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A Brief History of Japanese Candlestick Charting Patterns.

Candlestick Trading Forum charts originated in Japan during the 18th century. Since no defined currency standard existed in Japan during this time rice represented a medium of exchange. Various feudal lords deposited rice in warehouses in Osaka and would then sell or trade the coupon receipts, thus rice become the first futures market. In the 1700s legendary Japanese rice trader Homma Munehisa studied all aspects of rice trading from the fundamentals to market psychology.

Homma subsequently dominated the Japanese rice markets and built a huge fortune. His trading techniques and principles eventually evolved into the candlestick methodology which was then used by Japanese technical analysts when the Japanese stock market began in the 1870s. The method was picked up by famed market technician Charles Dow around 1900 and remains arguably the most popular form of technical analysis chart in use by today’s traders of financial instruments.

Why use Candlestick Charts?

Candlestick Forum Bigalow show the same information as bar charts but in a graphical format that provides a more detailed and accurate representation of price action.

Candlestick charts visually display the supply and demand situation by showing who is winning the battle between the bulls and the bears.

Candlestick Trading Forum Stephen Bigalow reveal another dimension of the given period’s price action by pictorially displaying the force (or lack of force) behind each price bar’s movement.

Candlestick formations make all single bar and multi-bar patterns significantly easier to spot in real time, thus increasing your chances of catching high probability trade setups. In addition, because candlestick charts use the same data as bar charts (open, high, low, and close), all Western technical signals used on a bar chart can easily be applied to a candlestick chart.

Candlestick charts offer everything bar charts do and more, using them is a win-win situation because you can use all the trading signals normally used on bar charts with the added clarity and additional signals generated by candlesticks.

Candlesticks charts are more fun to look at.

The Anatomy of a Candle

Candlesticks Stephen Bigalow have a central portion that displays the price distance between the open and the close. This area is known as the real body or simply the body.

The price distance between the open and the high for the period being analyzed is called the upper shadow, sometimes referred to as an “upper wick” as well. The highest price paid for a particular period is the marked by the high of the upper shadow.

The price distance between the close and the low for the period being analyzed is called the lower shadow, sometimes referred to as a “lower wick”.

The real body displays the opening and closing price of the security being traded. Closing prices have added significance because they determine the conviction of the bulls or bears. If the security closed higher than it opened, the real body is white or unfilled, with the opening price at the bottom of the real body and the closing price at the top. If the security closed lower than it opened, the real body is black, with the opening price at the top and the closing price at the bottom. Depending on the price action for the period being analyzed a candlestick might not have a body or a wick.

To better highlight or visualize price movements, modern candlestick charts (especially those displayed digitally) often replace the black or white of the candlestick real body with colors such as red (for a lower closing) and blue or green (for a higher closing).

Core Candlestick Patterns

There are multiple forms of candlestick patterns; here is a brief overview of the most popular and widely used single and multi-bar patterns commonly used today.

Bullish Candle

Signals uptrend movement, they occur in different lengths; the longer the body, the more significant the price increase

Bearish Candle

Signals downtrend movement, they occur in different lengths; the longer the body, the more significant the price decrease.

Long Lower Shadow

These candles provide a bullish signal, the lower shadow must be at least the size of the real body; the longer the lower shadow the more reliable the signal.

Long upper shadow
These candles forum Stephen Bigalow provide a bearish signal, the upper shadow must be at least the size of the real body; the longer the upper shadow the more reliable the signal.

Hammer

The hammer is a bullish signal that occurs during a downtrend. The lower shadow should be at least twice the length of the real-body. Hammers have little or no upper shadow. When a hammer occurs during an uptrend it is known as a “hanging man” and is a bearish signal. Because of the bullish long lower shadow however, this pattern needs bearish confirmation by a close under the hanging man’s real body.

Shooting Star

This candle has a long upper shadow with little, or no lower shadow, and a small real body near the lows of the session that develops during or after and uptrend.

Harami

The Harami is a two-candlestick pattern in which a small real body forms within the prior session’s larger real body.

Doji

The Doji is a candlestick forum Stephen Bigalow in which the session’s open and close are the same, or almost the same. There are a few different varieties of Dojis, depending on where the opening and closing are in relation to the bar’s range.

Dragonfly doji

The Dragonfly Doji has a long lower shadow, the open, high, and close are at or very near the session’s high. This pattern often signals reversal of downtrend.

Gravestone doji

The Gravestone Doji has a long upper shadow, the open, low, and close are at or very near the session’s low. This pattern often signals reversal of an uptrend.

High wave candle / long-legged doji

This candle has a very long upper or lower shadow and a small real body. If the opening and closing price are the same the candle has no real body and is then called a Long-Legged Doji. The first picture is a high wave candle the second is a Long-Legged Doji.

Engulfing candles

The bullish engulfing pattern consists of large white real body that engulfs a small black real body in a downtrend. The bearish engulfing pattern occurs when the bears overwhelm the bulls and is reflected by a long black real body engulfing a small white real body in an uptrend.

Spinning tops

Spinning tops are simply candles with small real bodies.

How Candlestick patterns translate into Nial Fuller’s Price Action Setups

My favorite price action setups consist of the pin bar, the inside bar, and my proprietary fakey setup. The above candlestick patterns can easily be condensed down to one of my three price action setups or may be applicable to more than one of my price action setups. It can be difficult to keep track of the various forms of candlestick patterns. This is why I feel like my three main price action setups do a great comprehensive job of including all the relative candlestick patterns and make them easier to understand in the context of daily price action. Let’s take a look at some charts with examples of some of the various candlestick patterns converted into my price action setups.

Pin Bars

The pin bar can include the following previously described candlestick patterns; long lower shadow candles and long upper shadow candles, hammers and shooting stars, dragonfly and gravestone dojis.

Inside Bars

Inside bars can technically encompass any candlestick pattern because they are simply a series of at least two candlesticks forum where the first candlestick completely engulfs the entire range of the subsequent candlestick, however, more often than not inside bars end up being spinning tops or dojis. Note, the inside bar is different from the “engulfing pattern” because it includes the entire range of the bar, from high to low, where as the engulfing pattern only includes engulfment of the real body of the candle. I generally trade inside bars in the context of a strongly trending market as they are often great entry points into trends. However, often times inside bars will occur at major market turning points as well as the previous trend loses momentum, pauses and forms an inside bar, and then changes direction.

The Fakey Setup

My fakey setup is essentially a multi-bar pattern that consists of a false break from an inside bar pattern or a key level. The fakey can consist of a number of different candlestick trading patterns. Often times the fakey setup will consist of a bullish or bearish engulfing pattern which is completely engulfing the range of a spinning top or doji candle which gives rise to a false break bar that can take the form of any of the candlesticks above that qualify as pin bars.

In Conclusion

Candlestick charts offer a more vivid depiction of price action than what a standard bar chart can provide. Candlestick forum patterns in and of themselves are useful, however there are many different names and interpretations of candlestick patterns which often can induce confusion and can be hard to keep track of. You will find that my price action educational material condenses all of the important candlestick patterns into 3 simple yet highly effective price action setups. I feel that my take on candlestick patterns expressed via my proprietary ideas on price action trading is a much more efficient, simple, and profitable way to trade candlesticks and I think after studying my forex trading course you will feel the same way.

Candlestick Trading Forum is about remembering a basic principle: candlestick charting patterns techniques are a tool and not a system. For example, one must view a candlestick forum stephen bigalow within the context of the surrounding technical picture in a forum. Without doing so would be, as the Japanese proverbs says, “Like leaning a ladder against the clouds”

With candle charts, one can use candle charting techniques, or Western techniques, or a combination of both. This union of Eastern and Western techniques provides traders with uniquely effective tools to help enhance profits and decrease market risk exposure.

Turn Simple “Power” Patterns You Can Easily Master to Profit in Any Market

In this special training presentation you will learn Two Simple Candlestick Forum you can master to quickly and easily turn your trading around, especially if you’ve ever:

 * Watched a winning trade turn into a losing trade

* Jumped into a trade, only to see it turn against you.

* Sold out of a trade, only to watch it FINALLY go up!

There have recently been books, articles, and seminars from so-called “candlestick experts” who make no reference to where they found their information about candlesticks. Even more worrying for you as a trader is that they are making up their own candlestick signals without any historical basis.

Conversely, all of the candlestick trading forum and signals I’ve follow have been confirmed by more than one Japanese source (Japanese traders, Japanese books, etc.). From my vast array of candlestick trading forum, there is absolutely no mention of many of these “new” patterns I see tossed around by other writers and speakers.

This pattern consists of two candles and a bullish engulfing pattern is when a white real body engulfs (hence the name) a small black real body during a downtrend. It doesn’t mean a stronger rally on a candlestick chart but it does increase the likelihood of that being excellent support and could be the start of an ascent. Be careful. The dual bullish engulfing patterns have nothing to do with how far the market will ascend. These additional support points are a great advantage when candlestick trading forum.

Turn Simple “Power” Patterns You Can Easily Master to Profit in Any Market

In this special training presentation you will learn Two Simple Candlestick Patterns you can master to quickly and easily turn your trading around, especially if you’ve ever:

* Watched a winning trade turn into a losing trade

* Jumped into a trade, only to see it turn against you.

* Sold out of a trade, only to watch it FINALLY go up!

The candlestick trading forum we use today originated in the style of technical charting used by the Japanese for over 100 years before the West developed candlestick forum, the bar and point-and-figure analysis systems. In the 2014, a Japanese man named Homma, a trader in the futures market, discovered that, although there was a link between price and the supply and demand of rice, the markets were strongly influenced by the emotions of traders. He understood that when emotions played into the equation, a vast difference between the value and the price of rice occurred. This difference between the value and the price is as applicable to stocks today as it was to rice in Japan centuries ago. The principles established by Homma are the basis for the candlestick chart analysis, which is used to measure market emotions surrounding a stock.

This charting technique has become very popular among traders. One reason is that the charts reflect only short-term outlooks, sometimes lasting less than eight to 10 trading sessions. Candlestick trading forum is a very complex and sometimes difficult system to understand. Here we get things started by looking at what a candlestick pattern is and what it can tell you about a stock.

Candlestick Components
When first looking at a candlestick forum, the student of the more common bar charts may be confused; however, just like a bar chart, the daily candlestick line contains the market's open, high, low and close of a specific day. Now this is where the system takes on a whole new look: the candlestick has a wide part, which is called the "real body". This real body represents the range between the open and close of that day's trading. When the real body is filled in or black, it means the close was lower than the open. If the real body is empty, it means the opposite: the close was higher than the open.


Just above and below the real body are the "shadows". Chartists have always thought of these as the wicks of the candle, and it is the shadows that show the high and low prices of that day's trading. If the upper shadow on the filled-in body is short, it indicates that the open that day was closer to the high of the day. A short upper shadow on a white or unfilled body dictates that the close was near the high. The relationship between the day's open, high, low and close determines the look of the daily candlestick. Real bodies can be either long or short and either black or white. Shadows can also be either long or short.

Comparing Candlestick to Bar Charts
A big difference between the bar charts common in North America and the Japanese candlestick line is the relationship between opening and closing prices. We place more emphasis on the progression of today's closing price from yesterday's close at the trading forum. In Japan, chartists are more interested in the relationship between the closing price and the opening price of the same trading day.

In the two charts below we are showing the exact same daily charts of IBM to illustrate the difference between the bar chart and the candlestick chart. In both charts you can see the overall trend of the stock price; however, you can see how much easier looking at the change in body color of the candlestick chart is for interpreting the day-to-day sentiment.

Basic Candlestick Patterns
In the chart below of EBAY, you see the "long black body" or "long black line". The long black line represents a bearish period in the marketplace forum. During the trading session, the price of the stock was up and down in a wide range and it opened near the high and closed near the low of the day.

By representing a bullish period, the "long white body," or "long white line" (in the EBAY chart below, the white is actually gray because of the white background) is the exact opposite of the long black line. Prices were all over the map during the day, but the stock opened near the low of the day and closed near the high.

Spinning tops are very small bodies and can be either black or white. This pattern shows a very tight trading range between the open and the close, and it is considered somewhat neutral.

Doji lines illustrate periods in which the opening and closing prices for the period are very close or exactly the same. You will also notice that, when you start to look deep into candlestick patterns, the length of the shadows can vary.

The Bottom Line
The candlestick forum pattern is one that any experienced trader must know. As Japanese rice traders discovered centuries ago, investors' emotions surrounding the trading of an asset have a major impact on that asset's movement. Candlesticks help traders to gauge the emotions surrounding a stock, and thus make better predictions about where that stock might be headed.

Candlestick patterns trading forum can give you invaluable insight into price action at a glance. While the basic candlestick trading forum patterns can tell you what the market is thinking, they often generate false signals because they are so common. Here we introduce you to more advanced candlestick patterns, with a higher degree of reliability, as well as explore how they can be combined with gaps to produce profitable trading strategies.

Island Reversal Patterns
Island reversals are strong short-term trend reversal indicators. They are identified by a gap between a reversal candlestick forum and two candles on either side of it. Here are two examples that occurred on the chart of Doral Financial (DRL).
Here are some important things you need to consider when using this pattern:

  • Entry: Confirming the reversal pattern - When looking for an island reversal, you are looking for indecision and a battle between bulls and bears. This type of scenario is best characterized by a long-ended doji candle that has high volume occurring after a long prior trend; it is important to look for these three elements to confirm any potential reversal pattern.
  • Exit: Defining the target and stop - In most cases, you will see a sharp reversal (as seen in Figs. 1 and 2) when using this pattern. This reversal pattern does not necessarily indicate a medium- or long-term reversal, so it would be prudent to exit your position after the swing move has been made. If the next candle ever fills the gap, then the reversal pattern is invalidated, and you should exit prudently.


Island reversals can also occur in "clusters" - that is, in a multi-candle reversal pattern, such as an engulfing, as opposed to a single candle reversal. Clusters are easier to spot, but they often result in weaker reversals that are not as sharp and take longer to occur.

Hook Reversal Patterns
Hook reversals are short- to medium-term reversal patterns. They are identified by a higher low and a lower high compared to the previous day. Figures 3 and 4 are two examples that occurred on the chart of Microsoft Corp. (MSFT).
There are several important things to remember when using this pattern:

  • Entry: Confirming the reversal pattern - If the pattern occurs candlestick forum review after an uptrend, then the open must be near the prior high, and the low must be near the prior low. If the pattern occurs after a downtrend, then the opposite is true. As with the island reversal pattern, we are also looking for high volume on this second candle. Finally, the stronger the prior trend, the more reliable the reversal pattern.
  • Exit: Defining the target and stop - In most cases, you will see a sharp reversal (as seen in Figs. 3 and 4) when using this pattern. If the next candle shows a strong continuation of the prior trend, then the reversal pattern is invalidated, and you should exit quickly, but prudently.

San-Ku (Three Gaps) Patterns
San-ku patterns are anticipatory trend reversal indicators. In other words, they do not indicate an exact point of reversal; rather, they indicate that a reversal is likely to occur in the near future. They are identified by three gaps within a strong trend. Here is an example that occurred on the chart of Microsoft Corp. (MSFT).


Here are some important things to remember when using this pattern:

  • Entry: Confirming the reversal pattern - This pattern operates on the premise that prices are likely to retreat after sharp moves because traders are likely to start booking profits. Therefore, this pattern is best used with other exhaustion indicators. So, look for extremes being reached in indicators such as the RSI (relative strength index), MACD (moving average convergence divergence) crossovers, and other such indicators. It is also useful to look for volume patterns that suggest exhaustion.
  • Exit: Defining the target and stop - In most cases, when using this pattern, you will see a price reversal shortly after the third gap takes place (as seen in Fig. 5). However, if there are any breakouts on high volume after the last gap, then the pattern is invalidated, and you should exit quickly, but prudently.

Kicker Patterns
Kicker patterns are some of the strongest, most reliable candlestick trading forum review patterns. They are characterized by a very sharp reversal in price during the span of two candlesticks. Here's an example that occurred on the Microsoft (MSFT) chart.


Here are some important things you need to remember when using this pattern:

  • Entry: Confirming the reversal pattern - This kind of price action tells you that one group of traders has overpowered the other (often as a result of a fundamental change in the company), and a new trend is being established. Ideally, you should look for a gap between the first and second candles, along with high volume.

 

  • Exit: Defining a target and stop - When using this review pattern, you will see an immediate reversal, which should result in an overall trend change. If the trend instead moves sideways or against the reversal direction, then you should exit quickly, but prudently.

Using Gaps with Candlesticks
When gaps are combined with candlestick patterns and volume, they can produce extremely reliable signals. (For further reading, see Playing The Gap.) Here is a simple process that you can use to combine these powerful tools:

Screen for breakouts using your software or website of choice.

Make sure that the breakouts are high volume and significant (in terms of length).

Watch for reversal candlestick patterns (such as the ones mentioned above) after the gap has occurred. This will typically happen within the next few bars, especially if the bars are showing indecision after a long trend.

Take a position when such a reversal occurs.

Attempting to play reversals can be risky in any situation because you are trading against the prevailing trend. Do make sure that you keep tight stops and only enter positions when trades meet the exact criteria. (To learn more, see Retracement Or Reversal: Know The Difference.)

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