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Hey everyone and welcome back to the daily call. This is Kirk here again from Option Alpha and on today’s daily call, we’re going to talk about candlestick patterns, more specifically, answering the question, “Can options traders use these for better entries and exits?” What are candlestick patterns? Well, look. They’ve been around for generations, decades and it’s basically just a way to visually or graphically represent price movement or price trend in particular markets. Now, these can be done on a daily basis, intraday, weekly, monthly basis. Where you often see them obviously is in a lot of stock charting software and it’s become honestly the standard, not anything else in the investing space. For the last call it two decades or so, you see pretty much every stock chart has candlestick patterns. The reason they call them candlestick pattern is because they look like candles in some cases. They have these wicks and they have these main bodies. The idea is that visually looking at these wicks and main bodies and how large or small they are in relation to prior days or recent days can give us some sort of indication of where the markets might go or where the markets might trend. Now, we’ve got a lot of content on candlestick patterns because I use them probably a lot more when I started out and maybe I just relied on them a lot more when I started out. Right or wrong, I was very attracted to candlestick patterns early on because I learned about them in my time in New York and I figured that, “Hey look. If they watch them and monitor them there that I would too.” I’ve come to realize though that candlestick patterns I think do serve I think a purpose for options traders, though they are not the rule, meaning that you don't have to use candlestick patterns. I do find that for myself, knowing a lot of candlestick patterns that are out there, especially looking at days where we have just huge movements in the underlying market or huge reversals really, that those can maybe give me a little bit of indication of where the market either A, might be going or might not be going. There’s patterns like morning stars and evening crosses and things like that. I mean, there’s these all kinds of funky names for patters. Falling windows, shooting stars, dark cloud covers, whatever you want to call it. But the reality is that I think it does give us a good maybe visual just like secondary or third level clue as to maybe where things are going. The way that I like to use them in particular is just to see strength in the market. If you see a hammer pattern which the market opens up, it falls dramatically, but then it recovers that entire fall during the day and maybe closes near the open or above the open. That’ll generate what’s called generally like a hammer pattern or a hammer candlestick on the chart. What that shows just through its visual nature is that the market fell for some reason, but was able or strong enough to recover all or most of the fall that it had during the day. You see the same thing on the other end where you see these what are called shooting stars where the market opens, it rallies significantly higher, but then falls all the way back down to where it opened, basically gives up all of its gains, it couldn’t hold onto it. Maybe that tells us something about where the market is going, maybe at a point at which it’s maybe weak or vulnerable and could be turning over. Do I think you need it to be to be successful trading? No, because we’ve built back-testing software that never looks at candlestick patterns. And so, you can create a replicatable system just by entering positions and managing them properly, position sizing, etcetera. Our software never looked at candlesticks to say, “Okay, we’re going to enter a position on this day or exit a position on this day based on a candlestick pattern.” But again, when I'm looking at it, maybe it makes me think twice about going long or short for that particular moment. Maybe I wait one day just to see what happens in the market. If I see a shooting star, maybe I wait a day if I’m going to go long or bullish on something or it maybe might lead me to believe now might be a good time to get into a position that's bearish. I think you have to use them in conjunction with other things, is really what it comes down to. I never use candlestick patterns by themselves. I never use technical analysis by itself. It always comes back down to that core option strategy and then maybe some little stuff that can help engage you and visually stimulate maybe where the market is going. Hopefully that helps out. I know it’s a big question. Like I said, we’ve got a lot of content on candlestick patterns right here at Option Alpha and maybe by the time that this actually goes out or very soon afterwards, we’re going to be trying to put together a nice little course on candlestick patterns just to help people understand what they are and how to use them and how we look at them which should be good. As always, let me know if you guys have any questions. Until next time, happy trading!