Candlestick Charting

Gambar Tengku Mahmud Zuhdi Al-Fathani r.a

Candlestick charting was developed by Japanese rice traders over four centuries ago and could quite possibly be the oldest form of technical analysis. Since technical analysis is not only predicting probable price moves but also assessing market psychology, candlestick charting is probably the best tool to give the trader these answers in the shortest amount of time. Once a trader becomes familiar with candlestick charting, he or she can get a quick and highly visual signal because of the story candlesticks tell. Strict adherers to candlestick methodology take positions based on very short term patterns given by candlestick tradition. While candlestick charting is relatively unknown, and therefore unpracticed by the common investor, their use among active traders is growing. The greatest benefit candlestick charts provide the technical analyst is the ease of use and interpretation. The same price action, quickly seen using candlestick charts, may go unnoticed while scrolling through bar charts.

While analysis of chart patterns takes experience and some practice, so too will candlesticks. However, after learning the basic signals, candlesticks can provide the novice trader a shorter learning curve and also shorten the learning curve to chart reading in general. I like using bar charts to find chart patterns, and then switch to candlesticks for a closer look. Candlestick charts are especially useful when analyzing areas of consolidation such as triangles and flags for signs of
reversal or continuation. The major signals in candlestick theory are reversal signals. Some of these signals are considered so strong by serious candlestick practitioners; they will enter a trade based on its signal alone, without the need for conformation. Since our trading style is to confirm everything, we won’t act on the signal alone, although we will pay close attention.

Our goal will be to teach you candlestick methods in their purest form, so we will alert you to the signals in which no conformation is said to be necessary. We will also break down each signal, expanding on its psychological implications on the chart. Our objective will be to not only educate you in the proper use of candlesticks, but also give plenty of examples of their improper use within a chart formation or pattern.