How To Master Candlestick Patterns
Japanese candlesticks are basically an ancient tradition of the Chinese for keeping tabs on the rice markets. Considered by many (safe to say at this point.) to be the best way to view an asses price action. Japanese candlestick have become popular in just about every liquid market.
Candlestick charts show a trend just like any other chart but with more detail. They use a value system of open, high, low and close. There are 2 basic parts to a candlestick; the body, that is a rectangle shape either filled or hollow, and the shadows that are simply lines above and below the body.
A high is marked by the top of the upper shadow or a wick. It indicates the highest point of the day in trading. The low is marked by the bottom of the lower shadow. If a security closes higher than it opened, then a hollow body is drawn. The top line of the body itself would indicate the close and the bottom line of the body would indicate the open. If a security closes lower than the opening price, then a filled body is drawn with the top line indicating the opening and the lower one indicating the close. (See below.)
Candlestick charts are considered more eye appealing and easier to understand than the ordinary bar or line chart. They are more intuitive and easier to identify immediately, and they also show price action relative to the past. (Best left for another article.)
There are different sizes of bodies as well. A long hollow body indicates there was a large advance in pricing between the open and close. A long filled body indicates the closing price was much lower than the opening. In return and in keeping with the same analogy, a short hollow body would indicate a small rise in pricing between open and close and a short filled body would indicate a small drop in pricing between open and close.
Another characteristic would be a hollow or filled body with no shadows. These are called Marubozu or black & white. A white Marubozu would occur when the open equals the low and the close equals the high. A black Marubozu would occur when the open equals the high and the close equals the low.
Another important candlestick pattern is a spinning top. Spinning tops are represented by a long or short shadow / wick and a short real body. The short body tells us that there was a small gap between the open and close. If the shadow or wick is long it tells us that the highs and lows of the day moved hard but failed to remain strong. Whichever was long tells you of potential upcoming underlying strength. - 23226
Candlestick charts show a trend just like any other chart but with more detail. They use a value system of open, high, low and close. There are 2 basic parts to a candlestick; the body, that is a rectangle shape either filled or hollow, and the shadows that are simply lines above and below the body.
A high is marked by the top of the upper shadow or a wick. It indicates the highest point of the day in trading. The low is marked by the bottom of the lower shadow. If a security closes higher than it opened, then a hollow body is drawn. The top line of the body itself would indicate the close and the bottom line of the body would indicate the open. If a security closes lower than the opening price, then a filled body is drawn with the top line indicating the opening and the lower one indicating the close. (See below.)
Candlestick charts are considered more eye appealing and easier to understand than the ordinary bar or line chart. They are more intuitive and easier to identify immediately, and they also show price action relative to the past. (Best left for another article.)
There are different sizes of bodies as well. A long hollow body indicates there was a large advance in pricing between the open and close. A long filled body indicates the closing price was much lower than the opening. In return and in keeping with the same analogy, a short hollow body would indicate a small rise in pricing between open and close and a short filled body would indicate a small drop in pricing between open and close.
Another characteristic would be a hollow or filled body with no shadows. These are called Marubozu or black & white. A white Marubozu would occur when the open equals the low and the close equals the high. A black Marubozu would occur when the open equals the high and the close equals the low.
Another important candlestick pattern is a spinning top. Spinning tops are represented by a long or short shadow / wick and a short real body. The short body tells us that there was a small gap between the open and close. If the shadow or wick is long it tells us that the highs and lows of the day moved hard but failed to remain strong. Whichever was long tells you of potential upcoming underlying strength. - 23226
About the Author:
Japanese candlesticks are the choice for professional traders and anyone who wants to have incredible insight on price action, and current market sentiment. If you aren't using candlestick patterns to trade, you are most definately missing the boat when it comes to trading. To start using Japanese candlesticks now visit our website and download our free introductory course. http://www.candlestickgenius.com
posted by X - Men @ 7:57 AM
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