Candlestick Charting Techniques

Candlestick charting techniques are coming from Japan and as you probable are aware of, nowadays they are being part of the technical analysis trading world. It wasn’t like that before Western world started to appreciate the interpretation of candles (color, group of candles, shadows, etc) and adopted the theories with much enthusiasm as deserved. Candles wave become so popular that there is no charting software now without giving you the possibility of having the price on a chart being displayed like a candlestick chart.

Why are they so important? Well, they are easy to understand first of all, as all the concepts are clear and straightforward, and second, hey provide earlier indications of market turns, giving you precious insights regarding to possible tops and bottoms, and hence, will increase the efficiency of your analysis.

Under this chapter I will look at reversal and continuation patterns, being formed out of a single candle or a group of candles, what to they mean, targets, how to interpret them, advantages and disadvantages, etc. Each pattern will have a dedicated text explaining the basics and a recording that is designed to show you examples on what’s explained on the text. We will look at hammer, hanging man, engulfing patterns (bullish and bearish), the dark cloud cover concept, piercing pattern, and much more, as reversal patterns, then we’ll look at continuation patterns like windows, separating lines, rising and falling three methods, etc.

No candlestick charting will have sense without looking at the stars patterns (morning, evening, shooting, etc) and at the famous doji. In other words, prepare for a long chapter, but an interesting one, as each and every one of this patterns if understood properly is of great value for your technical analysis.

For those interested in more details than the ones presented under this chapter, my book recommendation would be Steve Nison, Japanese Candlestick Charting Techniques, New York Institute of Finance, 2001

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