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Old 12-26-2007, 03:27 PM   #1 (permalink)
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An Introduction to Trading Candlestick Chart Patterns


In our last lesson we finished up our series on technical indicators with a look at the Parabolic SAR. In today's lesson we are going to start a new series on Candlestick chart formations by looking at some of the most common candlestick patterns in the market.

As you should remember from our lesson on the basics of trading charts, candlestick charts display the open, high, low, and close of an instrument and shade the "candle" portion white if the close of the period is greater than the open of the period, and black if the close for the period is less than the open. The high and the low of the period are then connected by a thin line which is referred to as the wick.

Example:


At their most basic candlestick charts give us a picture of how volatile a particular period was and whether buyers or sellers won the trading period the candlestick represents. If a candle is long and white, this tells us that the period started with buyers in control and remained that way as they drove prices higher throughout the period. If a candle is long and black this is an indication of a volatile period where sellers won out over buyers. The less of a wick there is on a long candle the greater the control of either the buyers or the sellers depending on the color of the candle.

Example


Candlesticks which have long wicks and short bodies indicate periods where there was a lot of action pushing the market either higher or lower but where it ended up closing right near the open.

If there is a long part of the wick on the upper part of the candle means that buyers initially ran the market up against the sellers but then the sellers pushed the market back against the buyers to close the period right where it opened. Conversely if the long part of the wick is below the candle this means that sellers initially pushed the market against the buyers but buyers then pushed back successfully against the sellers to close the period near its opening.

Example



Short candlesticks represent periods in the market where the market closed near its open for the period and can represent either periods of little market activity or periods of activity where neither buyers nor sellers gained much ground.

Example



That concludes our lesson on the basics of candlesticks. In our next lesson we are going to look at two candlestick patterns called The Doji and The Spinning Top and what they can tell us about the supply demand situation in the market so we hope to see you in that lesson.

As always if you have any questions or comments please leave them in the comments section below so we can all learn to trade together, and good luck with your trading!


Other Links to Help You Learn About Candlesticks

On InformedTrades

Free Candlestick Video Course - InformedTrades
Stephen Bigalow's 14 Key Candlestick Formation - InformedTrades

Elsewhere on the Web

StockCharts' Introduction to Candlesticks
TradingDay.com Introduction to Candlesticks
Japanese Candlesticks | ThePitMaster.com



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Old 01-24-2008, 02:48 PM   #2 (permalink)
 
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David

I am looking at a couple of (daily) candlesticks on daily gold.

They are the last two days that I can see (22nd and 24th January 2008). For some reason I can't see 23rd on my chart.
(Edit: still don't see why my chart seemed to be missing some days.)

They are two long bodied candlesticks with a gap between them. (Edit: Looking @ it this morning I see the reason I thought 24th was as I said was because it was not finished for the day).


Is this regarded as indicating something? It looks bullish of course.

What do you think are the best indicators to use with candlesticks?

Douglas
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Old 03-24-2008, 03:40 AM   #3 (permalink)
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what a great, timely site. Thank you so much.
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Old 03-24-2008, 03:30 PM   #4 (permalink)
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what a great, timely site. Thank you so much.
Thanks for the kind comment it is much appreciated and I am glad you like the site.

Best Regards,
Dave
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Old 04-12-2008, 06:15 AM   #5 (permalink)
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awesome


Thanks Dave...Hats off to you for sharing this.... great work
Nicely done site with good info explained in a lucid way.
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Old 04-13-2008, 11:22 AM   #6 (permalink)
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Thanks Dave...Hats off to you for sharing this.... great work
Nicely done site with good info explained in a lucid way.
Hi Anu,

Welcome to the community and thanks for the feedback its much appreciated.

Best Regards,
Dave
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Old 06-14-2008, 07:42 AM   #7 (permalink)
 
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PDF of candlestick patterns?


David,

Do you know if there are any PDF or MS Word files that have a list & pictures of all the major candlesicks patterns? I would like something I can print out and use while trading.

Thanks for the great lessons on candlesticks!

James
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Old 06-15-2008, 04:11 PM   #8 (permalink)
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David,

Do you know if there are any PDF or MS Word files that have a list & pictures of all the major candlesicks patterns? I would like something I can print out and use while trading.

Thanks for the great lessons on candlesticks!

James
Hi James,

Not that I am aware of however we will be publishing a hard copy of these lessons which you will be able to order from the InformedTrades store in the upper right hand corner of this site. If you check back there in a week or so it should be available.

If there are any other PDF or word resources out there that people know of on this please feel free to post them here.

Best Regards,
Dave
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Old 06-15-2008, 07:50 PM   #9 (permalink)
 
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Nothing That I Could Find


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Hi James,

If there are any other PDF or word resources out there that people know of on this please feel free to post them here.

Best Regards,
Dave
I did a search and couldn't find anything for free.

I did find the following pages that can be copied and pasted into a MS Word file to make my own.

Lit Wick Co.:

Leavitt Brothers: Candlestick Patterns

James
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Old 06-15-2008, 08:03 PM   #10 (permalink)
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Quote:
Originally Posted by jcvictory View Post
I did a search and couldn't find anything for free.

I did find the following pages that can be copied and pasted into a MS Word file to make my own.

Lit Wick Co.:

Leavitt Brothers: Candlestick Patterns

James
Hi James,

Great resources thank you for posting.

Best Regards,
Dave
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