Japanese Candlestick Charting

Learn To Profit With Japanese Candlestick Charting

2008-09-14T17:09:00.016-05:00

Much has been written on the subject of candlestick charting and trading but most of it leaves the trader with more questions than answers. Candlestick charting is one of the most powerful tools a trader can use to quickly assess the mood of the market. Better yet, it can be used to accurately predict turning points in any tradable market. Then why has your experience with candlestick charting produced mixed results at best? Because candlestick charting has to be applied with present day market analysis to produce valid signals! No, I don't mean using a "magic" trading system or a pack of useless indicators. I mean a simple, straight forward approach that will produce valid signals.

GET YOUR CANDLESTICK CHARTING COURSE AND START PROFITING WHEN THE MARKET OPENS TOMORROW!

Japanese candlestick charting techniques have been around for over 400 years beginning with a Japanese rice trader named Homma who successfully used candlestick charting to trade rice commodities. Today, candlestick charts are used in almost every form of trading including stocks, options, index and commodities futures as well as the popular forex markets. Acquiring the knowledge to identify candlestick patterns can determine whether or not a trader is profitable. A candlestick tutorial is the first place to start for those new to Japanese candlestick trading.

AAPL Three Month Candlestick Chart

A Japanese candlestick chart is one of the most recognizable of all charts used in trading. Easily identified by a thick bar with two thin lines on either end, each individual candlestick provides important information about each day’s trading. Not only do the candlesticks show where the trading session opened and closed, but also can reveal a great deal about the tug-o-war that took place during the session between buyers and sellers.

The thin lines found at the top and bottom are called shadows. These lines show the extreme high and extreme low for the entire daily session. The shadow at the top of the candlestick body shows the extreme high point of the day with the shadow at the bottom revealing the extreme low of the day. The shadows are important since they can reveal not only technical information but also the emotional mindset of buyers and sellers. The shadows are important because they will show the absolute high and low of the trading session outside of the opening and closing range.

GET YOUR CANDLESTICK CHARTING COURSE AND START PROFITING WHEN THE MARKET OPENS TOMORROW!

The body of the candlestick also provides important information about the days session. Candlesticks that close higher than the previous day’s trading session are usually white or green with candlesticks closing below the previous day’s session colored in either red or black. Individual traders can usually choose, depending on their trading software, the color of up or down daily candlesticks depending on their personal preference.

Candlesticks can also be used for different time periods, not only the daily session. Time periods can be shown in ranges starting at one year all the way down to 1 minute with the time interval chosen dictating when each candlestick will form. If a trader needs to chart a long term trend for the past ten years, each candlestick represent one year for each of the previous 10 years. Futures traders or traders using scalping techniques will often use short term candlesticks such as the 5 minute, 3 minute and 1 minute candlestick time frame. Long term investors will not use the same time frame as short term traders using swing trading or day trading techniques.

Four levels or prices are revealed in each individual candlestick. The opening, the close, the absolute high and low during the time period selected, whether on a monthly chart or a 5 minute chart. Candlesticks combined together create patterns called formations that can often predict which way a stock or commodity is headed.

Some formations can show when a strong uptrend is nearing exhaustion and a reversal to the downside may be about to begin. Others may show that a breakout is about to occur as a upside move has broken through a strong resistance. One individual candlestick alone will not provide much information on determining which way the chart is heading, However, Japanese candlestick charting becomes very powerful once candlesticks are combined together in formations and patterns. These formations or patterns have been given colorful names such as: dark cloud cover, bullish engulfing pattern, bearish engulfing pattern, hanging man, morning star, evening star. Once a trader learns to recognize these formations, he can quickly determine which trades may be profitable and which are not.

Profitability is the goal of all traders no matter which market they choose to trade and Japanese candlestick charts can be used in all forms of trading. Learning to recognize profitable formations and set-ups will greatly improve trading results. Find out more about candlestick formations with this Japanese candlestick tutorial.

GET YOUR CANDLESTICK CHARTING COURSE AND START PROFITING WHEN THE MARKET OPENS TOMORROW!

Using Candlestick Charts in Equity Trading

2008-09-14T17:08:00.001-05:00

Trading in the financial markets is not a venue for the timid or for someone that is uneducated in technical analysis. One way of increasing your chances of profitability in the financial markets is acquiring knowledge in candlestick chart patterns. Candlestick charts have a long history and it has been said that rice traders in eighteenth century Japan used candlestick charting. Applying candlestick charts to stock trading and viewing past trading history of stocks, can give the stock trader an idea of what the stock may likely do in the future.

Individual candlesticks on a stock chart are unique in shape. The body of the candle is different each day depending on whether the stock closed up or down for the day.

If the stock closed up for the day, the color of the candle will be white or light in color in most cases depending on what setting the stock trader has chosen. Also, the candle body is wide with the upper portion of the candle showing where the stock closed on the day and the bottom showing where the stock opened in the trading session. It should be noted that often times there will be thin lines coming from the bottom and top of the candlesticks, but not always. These thin lines are called shadows and show the range in which the stock traded during the day.

In the case of a shadow on the top of a white candlestick, the shadow shows the high of the day that the stock traded during the market session. A shadow at the bottom of the candlestick would show the lowest point that the stock traded during the day. When a stock has a down day, the candlestick will usually be red or a dark color, again depending on the stock traders preference. The same applies for a down day candlestick with the exception that the bottom of the candlestick will show where the stock closed for the day and the upper candlestick will show where the stock opened on the day, the reverse of a white candlestick.

Candlesticks will vary in length depending on price movement during the trading session for each particular day. On days when a stock is moving higher, the stock will show a long white body since the buying pressure pushed the stock higher. On down days where traders and investors are selling, the candlestick represents the sell off with a long red or dark candlestick. Long white candlesticks show buying pressure and long red candlesticks show selling pressure.

Short and fat candlesticks show that a war was being fought during the session between buyers and sellers with no real winner since the price did not change significantly during the session. Also, if there was no candlestick body and only a flat line with shadows on the top and bottom of the straight line, this is called a doji. In some cases the doji appears when a change of trend is about to take place with the stock. The flat horizontal line with no candlestick body represents the struggle that took place during the trading session. The shadows on the top and bottom of the horizontal line represent the high and low during the session. When the doji appears, the following trading session may show that the stock is reversing direction and going the opposite direction of the trend in previous sessions.

Learning to read and understand candlestick charts can unlock a wealth of information about stocks, revealing their past history and what they may do in the future. Reading a candlestick chart is akin to a commander of an army receiving reports from the front lines of a battle, showing the daily struggle between his army and the opposing army. On days when the candlestick is long and white, the buyers reigned supreme. On days when the candlestick is long and red, the sellers won the day. On days when the candlestick is short or non-existent, the battle was a draw with no clear winner.

Candlesticks and their patterns are powerful indicators that can help a trader decide entry and exit points when trading stocks. They can also help in removing the emotion when trading. Emotion tends to remove rational thought and usually causes the trader to make unwise decisions that create losses. Candlestick charting is a tool that every stock trader and investor should have in their arsenal.

21 Candlestick Formations Every Trader Should Know

2008-09-14T17:06:00.001-05:00

The above describes the theme of a book by Melvin Pasternak and it tells you the best 21, of over 100 candlestick patterns which you can see or use on a forex chart. If you love candlestick charting or you want to learn, this book is a good place to start and at just $20.00 it's a steal.

Pasternak claims that by Knowing these 21 formations traders can gain a trading edge. There are those that occur most often and are more reliable and there are those that are warning signs of turning points.

Why are Candlesticks Such a Great Trading Tool?

The reason lies in the fact that they paint a picture on a chart.

This give you a more visual illustration of human psychology than a bar chart ever can. Candlestick charts bring human emotion to life right before your eyes and that's a good advantage to have, to initiate new positions or as a warning to cut and run!

A Deep Insight into Human Psychology

The answer can be found in the clear and straight-forward nature of the candlesticks themselves-offering traders the ability to see the bigger picture.

Continuation patterns, reversal patterns, emerging trends, bottom and tops -- all of these insights come together in a way that other charting systems just can't compete with.

The book explains the following:

* About the candlesticks (21 formations) every trader must know by name

* Discover the candlesticks that occur most often

* Learn about the candlesticks that will immediately affect your trading decisions

* Find out how to increase your accuracy and trade with greater confidence.

Candles combine well with other tools of technical analysis such as support and resistance, moving average, and indicators such, stochastics, RSI, ADX and MACD to name but a few.

I think paternick's choice of candlestick patterns is excellent and if you like the idea of candlestick charting, or are trading with them already, then this book will appeal to you.

Candlestick charts have been used for thousands of years and it's only in the eighties that they became popular again and let's hope that they stay popular. There fun, easy to use, can give you a deep insight into human psychology and if you are using forex charts - that's just what you need.

21 Candlesticks Every Trader Should Know, is 128 pages, an easy read and at a price of just under $20 it's a bargain.

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Candlestick Charting the Forex Market

2008-09-14T17:04:00.000-05:00

While on a Forex website the other day I read an article where the author told his readers that "candlestick charting can't be used in Forex trading". This is a common misconception among the currency trading community that needs to be corrected. Candlestick charting the markets is different from most other markets and exchanges but in my opinion candlestick charting is the most simple and powerful method to trade Forex there is! Is there a difference between Forex and other markets when using candlestick charts? Yes! But that doesn't mean you can't use candlesticks effectively in your trading!

The reason the mistaken belief about candlestick trading the Forex market has flourished is the fact that Forex markets are traded 24 hours a day, while other financial markets have a daily open and close. Most of the traditional candlestick patterns rely on gaps, both up and down, to complete the pattern properly. Since there is no break in trading in Forex, these gaps rarely occur and the patterns form differently...but they still form. Once a trader understands just how these patterns form, a whole new world of simplicity and profit will be the result.

Understanding reversals is one of the most important things that you can know, and Forex candlestick chart patterns can help calculate bullish and bearish reversals. Once the basics of the Forex candlestick charts have been mastered, the trader will find out that there is a great deal that can be learned from a candlestick chart that has been well put together. Where a simple bar chart will only show you vertical lines that display the highs and lows of each time period, a Forex candlestick chart will provide more information. Once you have learned to read a Forex candlestick chart, you will begin to parse universal patterns that will help you take in a situation at a glance.

Can candlestick charting techniques be used effectively while trading the Forex markets? You bet...and don't let anyone tell you otherwise! They are a powerful tool that, if you haven't tried, you're really missing out! Part of being a successful trader is learning to think for yourself. Take some time to study candlestick charting as it applies to Forex and you might just see your profits as well as your understanding of market psychology really pay off!

B.M. Davis is an active trader and the publisher of The Forex Candlestick System. If you would like more information about candlestick charting the Forex market, please visit his website at http://www.forexcandlestickcourse.com

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Reading Candlestick Charts Like A Professional

2008-09-14T17:03:00.000-05:00

Candlestick patterns are used by each and every kind of trader. Day trading and swing trading utilize candlesticks as a way to read chart patterns quickly and efficiently, while getting the same data offered by bar and HLOC charts. Professional traders love candlesticks because they can be read much quicker than a bar chart, while also allowing a different kind of technical analysis known as candlestick reading.

Modify for Your Style

Your trading style has much to do with whether or not candlesticks can become a part of your everyday trading technique. Developing a trading plan around candlesticks can be difficult, and thus, it is best to use candlesticks to supplement an already complete trading plan. There are many trading seminars put on by professional traders to study the key to candlestick investing and why chart patterns exist.

Candlesticks are just one of many tools to make consistent profits. Just as Japanese traders have used for hundreds of years, candlesticks can show chart patterns before they happen. For example, a large wick with a small downward body at the end indicates indecision, or that the market may be ready for a reversal. It would be hard even for a professional trader to see this without the graphical display that candlesticks give to an investor.

Use Your Own Plan

Investing is difficult enough without the use of candlesticks. Many traders prefer to use their own basic trading plan and then incorporate candlestick chart patterns as a confirmation. The day trader prefers these candlestick chart patterns because scalping and other short term positions have very small windows of opportunity. Candlesticks let you read and comprehend more data in less time.

A complete trading plan should allow for some candlestick patterns and other chart formations. A well worked strategy can handle the addition of a candlestick confirmation, while less complex strategies might not be diverse enough to accompany candlesticks. Many profitable trading strategies use a mix of both, straight technical analysis mixed with candlestick reading to produce consistent profits.

Use a Planner

A trading plan planner will help you throw in a mix of candlesticks without overdoing your strategy with too many variables. For the most part, a candlestick chart is just like a bar chart, but is also its own technical indicator. For instance, a small cross-like candlestick often means the bottom or the top of a chart, thus buying or selling should ensue depending on current momentum.

About the Author:
Leroy Rushing is an active, professional day trader; trading coach; and author. He is the Founder and CEO of Trading EveryDay, a distinguished provider of educational trading products and services that are available worldwide. Trading EveryDay also has many articles with unique perspectives on day trading.

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An Introduction to Japanese Candlestick Charting Techniques

2008-09-14T16:59:00.000-05:00

History of Japanese candlestick charting can be traced back to the eighteenth century. A Japanese trader of a speculative market known by the name Munehisa Homma first propounded it. He made many successful winning trades with the help of his new candlestick analysis. Candlestick charts usually shows the open, close, high or low for a security each day of a particular period. In format, it has similarity with that of a bar chart. However, its specialty is that it extenuates the relation between opening and closing prices.

A shadow or a wick indicates the price range of the day. When the opening price is below the closing price and the body is usually white or green. However, in the opposite case, the body is filled with black or red color. Japanese candlestick chart is a useful commodity price chart that is very easy to learn. Candlestick charts bring a different perspective on the table. They are usually more visually attractive and the information relating to prices are much easier to grasp.

Visual attractiveness is one of the major advantages of candlestick charts. A candlestick chart shows the open, low, high, and the closing prices within a particular period like a standard two-dimensional bar chart.

For the proper analysis of candlestick charts, it is important that you know about the components that make it. In a candlestick chart, the body is usually referred to as the real body and it signifies open and closing price ranges. A narrow vertical line that lies below and above the real body indicates the extreme low or high prices. To a Japanese candlestick chart-analyst, the open and closing prices are of utmost significance and therefore special attention is given to them. Whether the closing price is higher or lower than the opening price is easily distinguished by simply glancing at a candlestick chart.

No introduction to Japanese candlestick chart is complete without a mention of different terminologies involved in this method. When the opening price is above the closing price the candlestick chart is usually referred to as the black candlestick while on the other hand when the opening price is lower than the closing price it is called white candlestick. A candlestick chart that is devoid of any upper shadow, it is called the shaven head candlestick. Similarly, the candlestick chart with no lower shadow is called the shaven bottom.

Candlestick charts can be used by the traders to show double tops and bottoms, heads and shoulders etc. However, while viewing candlestick reversal patterns the background of its past activity must be kept in mind. Candlesticks apparently alike might be quite different in meaning due to differences in the background of their previous trends and formations.

For being a successful trader of the speculative market, the traders require assistance of some trading tools and a clear knowledge of the candlesticks if effectively applied goes a long way to help the trader to make profitable speculations and thus excel in his trade.

To read more Forex Trading, click here: Forex Multimedia Resources. Jonathan Gibson makes his money from home and has an extensive experience in market trading. To get 4 Free ebooks and resources on trading from a 30+ year trader veteran, click here: Free Forex Course.

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