Management from a Homemaker’s Lens

The word Management as defined in the dictionary means the process of dealing and coordinating with people. Management is a never-ending loop that begins when one gets up in the morning and ends when one sets the alarm for the next day and goes to sleep.

 Management is always conceptualized as a fancy degree from a Business school and jargons like Presentations, Entrepreneurship, SWOT, ROI, etc. Management is inevitably present and significant in all these fields, but what we often forget is that management is applicable in all walks of life. It covers all facets of our lives. We ignore this fact because we have been so used to doing these roles that we have forgotten about the management nature. Even a trip to Goa with friends or relatives requires proper planning so to effectively manage one’s schedule for an enriching experience.

 If we deep dive into our daily life schedule, I see my mother implementing all my MBA lessons in some way and the best part is though those decisions or acts of her do not bring any life-changing decisions but are pivotal for the smooth functioning of the house.

 The duties of a homemaker are frequently looked down upon, but as we look closely, we can see that becoming a homemaker demands immense management skills. One of the most difficult examples of management is managing an entire family, taking care of everyone’s special needs, settling petty conflicts among children, maintaining the bonds intact, ensuring food is prepared on time. All this might sound so simple when we compare it to the life of an MBA graduate but it is equally challenging and complex.

 If we draw an analogy between the life of a manager and a homemaker, it is quite indistinguishable. The only difference is the nature of the work they both execute. Just like in an organization, A manager is the one responsible for streamlining the tasks, planning things ahead of time so that the needs of the clients are fulfilled on time, and addressing the grievances of its employees. In the same fashion, Homemakers must plan for the whole family, predict future challenges, multitask and make the most use of their resources, and be armed with plans for any last-minute hiccups.

 Let us take a few examples where we see homemakers implementing various concepts of MBA.

 Before buying any vegetable, she does a SWOT analysis for it and checks for if it is the best available product in the market.

She keeps a close record of all house expenses and makes sure every expense is recorded and gets tallied with the money she has in hand. In some or the other way, she exhibits great accounting skills.

She doesn’t have a degree but yes she is a perfect manager and a successful leader.

About the Author
Sakshi Poddar a Computer Science Engineer by qualification is now pursuing MBA(Analytics from IIM Kashipur. She is a part of various student bodies like the Media and Public Relations Committee and Admission Support Body. She is an IT professional with 2 years of experience in Hewlett Packard Enterprise. She loves traveling and dancing. You can connect with her on LinkedIn

The irrationality of human behaviour in the Finance world

A career in MBA Finance is one of the lucrative and sought-after opportunities in the business world. But the irony in India is that when we go back into a student’s education journey, commerce subject which deals with all the basic nuances of finance & accounting is still not preferred as the desired subject as compared with science stream.

We often tend to confuse Finance with just accounting and calculations. But, the application of real finance is not just about numbers and calculations. It’s much more beyond that. It requires you to have: 

  • Strong calculative abilities of Commerce
  •  Analytical thinking process of Science 
  •  And behavioral understanding of Humanities 

This third aspect of finance which is been ignored for decades but recently is becoming one of the hot topics for researchers. Due to the complexity and irrationality of human behaviour, it becomes difficult to take this factor into consideration for organized analysis. But this factor builds up the basis of most of the previous innovations in finance. Behavioural finance is like salvation to mathematical finance just like Friction is to Newton’s forces. For example, the birth of one of the major financial instruments in history is Insurance which is a result of irrational human behaviour explained by Kahneman and Tversky in terms of Prospect Theory.

When the fear of loss and uncertainties prevail, insurances emerged as a strong instrument for risk management. Thus, encouraging people to take risks and invest, leading to an increase in the liquidity of markets. It clearly explains human behaviour in cases of profits and losses.

Prospect Theory of Finances

The Prospect Theory graph clearly depicts that when we lose Rs. 100, our pain would be much more in comparison to the happiness in gaining Rs. 100. Thus, the magnitude of happiness and pain doesn’t vary linearly with the amount of money.

On the basis of this human behaviour, insurance policies proved to be very successful in monetizing the irrationality of human behaviour. There are various other such phenomena in human behaviour like social contagion, cognitive dissonance, anchoring, overconfidence, etc. which answer the events like the randomness of the stock market, people’s decisions and other such cases of the finance world.

Out of the 74% literacy rate in India, only 24% have finance literacy which is one of the major factors responsible for the economy of any nation. When people lack the ability to manage their own personal finances, how can we expect a nation to have a strong economy? Many people are still unaware of the power of compounding, time value of money, credit opportunities, etc. to make use of it for their improvement of financial status. Thus, it becomes very necessary for financial managers, strategists, and policymakers to discover innovative ways to bridge this gap. It is high time that we move away from the narrow approaches of finance and introduce new frameworks in the correlation between accounting and behavioural finance which will include markets, people and their behaviour.

There lies a lot of opportunities in the domain of financial risk management using behavioural finance. Though the implication of this concept has various challenges due to randomness and complexity yet it can be accomplished when the researchers and corporate leaders will work together in the right direction. We are heading towards a more complex world where simple answers are not suitable anymore. We will have to develop an ecosystem to sustain and grow in future.

One can refer to works of researchers like Professor Robert Shiller, Daniel Crosby, Kahneman and Tversky, etc for more understanding on the subject and topic of behavioural finance. This is a potential field waiting to get explored to its core. A lot of new developments can be seen in this direction in the upcoming time.

Raksha Agrawal (MBA Batch 2020–22)

Demystifying Stock Market and Economics

Few lingering questions which every common investor has in his mind are how can the stock markets and the economy growth move in the opposite direction? Will the market crash due to poor economic growth anytime?

While the Covid-19 pandemic forced all economic activities to a total halt, pushing major economies into a recession, the markets around the world on the other hand had a mixed response showing a steep fall during the initial pandemic breakout and steadily recovering over time to race all-time highs in Indian and US exchanges.

The empirical analysis of the annual GDP growth rate and the historical market performance of leading stock exchange indices of major countries such as USA, Japan, China, and India respectively over the decade show little correlation between the growth of countries’ GDP and performance of stock markets.

Japan faced one of the worst decades of economic growth battling recession and unemployment having a maximum GDP growth rate of a mere 2% in the last decade. While Nikki_225, the benchmark index of the Tokyo Stock Exchange had lost more than 60% of its value over the decade, sharp falls in the index during this period was the result of external events such as Fukushima’s nuclear crisis and the European Sovereign Debt crisis in 2011. The rally in 2013 which surged more than 70% due to the weakening of Yen and expansive economic policy was short-lived as the market plunged by ~60% at the end of 2013 due to the weak GDP growth of China and quantitative easing of US Federal Reserve during the same period.

Though China’s economic growth declined gradually from 10% to 6% over the decade, it was still having the highest growth rate among the developing countries. The Shanghai composite index grew a mere 16% over the decade despite the country having the highest GDP growth among the major economies. The Chinese exchange majorly influenced by the domestic investors who were largely inexperienced and traded using borrowed capital persuaded by the Chinese state-owned media during the period of 2015, saw a bubble in the market with the index soaring more than 150% over the previous year despite the country having poor manufacturing and economic growth. However, the bubble was short-lived and consequently busted as it lost 40% of the value in the month of June and continue to fall subsequently due to the devaluation of Yen.

The turbulence of Chinese stock markets combined with slowing growth of China’s GDP, falling oil prices, and weakening of the Japanese Yen against the US dollar and Brexit event resulted in a global sell-out during the period of 2015–16 which impacted all major stock markets around the world including US and India. 

Despite having low GDP growth of around 2% over the decade, US markets have continued to grow over where the leading indices such as Dow Jones Industrial average, S&P 500 and NASDAQ Composite have yielded returns of over 200% primarily driven by innovation and technology. FAANG companies due to the power of the platform model, network effects have had a compounded annual return of more than 20% individually over the decade. Markets also saw an emergence of new business models and sunshine sectors such as electric vehicles, e-commerce, AI & Cloud computing, alternative energy, OTT etc which continue to have positive investor sentiments.

Globalisation and foreign trade are also important factors to consider why the performance of the Indian stock markets has little correlation with economic growth as the manufacturing sector contributes only ~15% of total GDP compared to China and Japan which has ~ 30% and ~20% respectively. The major sectors such as IT, Pharma, Breweries and Distilleries, Precious Metals, Automobiles are export-oriented which relies on the US and the global economy. Sectors such as Refinery, Paint, Aviation are highly dependent on the price of crude oil as India is one of the major importers.

FII also has a significant factor to play in controlling the direction of the stock markets. Indian equities saw a record inflow of $23 Bn (Rs. 1.6 Lakh Crore) in 2020 as the global investors were optimistic about the strong economic recovery, vaccine progress and low mortality of Covid-19 in India compared to western countries. This liquidity provided by FII continues to drive the market sentiments forward leading the prices to soar all-time high across multiple sectors.

The performance of the stock markets does not rely only on the economic growth of the country. Other factors such as the nature of its constituents, the impact of FII, technology & innovation and global events can also impact the markets. Markets can be both forward-looking and reactive to economic events and will correct themselves in the event of any bubble during times of weak economic growth.

Arjun R. (MBA Batch 2020–22)

TFC-The Finance Club|IIM Kashipur

The Finance Club is one of the pioneer academic clubs initiated towards enhancing knowledge in the field of finance through innovative activities such as events, hands-on workshops, knowledge sharing sessions, and guest lectures from industry experts.

The club organizes innovative events throughout the year to enhance the knowledge of finance among the student community in various concepts such as trading, risk management, and investment strategies. BullsEye, a virtual simulation game that was conducted online recently saw overwhelming participation where students had an experience closer to real-time trading. Accrual Madness, Trade Wiz, Aestimatus, Open Outcry, The Simulation Challenge, High Stakes were some of the events conducted over the past year where students from various top business schools actively participated and gained exposure to various financial concepts such as risk management, portfolio management, fund allocation, etc.

TFC believes in practical application of financial knowledge and hence, Pragati, IIM Kashipur’s student-run investment fund was set up during October 2019 to foster investment knowledge among the student community. The fund was set up with the objective to provide investors with an opportunity for long-term capital appreciation by investing in a diversified portfolio comprising large and MidCap Securities. Students and alumni of the institution have actively participated in the fund by investing through multiple fund-raising windows and gained knowledge of its working. The fund is managed by the members of the club under the guidance of Prof. Dilip Kumar and has consistently outperformed its benchmark index Nifty 50 since its launch. Members of the club are actively involved in carrying out market research, portfolio tracking, and publishing monthly factsheets on the fund’s performance. The setup of the fund helped in real-time tracking of the securities market for the club members and other student’s investors during the challenging times of the pandemic which helped in formulating and analyzing various investment strategies to effectively monitor the risk volatility and performance of the portfolio.

The club published articles and newsletters regularly on current financial events through Vit Pratiti and The Financial Gazette. The club has started to post a new series of articles and content related to the working of various financial instruments and analysis of individual companies and conglomerates on social media in order to collaborate and share knowledge with the external community

Recently, the Club has partnered with StockGro, a mobile application for virtual trading and investing where students from leading b-schools get real-time experience in trading and portfolio management. Over 200+ students actively registered and participated in daily contests which helped them to stay updated with the current trends in the stock markets

The Finance Club conducts a number of knowledge-sharing sessions throughout the academic year. A variety of topics such as personal finance, investment, and trading strategies are discussed over a series of sessions which enhances the knowledge of working of stock markets and trading. Special sessions were also held on the discussion on Annual Budget 2019 and its special features which saw participation from more than 100 students.

The club hosted Coalescence – The Finance Summit in association with the academic forum to bridge the industry-university gap. Rakesh Singhania, CFO of Wells Fargo Bank, India, participated as a keynote speaker and shared his experience on how industries navigated adversity in the new era of the post-pandemic. The lecture was attended by over 100 student participants who had an opportunity to interact and gain insights on challenges faced by the financial markets. The club also hosted Money Matters, a guest lecture session in the presence of Prof. Dilip Kumar on discussing various investment-related topics concerning Pragati. The club also aided the students in preparing for competitive examinations by participating in FLIP National Challenge and CFA Research Challenge.

In this way, the club ensures that students get the essence of finance as a domain of management. It helps the students to learn about the scope in this domain and select the best course of action for their future choices. In nutshell, The Finance club fosters a culture for finance within the realms of IIM Kashipur.

Scope of MBA in Business Analytics – IIM Kashipur

Analytics is a booming field right now and there is a heavy demand for analytics professionals. An MBA in Business Analytics will give you an overall understanding of how the analytics industry works as well as what role you would be required to perform. You may want to tap into this challenging and demanding field if you have an analytical mindset or an interest in statistics. The multidisciplinary MBA in Business Analytics covers technical, corporate, management, leadership, and communication training as well as business-analytical qualifications.

The MBA (Analytics) program at IIM Kashipur is a two-year full-time residential program which aims to prepare managers and future leaders who will shape the increasingly technology-oriented and data-driven world. It focuses on grooming its students to acquire knowledge, skills and attitudes for leadership profiles so that they can seamlessly navigate the ever-changing business landscape. The primary objective of the institute is to nurture the students through a balanced mix of academics, industry exposure and co-curricular activities. Here is an overview of why and what all parameters one must consider before giving a thought of pursuing MBA in Analytics.

What to Learn?

An MBA trains business leader, including managers, and your primary area of education in business and management. Your MBA program, including “hard” and “soft” business skills, gives you a strong understanding of business fundamentals. This is taught in a fixed sequence of necessary courses or “core courses.” Some of the classes you may encounter as part of your MBA core include:

· Accounting

· Finance

· Marketing

· Ethics

· Operations

· Macroeconomics

· International Business

· Microeconomics

· Human Resources

· Leadership

Your concentration on business analytics will delve into specific business analytics and data expertise and also teach you to understand business issues via a data-driven lens. The most advanced business analysis tools, case studies, and projects, including real-world data, allow you to practice practically. Some of the classes you may see offered as part of a business analytics MBA concentration include:

· Spreadsheet Modelling

· Accounting Analytics

· Marketing Analytics

· Financial Analytics

· Business Statistics

· Applied Regression

· Principles of Management Science

· Data Mining

· Forecasting and Modelling

· Business Computing

Data science vs Business Analytics are separate disciplines, which are quite often  used interchangeably. A layman may not be so concerned with this interchangeability, but professionals have to use the words appropriately, since they have a broad and immediate effect on the company.

Is Business Analytics and Data Science the same?

A Business Analyst’s job includes researching and extracting useful information to clarify business performance (present and future) from data sources. The correct plan to develop the organization is often decided by a Business Analyst. Whereas, Data scientists gather, analyze, and interpret broad data sets and use their analytical, mathematical, and programming skills to decipher valuable insights for solving difficult business problems. The three major factors that differentiate business analysts from data scientists are overall responsibilities, skill sets, and user interaction.

  • Overall responsibilities: The functional requirements that inform IT system design is provided by business analysts. On the other hand data scientists derive significance from the data generated and processed by such systems. Data scientists may also simplify the activities of the company analyst and be able to provide some of the market insights. Taking monetary benefits into consideration business analysts are slightly paid more than data analysts.
  • Skill Sets: Business analysts need data science expertise as well as skills related to communication, critical thinking, negotiation, and management. Whereas, data analysts need similar skills with a more in-depth emphasis on technological data manipulation.
  • User interaction: Business analysts also have more direct contact with system users, clients, system developers, and others as project facilitators and managers than data analysts do. That’s because market analysts will also interview individuals and learn more about how to enhance technology to help business processes. During the course of a single project, they work collaboratively with others. While data analysts can initially collaborate to define important data sets with internal subject matter experts, the majority of their work is performed independently.

Considering business analytics and data science domain, the former attracts the target base more owing to its business coherence and state of the art application-related job role. Apart from these there are few more benefits of pursuing business analytics which are as follows:

  • More informed decision making: Business analytics can be a valuable resource when approaching a substantial strategic decision. For example, when the company needs to analyze its product line update, business analytics can be applied to determine whether the updated product has resulted in faster service, more precise recommendations for resolution, and higher scores of customer satisfaction are achieved.
  • Improved operational efficiency: Analytics, beyond financial benefits, can be used to fine-tune company processes. Business analytics can be used to forecast business operations and assist the company by more effectively timing maintenance, enabling it not only to save operating costs, but also to ensure that it maintains assets at optimum levels of performance.

Is Business analytics a good career option?   

As digitization has become a buzz in recent times with technology and data being utilized from local grocery shops to well-sophisticated malls, the demand for business analysts also has increased significantly. Moreover, as per the statistics, for every hour, terabytes of data are generated by 6 billion connected devices. With this increasing demand, there is an insufficient supply of professionals.

From the above-mentioned courses offered by MBA institutes, one can get the knowledge of the following skills: Python, SQL databases, and R, Survey/query software, Business intelligence, and reporting software, Data visualization, Database design, Problem-solving skills, Effective Communication, Creative Thinking and Industry Knowledge. These help them to be the best fit for diversified job roles, which include data analyst, supply chain analyst, big data analyst, business analyst, marketing analyst, finance analyst, HR analyst, etc. The increasing demand for MBAs with analytical skills has made Business Analytics a relatively new and popular specialization in the management domain.

What is a Business Analytics MBA Job Market?

There is a shortfall of 1.5 million analysts, according to a report by the McKinsey World Institute. With an MBA in Business Analytics, you are eligible for a large range of careers, including popular C-suite jobs. This is because MBA graduates are qualified to hold leadership positions in a number of business environments. In all types of businesses, health industry marketing, supply chain management, data-driven decision-making is increasingly in demand. Based on their domain knowledge, skills and work experience, companies typically offer these job roles to candidates. The high demand for professionals with an MBA in Business Analytics is generated by MNCs, retail and manufacturing companies, IT companies, e-commerce companies, consultancies, telecommunications companies and business analytics and intelligence companies. MBAs are hired not only by MNCs but even by startups. As an MBA is primarily a business degree in Business Analytics, you will not be looking at data science work. You’ll be eligible for data-driven positioning instead. You will also have the advantage of competing with a background in analytics for more general positions in business management.

To conclude, the MBA in Business Analytics is an upcoming field of expertise in all sectors of the industry that is gaining increasing traction. The specialization demonstrates a positive and promising outlook, and you can go ahead and begin your MBA journey in Business Analytics for those of you who have long been skeptical about choosing this career path!

Deshmaa RT and Sakshi Poddar

MBA (Analytics) 2020-22

Indian Institute of Management Kashipur

Manthan – The annual Finance Summit

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Kashipur- 17th January, 2015: Manthan- the annual finance summit was hosted by IIM Kashipur on 17th January, 2015. This year the themes were “High frequency trading- regulation and challenges, growth challenges in BSE, Valuation of e-retail learning and risk management for 21st century”. The bigwigs of the industry graced the campus with their presence so as to share their experiences in the market. The speakers of the occasion were

1. Ms. Rana Usman, Sr. Asst. Vice President, National Stock Exchange

2. Mr. Nayan Mehta, Chief Financial Officer, Bombay Stock Exchange

3. Mr. Anuj Jain, Associate Director, Ernst & Young

4. Mr. Alpesh Porwal, Sr. Vice President & Head- Retail SBI Capital Securities Ltd.

5. Mr. Mohit Kabra, Chief Financial Officer, MakeMyTrip

6. Mr. Satish Kottakota, Chief Financial Officer, Call Health Services Pvt. Ltd.

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The event started with the lighting of the lamp by the guests. Thereafter the event kick started with Ms. Rana Usman’s keynote speech and a presentation on ‘Use of algorithms in high frequency trading’. The second keynote speaker for the day was Mr. Nayan Mehta. His young and enthusiastic demeanor was welcomed by the students; he further elaborated the challenges in handling one of the oldest stock exchanges in the world; BSE. Thereafter there was a panel discussion involving Mr. Anuj Jain, Mr. Satish Kottakota, Mr. Alpesh Porwal with Prof. K.N. Badhani of IIM Kashipur as the moderator. The topic of the discussion was “Risk management for 21st century managers”. During the discussion, the panel discussed the growing significance of the understanding of risk profiles of various securities for managers. Finally,there was a keynote speech by Mr. Mohit Kabra (CFO, Makemytrip) who is seen as the posterboy of India’s new age entrepreneurship. He shared his enormous experience in the industry while he was working with companies like PepsiCo, Colgate and Kohler amongst many others. He talked about the sustainability of e-commerce valuation of retail learnings. The event concluded with a vote of thanks by Prof. Kunal of IIM Kashipur.

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Guest Lecture: Mr. Shubham Narayan, Goldman Sachs

IIM Kashipur welcomed Mr Shubham Narayan, Analyst at Goldman Sachs Investment Banking Division to provide insights on portfolio management. Students were highly engaged in the discussion on investments and the value of shareholders in an organization.
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PGP ’12 student Harsh Patel speaks about clearing CFA Level 2

“The structured nature of the CFA course is very beneficial, as it helps in getting concept clarity and brings out clearly the interrelation and distinction among various theoretical aspects of finance.”

PGP ’12 student, Harsh Patel, recently cleared the CFA Level 2 Exam. He shared his insight on need of CFA and approach that is required to clear it.

1) What is CFA Program and what is its scope in today’s context?

CFA program is globally recognized course in the field of finance. CFA program includes three exams (Level I, II and III). After passing all three levels and four years of work experience in finance field one can earn the CFA Charter. CFA program primarily focuses on portfolio management, valuation and investment analysis. CFA level 1 covers fundamentals of finance like financial reporting analysis, economics, statistics, fixed income, corporate finance, derivatives etc. whereas CFA Level 2 focuses on aspects of valuation. CFA level 1 and 2 exams consist of multiple choice questions. CFA level 3 focuses on portfolio management and it consists of essay type questions and MCQs.

2) Who should pursue this program? How does CFA add value to a regular MBA?

CFA is a good course to pursue for those who want to build a career in the finance field. Especially for MBA finance students, it is an added advantage.

Regular MBA is focused on case study and problem solving while CFA gives you much deeper insight into theoretical explanations and well developed US financial markets. The structured nature of the CFA course is very beneficial, as it helps in getting concept clarity and brings out clearly the interrelation and distinction among various theoretical aspects of finance. CFA exposes an MBA student early to complex financial fields like derivatives, fixed income etc., which are not covered in MBA 1st year. This will give students more clarity regarding their career preferences.

3) Do you think the popularity of the CFA is growing? If yes, what advantage do students have in placements if there are already many people having cleared CFA exams?

If we go by sheer numbers, latest data shows Indian students form third largest group (5,173 candidates) after US and China while the total number of candidates registering for CFA level 1 December 2012 exam stood at 48,981. India has seen a huge rise in CFA registration in the past decade even after financial crisis.

Clearing CFA exams are highly appreciated by recruiters. It shows dedication of the candidates who shell out thousands of rupees for reading thousands of pages!! Passing CFA level 1 is not only a strong resume point but also helps to crack the interview for summer internship. For final placements, passing CFA level 2 will be a differentiating factor.

4) How should candidates prepare for CFA considering academic rigor in MBA?

Considering rigor of MBA, especially of IIMs, candidates should start early (at least three months before exam on average) and put in regular efforts so that they can allocate reasonable amount of time for their regular academics too. For the non commerce candidates, CFA level 1 requires more time to prepare as they are getting exposed to nitty-gritty of financial field for the first time. Students appearing for CFA Level 1 in June will find the going a bit easier, as some of the concepts will be covered in MBA classes by that time. Once one gains conceptual understanding it becomes easy to build upon these for the next levels.

Apart from CFA books, there are numbers of materials available that compile the course for sort of crash course preparation. But that is not advisable as it is difficult to get learning or understanding out of that. So better stick to its original books. Candidates should start solving mock exam papers (like Schweser test papers) at least 15 days before exam followed by performance analysis. Scoring more than 70% (generally around 65%) in exam would suffice to pass the exam, but the primary aim should not be just to achieve the score instead emphasis should be on learning and application in the real world.

Candlestick Charting

IIM Kashipur, PGP ’11 student, Varun Agarwal,  A finance enthusiast shares his insight on Candlestick Charting

In the 17th century, the Japanese developed a method of technical analysis to analyse the price of rice contracts. This technique is called candlestick charting. Steven Nison is credited with popularizing candlestick charting and has become recognized as the leading expert on their interpretation.

Candlestick charts display the open, high, low, and closing prices in a format similar to a modern-day bar-chart, but in a manner that extenuates the relationship between the opening and closing prices. Candlestick charts are simply a new way of looking at prices, they don’t involve any calculations.

Each candlestick represents one period (e.g., day) of data. The figure below displays the elements of a candlestick.

The interpretation of candlestick charts is based primarily on patterns. The patterns are examined in three main groups as “Bullish”, “Bearish”, and “Neutral”. These groups are further subdivided with respect to the type of the patterns as “Reversal”, “Continuation”, and with respect to their reliability as “High Reliability”, “Medium Reliability” and “Low Reliability”

Candlestick charts are flexible, because candlestick charts can be used alone or in combination with other technical analysis techniques. A significant advantage attributed to candlestick charting techniques is that these techniques can be used in addition to, not instead of, other technical tools. In fact this system is superior to other technical tools. Candlestick charting techniques provide an extra dimension of analysis. As with all charting methods, candlestick chart patterns are subject to interpretation by the user.

Examples

BULLISH MORNING STAR

Type: Reversal

Relevance: Bullish

Prior Trend: Bearish

Definition

This is a three-candlestick formation that signals a major bottom. It is composed of a first long black body, a second small real body, white or black, gapping lower to form a star. These two candlesticks define a basic star pattern. The third is a white candlestick that closes well into the first session’s black real body. Third candlestick shows that the market turned bullish now.

Recognition Criteria:

  • Market is characterized by downtrend.
  • We see a long black candlestick in the first day.
  • Then we see a small body on the second day gapping in the direction of the previous downtrend.
  • Finally we see a white candlestick on the third day.

Explanation:

We see the black body in a falling market suggesting that the bears are in command. Then a small real body appears implying the incapacity of sellers to drive the market lower. The strong white body of third day proves that bulls have taken over. An ideal Bullish Morning Star Pattern preferably has a gap before and after the middle candlestick. The second gap is rare, but lack of it does not take away from the power of this formation.

Important Factors:

  • The stars may be more than one, two or even three.
  • The colour of the star and its gaps are not important.
  • The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested.

BULLISH RISING THREE METHODS

Type: Continuation

Relevance: Bullish

Prior Trend: Bullish

Definition:

The pattern is characterized by a long white candlestick followed by three small bodies in three consecutive days. The small bodies represent some resistance to previous uptrend and they may even trace a short downtrend. These three reaction days usually have black candlesticks but the bodies remain within the high and low range of the first day’s white candlestick. The pattern is completed by a white candlestick on the fifth day, opening above the close of the previous day and closing at a new high. The small downtrend between the two long white candlesticks represents a break during the uptrend. The upward trend then resumes and continues.

Recognition Criteria:

  • Market is characterized by uptrend.
  • We see a long white candlestick in the first day.
  • Then we see small real bodies defining a brief downtrend but staying within the range of the first day on the second, third and fourth days.
  • Finally we see a long white candlestick on the fifth day opening above the close of the previous day and also closing at a new high.

Explanation:

The Bullish Rising Three Methods Pattern typically represents a rest in the market action. This may be used to add new positions by longs. The pattern is the reflection of doubts about the ability of the trend to continue. This doubt may increase because of small-range reaction days. However, given the fact that a new low cannot be made, the bullishness is resumed and new highs are set quickly.

Important Factors:

  • The high-low range includes the shadows.
  • The reliability of this pattern is very high, but a confirmation in the form of a white candlestick with a higher close or a gap-up still is suggested.