Japanese Candlestick Charting - Traders Edge India
Candlestick charts show the same information as bar charts but in a graphical format that provides a more detailed and accurate representation of price action.
Meaning At first, due to the gap down at the open, it seems that the downtrend will continue and the price will drop further. The atmosphere is bearish. Although the bulls step in and rally the prices up briefly, they’re weak and the price is ultimately pushed very low, closing near to where it opened. To confirm that a bullish reversal will occur, check for a higher open during the next trading period.
The chart below of Wal-Mart (WMT) stock shows many instances of gaps up and gaps down. Notice how gaps down can act as areas of resistance and gaps up can act as areas of support :
In this first example, you can spot numerous doji throughout the timeframe of the candlestick chart. We’ve marked three prominent examples, two of which are long-legged doji that foreshadow strong reversals. After each of these moments of indecision, a reversal occurs. The first is quite significant, while the second is slightly less impressive. Notice how other doji within the chart do not foreshadow reversals. The key is to look for doji that follow an uptrend or downtrend.
Generally speaking, the longer the body is, the more intense the buying or selling pressure. Conversely, short candlesticks indicate little price movement and represent consolidation.
Just above and below the real body are the "shadows". Chartists have always thought of these as the wicks of the candle, and it is the shadows that show the high and low prices of that day's trading. If the upper shadow on the filled-in body is short, it indicates that the open that day was closer to the high of the day. A short upper shadow on a white or unfilled body dictates that the close was near the high. The relationship between the day's open, high, low and close determines the look of the daily candlestick. Real bodies can be either long or short and either black or white. Shadows can also be either long or short.
For the same reasons as you find with the Doji patterns, these three show that either buyers or sellers tried to gain the upper hand, and then were overwhelmed, and a trend reversal follows.
So the candlestick looks like an inverted cross, a simple cross, or plus sign. The doji conveys an even struggle between the forces of the market, both side pushing with no net gain is achieved. The doji can be both a reversal pattern and a continuation pattern.
Two additional things that traders will look for to place more significance on the pattern are a long lower wick and an increase in volume for the time period that formed the hammer.
Japanese Candlestick Trading Patterns on Forex Charts show the same information as bar charts but in a graphical format that provides a more detailed and ...
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Usually the Doji candle signifies indecision in the market. Neither the Bulls nor the Bears can move price in one direction and this causes price to fluctuate up and down during the period and eventually close almost in the same point where it opened. If after a strong, prolonged move in one direction, several Doji candles appear, we must be aware of a possible reversal, but given that the Doji is mainly a indecision sign, price can go either way because eventually one of the two sides will win the battle.
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.