| In recent years candlestick charting has enjoyed | | | | candlestick patterns with exotic names like The |
| great popularity and a variety of systems for | | | | Morning Star, the evening star and Harami lines which |
| interpreting candlesticks has become a veritable | | | | are used to predict potential reversals in ongoing |
| cottage industry. One distinct advantage candlestick | | | | trends. As I have said, I am far more interested in |
| charts hold over traditional indicator and oscillator | | | | the trends and trend reversals suggested by |
| systems is they deal directly with price action. That is | | | | candlestick charts than actually making trading |
| to say, candlestick charts generate buy and sell | | | | decisions based upon the above named indicators. To |
| indicators separate from algorithms and complicated | | | | be sure, they can be a very valuable tool in your |
| oscillators. Instead of using high-tech algorithms, | | | | trading, especially when used in conjunction with |
| candlesticks draw upon simple price action to | | | | traditional chart analysis. |
| generate both buy and sell signals. | | | | The scope of these candlestick patterns is large |
| I became interested in candlestick formations about | | | | enough to preclude me from intricately detailing |
| five years ago as I sought to deviate from traditional | | | | individual candlestick patterns, but rest assured there |
| mathematically derived indicators and rely more upon | | | | are hundreds of patterns that each indicate potential |
| raw data (from the NYSE tick, for example) and | | | | price action activity. |
| from actual price action analysis. I have long felt that | | | | No single indicator gets more publicity than a |
| the exponential nature of oscillators and rate of | | | | candlestick formation called a Dogi, and it is one |
| change indicators are not nearly as accurate as their | | | | formation in the candlestick series that garners my |
| inventors would you have us believe. In short, I | | | | attention. Basically, Dogi's reflects indecision in the |
| wanted to analyze raw data from the markets that | | | | market. The results of this indecision often lead to |
| is unaffected by mathematical manipulation. For the | | | | market reversals and sometimes dramatic changes in |
| record, I can say this is not a widely held point of | | | | static market price structure. Like all things in |
| view in the trading community. I will be the first to | | | | candlestick theory, there are numerous versions of |
| admit that learning candlestick formations and their | | | | the doji and each version of the dogi foretell various |
| implications in trading is an ongoing process, and not | | | | intensities in market reversals. Of course, being able |
| something you can pick up from a single reading of a | | | | to diagram some of these candlestick patterns would |
| book and implement. | | | | be helpful, but the nature of articles precludes specific |
| Most traders are aware that candlestick charting has | | | | graphics. The point is a simple one, and that is to |
| its origins in the early rice future markets that | | | | spend some time learning the nature and function of |
| existed in Japan in the middle 17th-century. I think it | | | | candlestick patterns as they can be a valuable asset |
| would be safe to say that candlestick analysis Is | | | | in your futures trading. In my opinion, a basic |
| among the oldest trading analysis still in active use. I | | | | knowledge of the fundamental patterns in candlestick |
| am the first to admit that I am hesitant to use | | | | trading is sufficient to assist your trading, as there |
| candlestick analysis as a primary indicator in my | | | | are literally hundreds of identifiable patterns in the |
| trading. On the other hand, candlesticks and provide | | | | candlestick trading system. |
| significant insight into price action in a variety of | | | | While candlestick patterns may not make or break |
| futures markets. | | | | your success in trading futures, they are without a |
| Interpreting candlestick patterns is not terribly | | | | doubt a valuable asset in your trading arsenal and I |
| different from interpreting traditional price action | | | | would highly recommend you spend time familiarizing |
| patterns most of us are familiar with. For example, | | | | yourself with the potential ramifications candlestick |
| patterns like head and shoulders formations, banners, | | | | patterns present to the trader. |
| pennants and a host of other chart patterns are | | | | As an aside, and in addition to being helpful trading |
| widely used and accepted. Steve Nison has been an | | | | indicators, the history and evolution of candlestick |
| outspoken proponent of candlestick analysis for | | | | charting is fascinating and gives a trader a wonderful |
| many years, and can be attributed as the writer who | | | | insight into the development of the futures trading |
| has popularized candlestick formations in recent | | | | business. After all, candlestick patterns were being |
| years. He currently has a number of well written | | | | used before our country was formed. Do yourself a |
| books that detail intricate analysis of candlestick | | | | favor, and spend some time studying these |
| patterns. | | | | fascinating patterns and see if they don't improve |
| The general theory underpinning candlestick charting | | | | your trading and recognition of specific market |
| suggests candlestick patterns can forecast changes | | | | patterns that occur throughout the course of the |
| in market direction. There are a variety of identified | | | | trading day. |