| The Candle stick charting originates in Japan in the | | | | is imminent. |
| 18th century by the rice trader Homma Munehisa. | | | | There are many simple and complex patterns, the |
| The system was adopted into the western trading | | | | scope to explain them is beyond this article, but it is |
| world by Charles Dow about the beginning of the | | | | possible to reduce them to just a few useful |
| 20th century. | | | | indicators. |
| For day traders it is most useful, but not so much | | | | 1. Full Green body candlestick: Indicates an upward |
| for longer term traders. A candle stick is a | | | | movement. The longer the body, the stronger the |
| combination of a line chart and a bar chart. The | | | | market commitment. |
| extreme high and low are shown, this is called the | | | | 2. Full Red body candlestick: Indicates an downward |
| wick, but the area between the open and the close | | | | movement. The longer the body, the stronger the |
| are shaded. This is known as the body. | | | | market commitment. |
| If the market open was lower and it was trading up | | | | 3. Doji pattern, a small body with long wicks. If this |
| the shaded area would be green (white), if it opened | | | | comes after a series of full body candles, either red |
| and then traded lower the body would be red( or | | | | or green then the market appears indecisive and a |
| black). I prefer colour it seems easier to read | | | | change of direction may occur. |
| especially on a congested chart. | | | | 4. Hanging Man: There is a sharp sell off after the |
| The benefit of this to a trader is that it is very easy | | | | market opens during an uptrend. However by the |
| to see if the market is trending or moving in a | | | | end of the trading day, the market closes at or near |
| sideways pattern. | | | | its high for the day. The body is at the upper end of |
| The body can be just a thin line, with long wicks, | | | | the trading range and the wick is a t least twice as |
| indicating the open and close were about the same | | | | long as the body. |
| but the market was volatile during the trading period | | | | 5. Harami: A two candle stick pattern, showing a |
| you have chosen. | | | | possible slowing of momentum. E.g. after a long red |
| The body can extend the full length. This is more | | | | day occurs the second day is a green day where the |
| indicative of a more gradual move in the market, | | | | real body is completely engulfed by the real body of |
| within the time frame you trade. If you were to see | | | | the first. A version of an inside day. |
| 2 of these bars in a row, it may indicate some | | | | These are the primary candlestick patterns, and are |
| momentum, but if I was to see 5 I would be | | | | useful without knowing the more complex patterns. |
| cautious as it could mean a change in trading direction | | | | |