Candlestick
A technique created centuries ago by a Japanese rice trader .
Candlestick patterns are easy and enjoyable to learn.
They become a potent decision-support tool that can confirm of enhance buy/sell signals
Important analytical tool for many traders and investors
Candlestick charts is an important analytical course helping to
- spot early reversal signals
- can help preserve capital
- increase the percentage of successful trades
Construction of an Candlestick
The candle line is constructed from the open, high, low, and close, which is the same data used in bar charts.
Candlestick charts (CC)
- display the supply-demand situation by showing who is winning the battle between the bulls and the bears
- show the trend of the market, and add another dimension by also revealing the force (or lack of force) behind the move
- Bar chart techniques often take weeks to transmit a reversal signal. CC often send out clues of imminent reversals in one or three sessions -> often provide the opportunity for more timely trades
- same data a bar chart does (open, high,low and close)
- get all the trading signals used in bar charts with the earlier reversal signals generated by the candles
Avantages
Their effectiveness on charts on a wide spectrum of markets: Futures, bonds, currencies and equities, and any chart in which sessions include a high, low, open, and close can display candlesticks.
Apply to any time frame. Individual and institutional investors utilize them on weekly charts, swing and intermediate-term term traders study them on daily charts, and short-term and day traders examine them on intraday charts.
Candles give instant pictures of market psychology. Early Japanese traders placed great faith in interpreting the emotions of market participants.
In today’s volatile markets, driven to extremes by the impact of sudden news and events, it’s easy to see why awareness of market sentiment and collective opinion is so important.
Unlike bar charts, in which opinion is not so easily spotted, one glance at a candle chart tells you instantly how people feel about a stock or market. A candle’s extended real body demonstrates definite bullish or bearish control. Conversely, a small real body indicates indecision or a tug-of-war between the bulls and bears with no apparent winner.
If you have favorite Western tools, such as volume or moving averages, stay with them, and add the candle charting techniques to your analysis.
Attention
Keep in mind that the tools addressed in the course should be only a part of your analysis. If you have favorite Western tools, such as volume or moving ing averages, stay with them, and add the candle charting techniques to your analysis.
