and close) should be at or no more than 25% less than the high.

SMALL DOJI This candle is created when the open, and close are equal during a smaller than average daily range. The body line (open and close) should be at the mid-range of the high and low.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. SMALL BLACK DOJI This candle is created when the open and close are almost equal during a smaller than average range, and the close must be less than the open. The body line (open and close) should be at the mid-range of the high and low.

SMALL WHITE DOJI This candle is created when the open and close are almost equal during a smaller than average range, and the close must be greater than the open. The body line (open and close) should be at the mid-range of the high and low.

§ PATTERN INTERPRETATION

FOUR PRICE DOJI LINE Candlestick signal: Possible major market reversal, wait for confirmation. Proper action: Excellent candle if it has gapped above or below to become a star.

GRAVESTONE DOJI LINE Candlestick signal: Possible major market reversal. Wait for confirmation. Proper action: Very good if found with an overbought market. This type of “Doji Line” is interpreted as a consolidation, which could signal a shift in market momentum and direction.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. LONG LEGGED SHADOW DOJI Candlestick signal: Possible major market reversal. Proper action: This type of “Doji Line” is interpreted as a consolidation with increasing force. The extreme daily range could be signaling a major trend change.

DRAGONFLY DOJI LINE Candlestick signal: Possible major market reversal, wait for confirmation. Proper action: Excellent candle if it has gapped above or below to become a star.

SMALL DOJI Candlestick signal: Possible major market reversal, wait for confirmation. Proper action: Excellent candle if it has gapped above or below to become a star. The “Doji Star” indicates the possible termination of a trend. This type of “Doji Line” is interpreted as a consolidation with a decrease in force because of the small daily range. This could be signaling a major market top or bottom.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. SMALL BLACK DOJI Candlestick signal: Possible major market reversal, wait for confirmation. Proper action: Excellent candle if it has gapped above or below to become a star. The “Doji Line: indicates the possible termination of a trend. This type of “Doji Line” is interpreted as a consolidation with a decrease in force because of the small daily range. This could be signaling a major market top or bottom.

SMALL WHITE DOJI Candlestick signal: Possible major market reversal, wait for confirmation. Proper action: Excellent Candle if it has gapped above to become a star.

§ PATTERN DESCRIPTION

SHOOTING STAR This candle pattern is created when an inverted umbrella line appears above the top of the real body of the previous day’s candle. This pattern can continue forming into many other advanced patterns.

DARK CLOUD COVER This candlestick pattern is created when a white candle followed by a black candle and the black candle’s open is above the previous day’s high. The low of the black candle should fall about mid range of the white candle’s real body, and must not have a lower low than the previous day’s open.

ENGULFING BULLISH LINE “Tsutsumi line” This candlestick pattern is created when any black line is followed by a long white body that has a higher high, and a lower low.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. ENGULFING BEARISH LINE “Tsutsumi line” This candlestick pattern is created when any white line is followed by a long black line that has a higher high, and a lower low.

PIERCING LINE This candlestick pattern is created when any white line is found after a long black line. The white line must open below the low of the previous day and the close must be above the previous day’s midpoint and below the previous day’s high.

THREE RIVER MORNING DOJI STAR This candlestick pattern is created when a doji star is formed in between a black and a white candle. The high of the doji candle must be lower than the lows of both the black and white candles beside it.

THREE RIVER EVENING DOJI STAR This candlestick pattern is created when a doji star is formed in between a black and a white candle. The low of the doji candle must be higher than the highs of both the black and white candles beside it.

BEARISH HARAMI LINE This candlestick pattern is created when a small white line is surrounded by a black candle preceding it.

UP TREND MEETING LINES This candlestick pattern is created when a white line is followed by a black line. As the name implies they must each close at the same point.

DOWN TREND MEETING LINES This candlestick pattern is created when a black line is followed by a white line. As the name implies they must each close at the same point.

UPSIDE GAP TWO CROWS This candlestick pattern is created when the latest two candles are black bodies following a long white line. The first black body must open above the high of the long white line and create a gap. The second black line must close lower than the first black line. The low of the second black line should fill the gap created by previous two candles.

BEARISH WINDOW This candlestick pattern is created when the most current candle has high below the previous candle.

DOUBLE DOJI STARS This candlestick pattern is created when the two most current candles are doji’s and have gapped above or below the candle they follow.

BEARISH SIDE BY SIDE LINES This candlestick pattern is created when a black candle is followed by two consecutive candles with each high below the black candle they follow.

TWEEZER TOP This candlestick pattern is created when two or three consecutive candles have equal highs.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. TWEEZER BOTTOMS This candlestick pattern is created when two or three consecutive candles have equal lows. Shows bullish support at low price.

BULLISH HARAMI CROSS This candlestick pattern is created when any doji line falls within the real body of the previous white candle.

BEARISH HARAMI CROSS This candlestick pattern is created when any doji line falls within the real body of the previous black candle.

HAMMER This candlestick pattern is created when an umbrella line appears after a downtrend. This pattern is potentially bullish and may indicate a possible market bottom. Look for confirmation before buying.

INVERTED HAMMER This candlestick pattern is created when an inverted umbrella line appears after a downtrend. Like the hammer, it is potentially bullish and may indicate a possible market bottom. Look for confirmation before buying.

SHOOTING STAR Candlestick signal: Sell signal, if followed by a lower close, and technical confluence. Proper action: Best if market is overbought. Look for another bearish advanced patterns.

DARK CLOUD COVER Candlestick signal: Bearish sell signal, possible reversal if market is overbought. Proper action: Look for lower Close on following candle to sell.

ENGULFING BULLISH LINE “Tsutsumi line” Candlestick signal: Buy signal, possible reversal. Proper action: Look for higher Close to buy. Best if found following a new or contract low.

ENGULFING BEARISH LINE “Tsutsumi line” Candlestick signal: Sell signal, possible reversal. Proper action: Look for lower Close to sell. Best if found following a contract or new high.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. PIERCING LINE Candlestick signal: Possible buy signal. Proper action: Good buy indicator if found after a downtrend. Wait for higher close to confirm a buy.

THREE RIVER MORNING DOJI STAR Candlestick signal: Buy signal. Proper action: Enter long position provided white candle’s close is above the black candle’s high. Place sell stop below the low of the doji.

THREE RIVER EVENING DOJI STAR Candlestick signal: Sell signal. Proper action: Enter short position provided black candle’s close is below the white candle’s low. Place buy stop above the high of the doji.

BULLISH HARAMI LINE Candlestick signal: Indecision in market. Proper action: Wait for next signal. Possible reversal. Wait for confirmation. Use the preceding and succeeding candles to establish direction.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. BEARISH HARAMI LINE Candlestick signal: Indecision in market. Possible reversal. Proper action: Wait to sell on confirmation of signal.

UP TREND MEETING LINES Candlestick signal: Possible reversal. Proper action: Wait for next signal. Possible market short-term correction. Use the previous candle and the next candle for direction.

DOWN TREND MEETING LINES Candlestick signal: Short-term support. Proper action: Wait for next signal. Possible market short-term correction. Use the previous candle and the next candle for direction.

UPSIDE GAP TWO CROWS Candlestick signal: Sell signal, if followed by a lower Close during an overbought market. Proper action: Look for lower prices. Possible top if found following a new or contract high.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. BULLISH WINDOW Candlestick signal: Current trend intact. Bullish continuation signal when market is not overbought. Proper action: If market is oversold, this can be a good buy signal. Look for stability of trend if gap stays Close.

BEARISH WINDOW Candlestick signal: Current trend intact. Bearish continuation signal when market is not oversold. Proper action: If market is overbought, this can be a good sell signal. Look for stability trend if gap stays Close.

DOUBLE DOJI STARS Candlestick signal: Possible major market reversal. Proper action: Wait for confirmation. This type of doji pattern is interpreted as a market consolidation, with an increase in the likelihood of a major trend change in the market’s momentum.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. BEARISH SIDE BY SIDE LINES Candlestick signal: Short-term trend is bearish. Proper action: Wait for next signal. Look for stability of trend if high is not broken. Bearish signal if high is not broken.

TWEEZER TOP Candlestick signal: Short-term trend resistance, bearish. Proper action: Wait for next signal. Look for stability of trend if high is broken. Bearish signal if high is not broken.

TWEEZER BOTTOMS Candlestick signal: Short-term trend support, bullish. Proper action: Wait for next signal. Look for stability of trend if low is broken. Bullish signal if low is not broken.

BULLISH HARAMI CROSS Candlestick signal: Indecision in market. Possible reversal. Proper action: Wait for next signal for confirmation. Possible reversal. Best if found during an oversold market and a contract or new low.

Copyright Ó 2000 Highest Summit Technologies Sdn Bhd. All Rights Reserved. BEARISH HARAMI CROSS Candlestick signal: Indecision in market. Possible reversal. Proper action: Wait for next signal for confirmation. Possible reversal. Best if found during an overbought market and a contract or new high.

HAMMER Candlestick signal: Possible reversal, buy on confirmation. Proper action: Look for higher close above the black candle to buy.

INVERTED HAMMER Candlestick signal: Possible reversal, buy on confirmation. Proper action: Look for higher close above the black candle to buy.