Candlestick Charting Techniques

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Candlestick Charting Tips & Tricks

Japanese Candlestick Charts can be used to show price action of stocks, bonds, options, and (my personal favorite) Forex. They show the same information as bar charts, but in a more colorful format that I find easier to read.

Great Candlestick Charting Sites!
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The Basics

How to Read a Candlestick

Candlestick charts usually consist of candles of two different colors. One represents price going up, one represents price going down.

In the example below, the candle showing price moving up is green, and the candle showing price moving down is red:

By using candlestick charts, you can easily read 4 things about the price movement:

OHLC - Open, High, Low, and Close

The lines sticking out above and below the candles are the "tails." The tails represent the high and low of the price movement.

The colored center of the candle is called the "body." The body shows the open and close price.

An Up Candle closes higher than it opens.

A Down Candle closes lower than it opens.

Reversal Candlestick Patterns

Several candlestick patterns signal reversals in price. Reversals don't always occur when you see these candle patterns, but if you see them after a long run up, or a long run down in price, check your other technical indicators, and be on the watch for a reverse in price!

Candlestick Reversal Patterns are easy to remember, because they are named for items that they look like.

One of my favorite reversal patterns is RailRoad Crossing:
This candlestick pattern looks similar to a railroad crossing sign, because it is two long body candles of opposite colors.

Another excellent reversal candlestick pattern is Hammer:
Notice how the candles look like hammers? A Hammer candlestick will have one long tail, with a small body at the end closest to price action.

My other favorite reversal pattern is Spinning Top:
A Spinning Top candle has long tails on both ends with a relatively small body toward the middle of the candle.

A Spinning Top with little or no colored body is called a "Doji."

Candlestick Reversal Patterns in Action

This is an actual Forex chart. Check out these candlestick reversal patterns...

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Want To Learn More?

Candlestick charting can be used for any type of trading. My personal favorite is Forex Trading. If you are interested in learning to trade Forex, I highly recommend Peter Bain's ForexMentor Program. This is an excellent training program, simple enough for beginners to learn, yet packed with so much information, even seasoned traders will love it.

Preview ForexMentor Program

Here is a sneak peak of the wealth of information available with Peter Bain's ForexMentor Program.

Price Action - Technical Analysis = Money Aug.2/07

http://www.forexmentor.com/ AUD/USD Aug. 2, 2007

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