From the previous section, we determined that price movements result from massive emotions of fear and greed regarding trader's position in the market with a given stock.
Recognizing the footprints of greed and fear is not difficult. Recognizing the signs that the rally or decline before it happens is the difficult part of trading. How many times has this situation happened to you: You enter a trade based on a bullish reversal signal, but then exit on a slight pull back only too see the stock rally to a new high after you exit.
Or how often have you held on to a stock that experiences a bearish pull back in hopes that it will turn around, only to see the stock plummet to new lows before you finally concede to defeat and exit.
Unfortunately, there is no system that can predict with 100% accuracy exactly where a greed rally or fear sell off begins. There are; however, techniques based on candlestick patterns that help us locate probable areas for these turning points. The rest of this section will explore the techniques in identifying those probable areas that properly managed will result in profits for the trader in the long run.
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