CANDLE PATTERNS

Many people believe that high profit candlestick patterns are found by simply identifying the bars in the candle chart alone. However the truth is that while Japanese candlestick charting patterns are an excellent tool to use in your technical analysis, determining if they are high probability or not is dependent upon where they occur in the context of the chart.

Finding a doji, shooting star, dark cloud cover or hanging man candlestick is not enough for a high probability and high profit trading signal whether you are trading the stock market, futures for the Forex market.

This brief video demonstrates the concept that high profit candlestick patterns, by themselves, do not consistently produce reliable, profitable trading signals.

This is a very basic video for those fairly new to candle charts. If you’re looking for more advanced candlestick teaching I’ll be offering that in the future.

ORGIN OF CANDLESTICKS-1

In the early 1700s, a wealthy Japanese rice merchant, Munehisa Homma, developed a system of tracking and analyzing rice futures, which over time matured into the high profit candlestick patterns we know today. Homma is credited for creating or developing these specialized Japanese candlestick trading signals during the early history of the futures market.

Until about 1710, actual rice was traded from hand to hand. The futures market was developed with the idea that traders gave coupons or a promise to deliver rice at some future date. This quickly emerged as a very lucrative form of business so the futures market was born.

Homma’s business sense and ability to read the candle chart was unparalleled in his time. His ability to analyze the rice futures using what is now called Japanese candlestick charting techniques revolutionized trading and as such made him possibly the wealthiest trader in market history.

Terms like Dark Cloud Cover, Doji Candlestick, Shooting Star, and Hanging Man Candlestick are bantered about in trading circles probably with little thought for their humble beginnings in the rice trade and the infant futures market. What we are left with is a powerful collection of trading signals when we learn how to read candlestick charts for trading the futures, stock or Forex market.

The techniques that Homma began using 300 years ago can still be effectively used in today’s online trading environment as part of a complete technical analysis trading plan.

Here are some basic terms and concepts of the candlestick patterns:

A candle represents the high, low, open and close of a commodity, stock or currency for a certain period of time. Stocks, commodities and currencies can be traded in almost endless time frames such as 1, 5, 15 minute, 1 hour, 1 day, and 1 week time periods. For example on a one minute chart, one candle equates to how much the price moves on the market in one minute.

A bull candle, which is indicating increasing price, shows the opening price at the bottom of the body of the candle and the close price at the top of the body. Any extensions (called shadows or the wick of the candle) show the high and low price for that period.

A bear candle shows the opposite of the bull or a decreasing price: the top of the body of the candle indicates the opening price for that period and the bottom of the body of the candle indicates the close, with the shadow indicating the high and low price for that period.

The bullish Japanese candlestick pattern is usually color-coded green (close above the open)

The bearish Japanese candlestick pattern is usually color-coded red (close below open).

orgin of candlesticks

Much study has been devoted to Japanese candlestick charting techniques. Steve Nison originally made detailed analysis of these trading signals and traders ever since have benefited from some form of his work.

In trading software, a chart moves or updates according to the chosen time period and as the candle pattern reflects the ups and downs of the market, in time a trader can learn how to read candlestick charts.

The market is driven by many things, most notably national and international news and economic forecasts. Traders react in certain ways and the chart patterns show up in the candle chart. As candles appear in relation to one another, they form patterns that show trends and thus help traders make decisions of when to enter and when to exit a trade.

In this way, traders get a feel for the market and can make educated determinations as to when to buy or sell. Buying and selling stocks, futures and the Forex market is a difficult business but experienced traders have managed to reduce a certain amount of the risk by using the Japanese candlestick charting techniquesdevised by Homma and brought to the West by Steve Nison.

Here are a few examples of well-known candlestick patterns:

A Hammer candlestick may appear as the market is moving down, indicating a change trend and a possible bottom being put in place. It has a short body with a long wick below the real body indicating a possible rejection of the prices below it. If there are other indications confirming the candlestick pattern, a trader may then decide to enter a long position in the Forex market or buy stock, futures or options.

On the other hand, the Hanging Man (which is the same single candlestick pattern, but occurs while a market is moving up) indicates the opposite – that the trend may change and start going down or bearish.

A Doji is a candle that has no body – the open and close were the same. One may still consider it bullish or bearish depending on the length of the wick (or “shadow”) and whether there is a longer wick above or below the real body, as well as where it occurs in the overall chart pattern.

Another popular candle pattern is the Spinning Top. Here the candle body is small and the wicks on both ends are longer than the body. This pattern indicates uncertainty in the market so the trader will likely wait.

These are only a few of multitudes of candlestick types which play a part in how traders use Japanese candlestick charting patterns to help them make their trading decisions.

Candlestick techniques are just one aspect of technical analysis and so should not be used exclusively to make trading decisions. One must also consider support and resistance, the larger trend, cycles, momentum and other time frames.

Intraday

"POSITIONAL SELL DCB BELOW 60
TGT 54-53 / 49-47 CARRY SL 63 CLOSING
EXIT INTRADAY IF CLOSE ABOVE 60
CASH LEVELS
USE INTRADAY RISE TO SHORT NIFTY - SL 5580 CLOSING NIFTY SPOT

OUT OF 14 COUNTER 7 COUNTERS ACTIVE ON BREAK BELOW RATE ALL CASH LEVELS
AXISBANK-1300, BHUSGNSTL-438, HDFC-710, IDFC-132.30, INFY-2960 , JSWSTEEL-875, POWERGRID-108, TATASTEEL-590
IF CLOSING ABOVE THE ABOVE RATES THEN EXIT - ELSE HOLD FOR TGT

FOLLOWING COUNTERS WILL GET ACTIVE ON BREAK BELOW
IFCI - 46.40, TATAPOWER - 1270, RELCAP- 578, RCOM - 96.40, KOTAKBANK - 470


POSITIONAL SHORT 14 COUNTERS - ALL CASH LEVELS
TATASTEEL, TATAPOWER, SIEMENS, RELCAP, RCOM POWERGRID
KOTAKBANK, JSWSTEEL, INFY, IFCI, IDFC, HDFC, BHUSANSTL, AXISBANK
SELL BELOW ???? SL ???? TGT ???? MORE ????"