Candlestick Trading Blog
July 11, 2008
Candlestick Patterns
Candlestick Patterns Introduction The Japanese began to use technical analysis to trade rice in the 17th century. Candlestick patterns first came into play at some point around 1850 and much of the credit for the development of these patterns and candlestick charting goes to a rice trader named Homma from the town of The interpretation of Japanese candlestick charts in based primarily on patterns and the most popular patterns are examined in three main groups. These groups include the bullish, bearish, and neutral. These groups are then further divided into the reversal and the continuation. To create a candlestick chart, there are four points of data including the open, high, low, and close values for each time period selected to display. The filled or hollow portion of the candlestick is called the body or the real body and the long thin lines above and below the body are called shadows. The shadows the candlestick patterns depict the high and low ranges with the high marked by the top of the upper shadow and the low by the bottom of the lower shadow. A hollow candlestick is formed if the stock closes higher that its opening price and a filled candlestick is formed if the stock closes lower than its opening price. Candlestick patterns are flexible because they can be used alone or in combination with other technical analysis tools. That is actually one of the advantages among many of candlestick charting. Another advantage is that these patterns are easier to read than your standard line and bar charts. Candlestick patterns simply offer more information regarding what is going on in the open market because they add an extra dimension of analysis than line or bar charts. How do patterns interpret what is happening in the markets? Basically there are two groups of people in the stock market, including buyers and sellers. Where exactly a stock closes in relation to the range tells us who is winning between the buyers and the sellers. It a stock closes at the top of the range it means that the buyers were more insistent and more willing to get in at any price, while the sellers were willing to sell at higher prices. When stock closes at the bottom of the range it means that the sellers were in control are were willing to get out at any price. This means also that the buyers were willing to buy at lower stock prices and therefore the stock moves down. Basically, a bullish market indicates that the buyers are in control, and conversely and bearish market (bear market) indicates that the sellers are in control. Candlestick chart analysis is a clear and easy way to identify patterns in the market. It does not require intricate formulas or ratios and the candlestick patterns are easy to see. Learn how you can utilize candlestick chart patterns to increase your profits. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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