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Saturday, August 9, 2008
There are several Candlestick patterns that need to be committed to memory. The Japanese Candlestick trading signals consist of approximately 40 reversal and continuation patterns. All have credible probabilities of indicating correct future direction of a price move. The following dozen signals illustrate the major signals.
The definition of "major" has two functions. Major in the sense that they occur in price movements often enough to be beneficial in producing a ready supply of profitable trades as well as clearly indicating price reversals with strength enough to warrant placing trades.Utilizing just the major Japanese Candlesticks trading signals will provide more than enough trade situations for most investors.
They are the signals that investors should contribute most of their time and effort. However, this does not mean that the remaining patterns should not be considered. Those signals are extremely effective for producing profits. Reality demonstrates that some of them occur very rarely. Other formations, although they reveal high potential reversals, may not be considered as strong a signal as the major signals.
Candlesticks contain the same data as a normal bar chart but highlight the relationship between opening and closing prices. The narrow stick represents the range of prices traded during the period (high to low) while the broad mid-section represents the opening and closing prices for the period.
If the close is higher than the open - the candlestick mid-section is hollow or shaded whi te
If the open ite higher than the close - the candlestick mid-section is filled in or shaded black.
If the close is higher than the open - the candlestick mid-section is hollow or shaded whi te
If the open ite higher than the close - the candlestick mid-section is filled in or shaded black.
The advantage of candlesticks is the ability to highlight trend weakness and reversal signals that may not be apparent on a normal bar chart.
