Transcript
Page 1: Candlesticks Pattern Masterclass...Candlesticks Pattern Masterclass. Candlesticks Pattern Masterclass. Disclaimer. 2. The information in this webinar is for general information purposes

Candlesticks Pattern Masterclass

Page 2: Candlesticks Pattern Masterclass...Candlesticks Pattern Masterclass. Candlesticks Pattern Masterclass. Disclaimer. 2. The information in this webinar is for general information purposes

Disclaimer

2

The information in this webinar is for general information purposes only and

is provided on an “as is” basis without any representations or warranties of

any kind. The information does not constitute legal, financial, trading or

investment advice and it does not make any recommendation or

endorsement regarding any and all products mentioned. All participants of

the presentation and persons reading the information in these presentation

slides are advised to seek independent advice and/or consult relevant laws,

regulations and rules prior to relying on or taking any action based on the

information presented. All examples and views expressed are entirely the

presenter’s own.

Bursa Malaysia Berhad, the Bursa Malaysia group of companies (the Company)

and the presenter do not accept any liability for: the information provided

during the presentation and in the presentation slides (including but not

limited to any liability pertaining to the accuracy, completeness or currency

of the information); and for any investment or trading decisions made on the

basis of this information.

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Speaker Profile

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What’s Covered Today

✓ Introduction to Price Action

✓ The use of candlesticks in history

✓ How to measure the power of Price Action with a candlestick?

✓ Bullish reversal pattern

✓ Bearish reversal pattern

✓ Volume to confirm candle movement

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Trading Skill1. Trading Psychology

2. Analytical and Decision Making

- Fundamental or Technical

3. Money Management

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Trading Price Forecasting • Technical Or Fundamental

• Timing – Purely Technical

• Money Management

• Betting Size, cut loss or take profit

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Trading decision• Price – Buy (Entry)

Sell (cut Loss or Take Profit)

• Time – Holding Period

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Trading decision• E – Entry

• T – Target

• E – Exit

• T - Time Frame

E. T. E. T

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Trader’s Style

• Position Trader – Months to years

• Swing Trader - Days to weeks

• Day Trader - One day only

• Scalp Trader - Seconds to minutes

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Japanese Candlestick

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Japanese Candlestick

• Used in 1600 by Japanese traders

• Notable trader is Munehisa Homma

• He made a killing in trading rice markets in Osaka Rice

Exchange (used to make 100 consecutive winning trades)

• Used by Americans since 1980’s

• “Japanese Candlestick Charting Technique” by Steve Nison

• “Japanese Charts Of Charts” – Seiki Shimizu translated by

Greg Nicholson

• “Always consult the Market about the market” – Seiki

Shimizu

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Advantages Of Japanese Candlestick

• Leading Indicator

• Pick top and bottom

• Pictorial

• Adaptability To Any Trading Medium

• Time Tested (over 300 years)

• Describe traders psychology at one point of time

• Give explicit buy and sell signal

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History

1.Said to be founded by Munehisa Homma (1724-

1803) came from Sakata.

2.Actively traded the rice coupon (futures) market

3.Given control of his family business in 1750.

4.Began trading at his local rice exchange in the port

city of Sakata.

5.When to Dojima Rice Exchange (Osaka) and began

trading rice futures.

6.Died in 1803.

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daily bar chart

candlestick

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BAR CHART VS JAPANESE CANDLESTICK

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LINE VS CHANDLESTICK CHARTS

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19Rōsoku ashi

Yoh Inn

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How to measure Price Action with a candlestick?

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Candlestick

1. Colour• White – bullish

• Black bearish

2. Size and Range• Bigger means more volatile

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3. Range of the body• Body size indicates the strength of either bull or bear

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4. Range of upper shadow and lower shadow

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Bull VS Bear

1. Long white candlesticks indicate that the Bulls controlled the ball (trading) for most of the game.

2. Long black candlesticks indicate that the Bears controlled the ball (trading) for most of the game.

3. Small candlesticks indicate that neither team could move the ball and prices finished about where they started.

4. A long lower shadow indicates that the Bears controlled the ball for part of the game, but lost control by the end and the Bulls made an impressive comeback.

5. A long upper shadow indicates that the Bulls controlled the ball for part of the game, but lost control by the end and the Bears made an impressive comeback.

6. A long upper and lower shadow indicates that the both the Bears and the Bulls had their moments during the game, but neither could put the other away, resulting in a standoff.

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LONG CANDLE

SINGLE CANDLE

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There are many different types of candlesticks

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LONG CANDLESTICKS

WHITE – BULLLISH

BLACK - BEARISH

Reversal and Continuation

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1

1. Bullish Morubozu

2. Long Candle

3. Bearish Morubozu

2

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Reversal and Continuation

DOJI (Blunder Or Mistakes)

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DOJI

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GRAVESTONE DOJI

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Long Candle

Short Candle

Volume

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How to measure the power of Price Action with a candlestick?

• Candlesticks are sensitive and it requires only 1,2 or 3 candles.

1. Short term Analysis

2. Reversal

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Hammer

1.Can be recognized by three criteria:

a.The real body is at the upper end

of the trading range. The color of

the real body is not important.

b.It has a long shadow that should

be at least twice the heights of

the real body.

c.It should have no, or very short,

upper shadow.

2.Bullish ramification.

3.Need a falling trend to reverse.

4.Confirmation: a close above the

hammer.

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Hammer

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Chin Hin Group Bhd (0.44500, 0.46000, 0.41500, 0.46000, +0.00000)

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Chin Hin Group Bhd (1.16000, 1.20000, 1.16000, 1.20000, +0.05000)

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Reversal pattern

Hanging Man

1. Can be recognized by three criteria:

a.The real body is at the upper end of

the trading range. The color of the

real body is not important.

b.It has a long shadow that should be at

least twice the height of the real

body.

c.It should have no, or very short, upper

shadow.

2. Bearish ramification

3. Need a rising trend to reverse.

4. Confirmation: a close below the hanging

man.

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March

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0.630Eversendai Corporation Bhd (0.54000, 0.54500, 0.52500, 0.54500, +0.01000)

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0.630Eversendai Corporation Bhd (0.25500, 0.26000, 0.25000, 0.26000, +0.00000)

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Reversal pattern

1. Can be recognized by three criteria:

a.The real body is at the lower end

of the trading range. The color of

the real body is not important.

b.It has a long shadow that should

be at least twice the height of

the real body.

c.It should have no, or very short,

lower shadow.

2. Bullish ramification.

3. Needs a falling trend to reverse.

4. Confirmation: a close above the

hammer.

Inverted Hammer

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Reversal pattern

1. Can be recognized by three criteria:

a.The real body is at the upper end

of the trading range. The color of

the real body is not important.

b.It has a long shadow that should

be at least twice the height of

the real body.

c.It should have no, or very short,

lower shadow.

2. Bearish ramification.

3. Need a rising trend to reverse.

4. Confirmation: a close below the

hammer.

SHOOTING STAR

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Techbond Group Bhd (0.88436, 0.89840, 0.87500, 0.87500, -0.00468)

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Reversal pattern

1. Three criteria for an engulfing pattern:

a. The market is in a clearly definable trend.

b. The second real must engulf the prior real

body (it not need to engulf the shadows)

c. The second real body should be opposite

color of the first real body.

2. In the bar chart known as Outside day.

3. Factors increasing likelihood of engulfing

pattern could be an important turning signal

a. First fay candle has a very small real body

and second day has a very long real body.

b. Appear after a very fast move/overextended

market.

c. Heavy volume of the second real body.

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Reversal pattern

1. Three criteria for an engulfing pattern:

a.The market is in a clearly definable trend.

b.The second real body must engulf the prior

real body (it need not engulf the shadows)

c.The second real body should be the opposite

color to the first real body.

2. In the bar chart known as Outside day.

3. Factors increasing the likelihood of an

engulfing pattern could be an important

turning signal

a.First day candle has a very small real body

and second day has a very long real body.

b.Appears after a very fast move/

overextended market.

c.Heavy volume of the second real body.

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Reversal pattern

1. Three criteria for an engulfing pattern:

a.The market is in a clearly definable trend.

b.The second real body must engulf the prior

real body (it need not engulf the shadows)

c.The second real body should be the

opposite color of the first real body.

2. In the bar chart known as Outside day.

3. Factors increasing likelihood of engulfing

pattern could be an important turning signal

a.First day candle has a very small real body

and second day has a very long real body.

b.Appear after a very fast move/

overextended market.

c.Heavy volume of the second real body.

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Eversendai Corporation Bhd (0.25500, 0.26000, 0.25000, 0.26000, +0.00000)

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Reversal pattern

1. The first candle is a strong white real body.

2. The second day’s price opens above the prior

session’s high. However closes within the prior day’s

white body.

3. If the close is more than 50% into the prior white

candle, it’s more powerful.

4. Bearish ramification.

5. Factors intensifying the importance:

a. The greater penetration of the black real body’s

close into the prior white body.

b.The first day is a white morubozu and the

second day is a black morubozu.

c. If the second body opens above a major

resistance and then fails.

d. If on the opening of the second day, there is very

heavy volume, then a buying blow off could have

occurred.

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Reversal pattern

Piercing Pattern

1. The first candle is a strong red real body.

2. The second day’s price opens below the prior session’s low. However closes within the prior day’s red body.

3. If it closes more than 50% into the prior red candle, it’s more powerful.

4. Bullish ramification.

5. Factors intensifying the importance:

a. The greater penetration of the green real body’s close into the prior red body.

b.The first day is a red morubozu and the second day is a green morubozu.

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3.4

3.5

3.6

3.7

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3.9

4.0

Telekom Malaysia Bhd (3.29000, 3.54000, 3.10000, 3.52000, +0.16000)

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23 30 6 13 20 27

September

4 11 18

October

25 1 8 15

November

22 29 6 13 20

December

27 3 10

2020

17 24 31 7 14 21

February

28 6 13

March

20 27 3 10

April

17 24 1 8

May

15 22 29 5 12

June

19 26 3 10

July

17 24

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35000

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4.3

4.4

4.5

4.6

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3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

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4.1

4.2

4.3

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4.5

4.6Telekom Malaysia Bhd (3.71000, 4.25000, 3.68000, 4.15000, +0.47000)

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Reversal patternMorning Star

1. Bottom reversal pattern (Bullish)

2. Has three candles

a. Candle 1: An extended black real body. (The bears

are in command.)

b.Candle 2: A small body that doesn’t touch the

prior real body. (Sellers are losing capacity to

drive the market lower)

c. Candle 3: A white real body that intrudes deeply

into the first session black candle. (Bulls has

seized control)

3. Factors intensifying the importance:

a. If there is no overlap among the first, second and

third real bodies.

b. If third candle close deeply into the first real

candle’s real body.

c. If there is light volume on the first candle session

and heavy volume on the third candle session.

4. The low of the star becomes a support.

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25 4

March

11 18 25 1

April

8 15 22 29

May

6

50005000

0.535

0.540

0.545

0.550

0.555

0.560

0.565

0.570

0.575

0.580

0.585

0.590

0.595

0.600

0.605

0.610

0.615

0.620

0.625

0.630

0.635

0.640

0.645

0.535

0.540

0.545

0.550

0.555

0.560

0.565

0.570

0.575

0.580

0.585

0.590

0.595

0.600

0.605

0.610

0.615

0.620

0.625

0.630

0.635

0.640

0.645Tiong Nam Logistics Holdings Bhd (0.54500, 0.57000, 0.54000, 0.57000, +0.02500)

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25 4

March

11 18 25 1

April

8 15 22 29

May

6 13

50005000

0.535

0.540

0.545

0.550

0.555

0.560

0.565

0.570

0.575

0.580

0.585

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0.600

0.605

0.610

0.615

0.620

0.625

0.630

0.635

0.640

0.645

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0.540

0.545

0.550

0.555

0.560

0.565

0.570

0.575

0.580

0.585

0.590

0.595

0.600

0.605

0.610

0.615

0.620

0.625

0.630

0.635

0.640

0.645Tiong Nam Logistics Holdings Bhd (0.59000, 0.60000, 0.57000, 0.57000, -0.01500)

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Reversal pattern

1. Bottom reversal pattern (Bearish)

2. Has three candles

a. Candle 1: An extended white real body. (The bulls are in

command.)

b. Candle 2: A small body that doesn’t touch the prior real body.

(Buyers are losing capacity to drive the market higher)

c. Candle 3: A white real body that intrudes deeply into the first

session white candle. (Bears have seized control.)

3. Factors intensifying the importance:

a. If there is no overlap among the first, second and third real

bodies.

b. If third candle close deeply into the first real candle’s real

body.

c. If there is light volume on the first candle sessions and heavy

volume on the third candle session.

4. The high of the star becomes a resistance.

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Reversal pattern

1. Bottom reversal pattern (Bearish)

2. Has three candles

a. Candle 1: An extended white real body. (The bulls are

in command.)

b. Candle 2: A small body that doesn’t touch the prior

real body. (Buyers are losing capacity to drive the

market higher)

c. Candle 3: A white real body that intrudes deeply into

the first session white candle. (Bear has seized

control.)

3. Factors intensifying the importance:

a. If there is no overlap among the first, second and third

real bodies.

b. If third candle close deeply into the first real candle’s

real body.

c. If there is light volume on the first candle sessions and

heavy volume on the third candle session.

4. The high of the star becomes a resistance.

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19 3

May

17 31 14

June

21 5

July

19 2 16

August

23 6 20

September

4 18

October

25 8 22

November

29 13 27

December

3

2020

17 31 14

February

28

March

50000

10000

20000

x10

0.41

0.42

0.43

0.44

0.45

0.46

0.47

0.48

0.49

0.50

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0.52

0.53

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0.57

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0.59

0.60

0.61Tiong Nam Logistics Holdings Bhd (0.49500, 0.49500, 0.47500, 0.48000, -0.02000)

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September October November December 2020 February March April May June July August September

50000 10000

20000

x10

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.25

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0.50

0.55Tiong Nam Logistics Holdings Bhd (0.40500, 0.40500, 0.39500, 0.39500, -0.01500)

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Reversal pattern

BULLISH HARAMI

1. A small real body that is contained within

a long candle.

2. Harami is the Japanese word for pregnant.

3. Comparable to Western Inside day.

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7 14 22 28 4

February

11 18 25 4

March

15000

20000

25000

5000

10000

x10

P

0.42

0.43

0.44

0.45

0.46

0.47

0.48

0.49

0.50

0.51

0.42

0.43

0.44

0.45

0.46

0.47

0.48

0.49

0.50

0.51

Nextgreen Global Bhd (0.51000, 0.52000, 0.49000, 0.50000, -0.01500)

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28 29 30 31 4

February

7 8 11 12 13 14 15 18 19 20 21 22 25 26 27

15000

20000

25000

5000

10000

x10

P

0.4300.4350.440

0.4450.4500.455

0.4600.465

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0.4850.490

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0.4700.4750.480

0.4850.490

0.4950.5000.505

0.5100.515

0.520Nextgreen Global Bhd (0.40500, 0.45500, 0.40000, 0.44000, +0.05000)

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Reversal pattern

BEARISH HARAMI

1. A small real body that is

contained within a long candle.

2. Harami is the Japanese word for

pregnant.

3. Comparable to Western Inside

day.

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Reversal pattern

Tweezer Tops and Bottoms

1. In an uptrend, a tweezer top is formed

when two or more consecutive highs

match.

2. In a downtrend, a tweezer bottom is

formed when two or more consecutive

lows match.

3. The tweezer could be composed of real

bodies, shadows or dojis.

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Reversal pattern

Tweezer Tops and Bottoms

1. In an uptrend, a tweezer top is formed

when two or more consecutive highs

match.

2. In a downtrend, a tweezer bottom is

formed when two or more consecutive

lows match.

3. The tweezer could be composed of real

bodies, shadows or dojis.

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Reversal pattern

Tweezer Tops and Bottoms

1. In an uptrend, a tweezer top

is formed when two or more

consecutive highs match.

2. In a downtrend, a tweezer

bottom is formed when two

or more consecutive lows

match.

3. The tweezer could be

composed of real bodies,

shadows or dojis.

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Continuation PatternWindows / Tasuki

1. Upward gapping tasuki is made of

a rising window formed by a white

candle and then a black candle.

The black candle opens within the

real white body and closes under

the white candle’s real body.

2. Downward gapping tasuki is made

of a rising window formed by a

black candle and then a white

candle. The white candle opens

within the real white body and

closes above the black candle’s

real body.

3. The two candles of the tasuki

should be about the same size.

4. Rare.

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Continuing Pattern

Rising three method

1. Composed of

a. A long white candle.

b.Followed by a group of falling/lateral

small real body candles. Ideally two

or three small candles, also

acceptable if the hold within the long

white candle’s high-low range.

c. The final day should be a strong

white real body with a close above

the first day’s close.

2. Resembles Western bull flag/pennant.

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Continuing Pattern

Falling three method

1. Composed of

a.A long black candle.

b.Followed by a group of falling/lateral

small real body candles. Ideally two or

three small candles, also acceptable if

the hold within the long black candle’s

high-low range.

c. The final day should be a strong black

real body with a close above the first

day’s close.

2. Resembles Western bear flag/pennant.

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Facts about Japanese Candlesticks

Candlesticks are a true leading indicator. They regularly identify potential market

price moves before they begin to happen.

Candlesticks are attuned to the short term trend (3 to 15 trading sessions) when

charted on a Daily basis. To apply candlestick to longer term trending markets,

one must use a Weekly or Monthly chart.

Candlesticks can be applied to any other Western technical oscillators to produce

a synergistic trading approach.

Candlesticks are the only technical analysis tool that generates intuitive text

messages (results) about the inner psychology of any market.

Candlesticks have been relatively unknown, except in Japan, for the last three

centuries.

Candlesticks use the same price data as bar charts, yet the candlestick technique

better promotes the ability to recognize complex patterns and to identify what

these patterns mean.

The Japanese candlestick technique consists of hundreds of different patterns that

accurately identify specific market traits or tendencies.

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Candlestick Analysis Rules & Suggestions

As one learns to interpret the different candlestick patterns, one should always keep in mind the

following rules to assist in the proper identification and possible actions taken from the patterns. There

are three simple rules to interpreting candlestick patterns:

1. Size

Larger candles play an important role when identifying patterns. They represent accumulation or

distribution within the market or stock. When you begin to see an increase in size of the candles, the

trend is accelerating and accumulation is occurring. When you begin to see a decrease in the size of

the candles, the trend is decelerating and distribution is occurring.

2. Shape

The shape of the candlestick, or pattern, determines the type of pattern generated, the possible

trading signal and the potential direction of trend. Shape and size work hand-in-hand. A very small

Engulfing Bullish pattern would indicate the potential for a market rally, yet the small size indicates

that the trend has not yet begun to accelerate.

3. Location

The location of a candlestick pattern will assist in determining the possible trading signal. For example,

a Shooting Star found after a defined up trend strongly indicates a potential bearish correction or top.

A Piercing Line found after a defined down trend indicates a potential for a bullish reversal. Either of

these two patterns found within a consolidated, sideways trend, do not indicate as strong a potential

for a trend reversal, and one should wait for confirmation of the candlestick pattern before taking

action.

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Bullish Candlestick reversal pattern

• Tweezer bottom

• Bullish harami

• Bullish engulfing

• Morning star

• Abandon baby

• Piercing line

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Bearish reversal pattern

• Tweezer top

• Harami bearish

• Bearish engulfing

• Evenng star

• Abandon baby

• Dark cloud

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DISCLAIMER:

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