| Candlestick charting was developed by Japanese rice | | | | a stock "turn on a dime", I usually keep an eye on |
| traders over four centuries ago and could quite | | | | the stock and enter a trade when the price retests |
| possibly be the oldest form of technical analysis. | | | | support or resistance. |
| Since technical analysis is not only predicting probable | | | | While I've incorporated candlestick charting into my |
| price moves but also assessing market psychology, | | | | trading strategies for quite some time, I have learned |
| candlestick charting is probably the best tool to give | | | | that there are a few technical criteria that will |
| the trader these answers in the shortest amount of | | | | enhance the candlestick reversal signal. Some of |
| time. Once a trader becomes familiar with candlestick | | | | these criteria include:o Heavy volume on the reversal |
| charting, he or she can get a quick and highly visual | | | | day - I look for volume to be greater than one and a |
| signal because of the story candlesticks tell. Strict | | | | half times normal volume.o Greater than average |
| adherers to candlestick methodology take positions | | | | price movement on the reversal day - I look for the |
| based on very short term patterns given by | | | | price to exceed its normal daily price range and |
| candlestick tradition. While candlestick charting is | | | | appear longer on the chart than most daily candles.o |
| relatively unknown, and therefore unpracticed by the | | | | Stock price that is heavily overbought or oversold - I |
| common investor, their use among active traders is | | | | look for the price to accelerate away, but in the |
| growing. The greatest benefit candlestick charts | | | | same direction as the current trend.o Signal forms on |
| provide the technical analyst is the ease of use and | | | | technical support - I look for the reversal signal to |
| interpretation. The same price action, quickly seen | | | | reveal itself on a trend line, moving average or |
| using candlestick charts, may go unnoticed while | | | | horizontal support. |
| scrolling through bar charts. | | | | While candlestick charting is enjoying a following that |
| While analysis of chart patterns takes experience and | | | | has grown in recent years, it should be viewed as |
| some practice, so too will candlesticks. However, | | | | just another tool the trader uses to profit in the |
| after learning the basic signals, candlesticks can | | | | market, not as a foolproof method of entering or |
| provide the novice trader a shorter learning curve | | | | exiting a stock. The signals tell a story of the |
| and also shorten the learning curve to chart reading in | | | | psychology of the market. Sometimes the signals are |
| general. I like using bar charts to find chart patterns, | | | | only valid for a short period of time, but at key levels |
| and then switch to candlesticks for a closer look. | | | | of support and resistance the reversal signals given |
| Candlestick charts are especially useful when | | | | by candlestick patterns can tip the trader off to a |
| analyzing areas of consolidation such as triangles and | | | | healthy price move. |
| flags for signs of reversal or continuation. | | | | My suggestion to any active trader is to take some |
| The major signals in candlestick theory are reversal | | | | time and learn the major candlestick reversal signals. |
| signals. Some of these signals are considered so | | | | There are many good books and courses available on |
| strong by serious candlestick practitioners they will | | | | the internet that are reasonably priced and will allow |
| enter a trade based on its signal alone, without the | | | | the trader to learn at his or her own pace. |
| need for conformation. Since I rarely see the price of | | | | |