1. Japanese Candlesticks
Ron William
Technical Analyst

2. Brief History
Market timing, charting, behavioural finance & quantitative analysis.
Methodology dates back to 1600s, originally used by Japanese rice farmers to monitor and forecast crop prices.
Famous trader named Homma (aware of supply/demand links), realised the markets were strongly influenced by emotions.
Introduced to the west in 1990 by Steve Nison, a leading expert in candlestick analysis.

3. Constructing the Candle Line
Bullish Candle White Real Body
Bearish Candle
Black Real Body
High
High
Upper Shadow
Close
Open
Real Body
Open
Close
Lower Shadow
Low
Low

4. The Real Body is the essence
of market psychology

5. Basic Candles Long Day Doji Spinning Top High Wave Strong buy/sell
Midpoint used as
support/resistance
Open and close
are narrow/same
Market is tired
1. Small real body
2. Colour not imp.
Prior trend weak
1. Small real body
2. Colour not imp.
3. Long shadows
Indicates confusion

6. Powerful Candles

7. Doji Criteria: Open and close are narrow or the same
Psychology: Market is “tired”

8. Doji
Silver (Weekly Chart)
Doji hints market is “tired” 5 3 4 2 1

9. Doji in box range USD/ZAR (Daily Chart)
Series of doji within box range merely sets tone

10. Single Line Hammer Shooting Star 1. Lower Shadow 2X 1. Upper Shadow 2X
length of Real Body
2. RB at upper end,
colour not important
3. No/very small upper
shadow
4. Confirmed with a
strong bullish day
1. Upper Shadow 2X
length of Real Body
2. RB at lower end,
colour not important
3. No/very small lower
shadow
4. Confirmed with a
strong bearish day
Hammering a base
Trouble overhead

11. Hammer
GBP/USD (Daily Chart)
Support

12. Shooting Star Wheat (Weekly Chart) Risk? Selling on close
implies risking
the pattern high
Sell?
Preferred Sell

13. Dual Line Engulfing Dark Cloud Cover Piercing Line
1. Downtrend evident
2. Session opens <
prior low
3. Bullish RB closes
>50% into bearish RB
1. Large RB wraps
around small RB
2. Opposite colours
3. Up/Down trend
1. Uptrend evident
2. Session opens >
prior high
3. Bearish RB closes
> 50% into bullish RB
Arresting control
Sentiment reversal
Sentiment reversal

14. Bullish Engulfing
Kuwait Stk Mkt (Weekly Chart)

15. Dark Cloud Cover
Palladium (Weekly Chart)
Midpoint
Sell

16. Three Line Morning Star Evening Star 3 White Soldiers 3 Black Crows
1. Downtrend evident
2. Bearish session
is followed by
indecision.
3. Bulls close > 50%
into prior Bear RB
1. Uptrend evident
2. Bullish session
is followed by
indecision.
3. Bears close > 50%
into prior Bull RB
1. Three bullish RB’s,
all of similar size
2. Prior trend is down
3. Each session opens
with recent RB &
closes near high
1. Three bearish RB’s,
all of similar size
2. Prior trend is up
3. Each session opens
with recent RB &
closes near lows
Upside reversal
Downside reversal
Uptrend
Downtrend

17. Western charting Optimises and confirms Price targets
Support and Resistance
Trend-lines
Price Patterns
Moving Averages
Oscillators
Elliott Wave

18. Moving Averages Gold (Weekly Chart) 70-week average Hammer
Piercing Line
High-wave
70-week average
Piercing Line

19. 3 White Soldiers (variant)
Price Patterns
Soybean (Daily Chart)
3 White Soldiers
Shooting Star
Shooting Star
3 White Soldiers
Morning Star
Bullish Engulfing
3 White Soldiers (variant)

20. Confluence
EUR/USD (Daily Chart)
61.8%
50%
Measured Objective
38.2%

21. Relative Strength Index
CRB (Weekly Chart)

22. Bollinger Bands Oil (Daily Chart) Bearish Engulfing Hammer Hammer
Dark Cloud Cover
Dark Cloud Cover
Bullish Engulfing
High-Wave
Hammer

23. Elliott Wave
(3)
Gold (Daily Chart)
(4)?
(1)
(2)

24. Corrective Wave (4)? Gold (Weekly Chart) (3) (4)? Dark Cloud Cover
Hanging Man
(4)?
Piercing Line
Hammer

25. Trading Rules Wait for the session’s close to confirm
DO NOT use candles in isolation
Always consider Risk/Reward ratios before placing a trade with a candle signal
Candles DO NOT offer price targets
Remember the importance of stops 1

26. Candle Analysis Unrivaled in Gauging Market Psychology
Human Emotion Drives the Market
Candle Analysis Unrivaled in Gauging Market Psychology
Presentation slides designed by Ron William