POSTED ON November 23, 2022 2:18 am
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Why not consider tracking your stocks in a similar manner to that which you do your charts? Consider the Japanese. They have not abandoned their techniques of candlestick analysis. It is one of the main measures of their success. To the Japanese, candlestick charts are a “must have”. They appear on the front page of their newspapers, on the covers of their magazines, and on their TV. Why not take advantage of this market intelligence and be able to see which of your trends are playing out in real time?
The author has designed this book to give you the confidence to use Japanese chart methods. He explains the different charts, how to identify market trends, what candlesticks represent, and how to use candlesticks to manage your trading. And, he points out the drawbacks of candlestick analysis, such as how they become worthless when there is a market trend reversal.
At first, I found using the Japanese chart method somewhat difficult. I could draw the charts, but I had to rely on my memory to know how to apply candlestick chart indicators. I have a memory for drawing straight lines and circles. But with chart patterns I have to rely on my memory. This does not mean that candlesticks cannot be used without the charts. I am applying candlestick chart methods to trade, and that part was easy. But, the real value of candlesticks lies in the chart pattern analysis.
Some candlestick charts may open on the front or the reverse of the bar. It really depends upon the charting software. Of course, this is an interesting way to test out new charting software. This is why there are candlestick charting training web sites on the web. One thing that I urge you to pay particular attention to is that the open, high, low, and close for the candlestick chart is ALWAYS displayed for the daily bar. This means that if you were to look at the daily bar first, then look at the candlestick chart at the same time, the open, high, low, and close of the candlestick chart would be drawn from the closing value of the daily bar. Now, you may occasionally see charts where the candlestick chart opens on the front or the reverse of the daily bar. It depends upon the software. If you were to look at the chart as is, that is, read from the daily bar first to the candlestick chart, you would see the candlestick chart open on the front or reverse of the daily bar. As the software matures, I hope they will remove this option.
Each bar on a candlestick chart is called a candle. I should note that, in candlestick charting, there is no open, high, low, and close. Instead, there are just three prices (a high, a low, and a close). The candle is the period within the bar when the prices were the greatest. If the candle is the opening candlestick of the bar, it is said to be an “up candle.” If it is the closing candlestick, it is said to be a “down candle.” There is no high and low candlesticks.
In this pattern, we have a bearish five bar pattern. There is a decline in the price of the stock. The pattern is forming over the last ten trading days. You can also see a bearish hammer on the daily chart.
Some people don’t like candlestick patterns. It’s usually because the candlestick patterns on the charts are a subset of the patterns on the time-trend lines. An uptrend or downtrend line is represented by continuous lines. When the lines intersect, a candlestick pattern occurs. The lines are broken by the open and close of the pattern. The pattern can be resolved into the developing trend. Yet, the candlesticks are small and they are distributed over a wide territory on the charts. So, if you like candlestick patterns, then fine. If not, that is ok. It is all a matter of preference. I like candlesticks because they are easy to read and maintain.
Maybe you want to find out more about how I discovered the chart? In 1991, I was living in Japan. I remember one winter day in Tokyo, when I was coming down a busy street, the weather was very clear and there was a light rain and a light fog in the air. I was sure something was wrong with the clouds. I looked up and I was stunned to see a huge dark black shadow covering the entire eastern sky. I told the taxi driver that there was something wrong with the clouds. The taxi driver said it was nothing to be concerned about. So I continued on to the office. Suddenly, the bank of clouds lifted up. It was a rare phenomenon. So I went to my corner office and wrote my first candlestick chart using only Western technical devices. I was amazed that the chart for JTEK when it expired on March 13, 1992 had a window in it.