candlesticks for dummies: Why read Candlestick Charting for Dummies?


And knowing what may lie ahead can be the difference between a profitable trade and a flop. Although candlestick patterns alone have proven to be reliable trading tools, using them in combination with other indicators can greatly enhance their ability to predict the future direction of a market or a stock. In the rest of Part IV, I take some simple and complex patterns and combine them with pure technical indicators to show you how coupling the two techniques can lead to profitable trading. The chapters in this part are chock-full of fascinating real-world examples from a variety of markets and industries. Two-stick candlestick patterns are one step up from those basic patterns, but just a single step up in complexity can provide quite a bit of additional information and versatility.

moving average

  • And knowing what may lie ahead can be the difference between a profitable trade and a flop.
  • It’s important that you’re clear on the options and, perhaps more importantly, why candlestick charting is at the top of the heap.
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  • It is identified by the last candle in the pattern opening below the previous day’s small real body.
  • And the candlestick with the white candle indicates that there was more buying pressure than desire to sell.
  • I build understanding from the ground up, beginning with how to create individual candlesticks and finishing with how complex candlestick patterns can be combined with other forms of technical analysis.

The above candlesticks for dummies shows the same exchange-traded fund over the same time period. The lower chart uses colored bars, while the upper uses colored candlesticks. Some traders prefer to see the thickness of the real bodies, while others prefer the clean look of bar charts. You may have noticed that hardly anyone uses simple lines on a chart anymore—everyone uses candlesticks. When I was revising my own book, the technical advisor recommended just deleting the part about different types of standard bars and presenting only candlesticks.

Even after 15 years of trading experience, I still tend to paper trade new ideas or systems for a while before putting real money to work. Here are two common examples of bearish three-day trend reversal patterns. The bullish harami is the opposite of the upside down bearish harami. A downtrend is in play, and a small real body occurs inside the large real body of the previous day. If it is followed by another up day, more upside could be forthcoming. ​A bearish engulfing pattern develops in an uptrend when sellers outnumber buyers.

And the candlestick with the white candle indicates that there was more buying pressure than desire to sell. You can’t have a For Dummies book without a Part of Tens, and this book is certainly no exception. When you come across the Technical Stuff icon, you may skip ahead because this icon indicates information that’s additive to trading knowledge, but not essential to gaining knowledge about candlestick charting. I hope that the candlestick methods described in this book help readers to make trading and investment decisions that lead to solid profits, but unfortunately, there’s no guaranteeing that. What I can guarantee is that after reading this book , you can gain a useful understanding of what candlesticks are, what they represent, and how they can be used in trading.

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Both types of patterns are very useful because they tell you when to get into a trade, when to get out of a trade, when a trade you’re in may make no sense, and even when to hang onto a trade you’re already in. Check out Chapters 5 through 10 for more info on identifying and trading on a wide variety of candlestick patterns. Years ago, when I was playing around with my first quote machine on the floor of one of the Chicago exchanges, I came across the candlestick charting function.

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These two patterns are common examples of bullish three-day trend continuation patterns. These patterns are common and reliable examples of bullish two-day trend continuation patterns in an uptrend. For all orders shipped to eu countries, we accept returns up to 365 days after shipment and offer complimentary shipping. For orders shipped to non-eu countries, the customer must bear the return shipping costs. Please note, after we have received your return, refunds may take between 5–7 business days to show on your account.

You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. A slight variation of this pattern is when the second day gaps up slightly following the first long up day. Everything else about the pattern is the same; it just looks a little different. For example, a down candle is often shaded red instead of black, and up candles are often shaded green instead of white. Mutual Funds for Dummies Position your portfolio for growth with one of America’s bestselling mutual fund books.

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For orders shipped to non-EU countries, the customer must bear the return shipping costs. Even though the pattern shows us that the price is falling for three straight days, a new low is not seen, and the bull traders prepare for the next move up. Warren Buffett is public and candid about his investment choices.

Getting into securities trading is now easier than it ever has been, and the result is a whole generation of investors and traders that handle their finances without professional help. Technology allows these people to enjoy many new types of market information, and one of the best tools available is candlestick charting. I begin Part IV with Chapter 11, which offers a more in-depth discussion of several other technical indicators. It’s useful for any trader to understand a variety of indicators because you can use them alone, to confirm your candlestick signals, and in combination with candlestick patterns.


These charts are a few of the most common and reliable bullish two-day trend reversal patterns in an uptrend. ​A bearish harami is a small real body completely inside the previous day’s real body. This is not so much a pattern to act on, but it could be one to watch. If the price continues higher afterward, all may still be well with the uptrend, but a down candle following this pattern indicates a further slide.

Candlestick Charting for Dummies (Edition (Paperback)

Candlestick charts also feature specific patterns that you can identify and use to decide when it’s time to buy, sell, or wait on a trade or investment. These patterns can be a real boon to your work with securities, and you can combine them with other technical indicators for even more reliable results. Three-stick patterns are the most complex patterns that I deal with in this book, and their nuts and bolts are explained in this part.

This is the Dummies guide for beginner and intermediate investors who want to make smarter decisions with a better understanding of how to read candlestick charts. I don’t know of any traders or investors who’ve taken the time to fully understand candlestick charting and then not used the techniques in their trades. After you’ve taken the time to grasp candlestick basics, it’s tough to deny their advantages over other types of charts, and the profits can certainly speak for themselves.

The relationship between the days open, high, low, and close determines the look of the daily candlestick. Candlestick charts quickly clue you in on the type of buying and selling that’s been going on during a given period and where it may occur again. In many cases, the buyers continue to buy and the sellers continue to sell during subsequent periods or if the price reaches a level that has spurred them to action in the past. As a true candlestick devotee, I believe that you can gain far more insight into a period’s trading by looking at a candlestick than you can by looking at another type of charting tool.

Candlestick Charting For Dummies sheds light on this time-tested method for finding the perfect moment to buy or sell. It demystifies technical and chart analysis and gives you the tools you need to identify…show more. There’s also a lot of grammatical errors some of which gives inaccurate descriptions of how certain moving averages and indicators work together. I’m a fan of the for Dummies line but I have to admit I’m a bit disappointed because of the numerous errors.

patterns use indicators

This friendly, practical guide explains candlestick charting and technical analysis in plain English. Shows you how to work with common candlestick patterns and analyze data to make smart trading decisions. You’ll also learn to combine patterns with other indicators for more profitable trading.

I am a lot more after making it through this book from beginning to end despite them because I was able to build on the understanding of the candlesticks that I already had. Highly recommend «Japanese Candlestick Charting Techniques» Second Edition by Steve Nison. Candlestick charting methods have been around for hundreds of years, but candlesticks have caught on over the past decade or so as a charting standard in the United States. I think you’ll feel the same way, and this book is the first step on the path to conquering candlesticks.

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The emotional rollercoaster involved with making and losing money can’t be matched in a dry run. But if you’re a novice who’s just starting to understand the ways of the market, I think paper trading is a great idea. The risks are nil, and the educational benefits are outstanding.

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