Japanese Candle Stick by Troy Conley created by Troy Conley

Japanese Candlestickes Introduction Who invented the JSC What is a JPC Japanese Candlestick Candlestick patterns/How it is used The benefit of using JSC Review

Introduction This presentation will introduce you to the Japanese Candlestick. The JSC is a valuable tool used by spectators to analyze the trends of the currencies in the market. We will cover the importance of this tools, the patterns and charts associated with using the Japanese Candlestick.

Who invented the Japanese candlestick? The JSC is a technique that was originated by the Japanese for technical charting over 100 years ago. This was a valuable tool that the Japanese rice traders used. It is used in all financial market across the world.

What is a Japanese Candlestick Candlesticks provide a visual image that make price action easier to understand. It is a very valuable tool to help with charts. Trading with Japanese Candle Charts allows you to better comprehend market sentiment. They provide a greater depth of information as oppose to a typical bar chart. They illustrate the highs and lows – candlesticks highlights the relationship between close price and open price. JPC allows spectators to quickly identify different types of price action, which allows you to see a certain trend reversals or continuations in trends JPC if combined with other technical analysis tools, candlestick pattern analysis can be a very useful way to select entry and exit points

Candlestick formation These are standard candlestick formations. The high and the low prices on the candlesticks are called wicks, shadows or tails. The red and green of the candlestick is called the body.

Sample of Patterns

Bullish/Bearish engulfing candlestick The bullish engulfing candlestick is a major reversal pattern composed of 2 opposite colored bodies. The bullish engulfing pattern is formed after a downtrend. The green candle completely engulfs the previous days red candle. Engulfing can include either the open or the close being equal to the open or close of the previous day but not both.

Doji candlestick The doji is composed of one candle. The Japanese say when doji occurs one should take notice. It is one of the most important candlestick signals. The formation is created when the open and close are the same. This forms a horizontal line. It is an important alert at both the top and bottom of trends. At the top of a trend the doji signals a reversal without needing confirmation.

Inverted hammer/Shooting star The shooting star is also composed of one candle. It is easily identified by the presence of a small body with a shadow at lest two times greater than the body. This candle is found at the top of an uptrend. The following day needs to confirm the shooting star signal with a red candle or better yet a gap down with a lower close.

Hammers and Hanging Man The hanging man is also composed of one candle. It is easily identified by the presence of a small body with a shadow at least two times greater than the body. It is found at the top of an uptrend. The following day needs to confirm the hanging man signal with a red candle or better yet a gap down with a lower close.

Piercing pattern The piercing pattern is composed of two candle formation in down trending market. The first candle is red, a continuation of the existing trend. The second candle is formed by opening below the low of the previous day. It closes more than midway up the black candle, near or at the high for the day.

Dark cloud cover The dark cloud cover is the bearish counterpart to the piercing pattern. The first day of the pattern is a long green candle at the top end of a trend. The second days open is higher than the high of the previous day. It closes at least halfway down the previous days candle, the further down the green candle the more convincing the reversal.

Evening Star The evening star is a top reversal signal. It is exactly opposite of the morning star signal. It is formed after an obvious uptrend. It is made by a long green body occurring at the end of an uptrend, usually when the confidence has finally built up. The following day gaps up, yet the trading range remains small for the day. Again resents the fact that the bears have now seized control. That candle should consist of a closing that is at least halfway down the green candle of two days prior.

Spinning Top Spinning tops are depicted with small bodies relative to the shadows. This demonstrates some indecision on the part of the bulls and the bears. Spinning tops are considered neutral when trading in a sideway market. However in a trending or oscillating market a relatively direction of the opening price.

Marubozu Candlestick Marubozu means closed-cropped or close-cut. Bald or shaven head is more commonly used in candlestick analysis. A long red or green body candlestick with no shadows at either end is considered a marubozu candle. This candle is an extremely strong signal. Considered how it is formed.

Benefits of candlesticks Japanese candlesticks: Are easy to understand Anyone, from the person new to technical analysis to the seasoned professional trader can easily harness the power of candlestick charts. This is because, as will be shown later, the same data required to draw a bar chart (high, low, open and close) is used for a candlestick chart. Provide earlier indications of market turning points candlestick charts can send out reversal signals in a few sessions, rather than the weeks often needed for a bar chart reversal signal. Thus, market turns with candlestick charts will frequently be in advance of traditional indicators. This will help you to enter and exit the market with better timing. Furnish unique market insights candlestick charts not only show the trend of the move, as does a bar chart, but, unlike bar charts, candlestick charts also show the force underpinning the move. Can be used in all markets such as the stock market, forex market, or futures or commodity markets and can be a powerful trading tool for option trading. Are used by those who do day trading, swing trading, active investing and for investing.

Review The candlesticks that I showed you here are just some of the major candlestick signals, there are many more candlesticks patterns out there but I just focus on the major and more common ones. Once you develop the ability to read and understand what an individual candlestick is telling you, you will have a better understanding of traders sentiment. Candlestick charting is far more superior than any other method of charting and is easier to analyze. Candlestick analysis enhances an investors ability to prepare for trend changes. This is the holy grail of an successful trading program. Japanese candlestick charting dramatically increases the depth of information conveyed for visual analysis. Keep in mind that these signals are the results of hundreds of years of cultivation for the most important aspect-profits Credits: to Stephen bigalow