Steve Nison goes through all of the major Candlestick patterns here. And, he shows you close calls as well. This is great, because the real world does not always have what is in the pretty picture in your book. Pdf see what candlesticks friends thought of this book, please nison up.
To ask other readers questions about Japanese Candlestick Charting Techniquesplease sign opciones y finanzas corporativas. Bulkowski J Your name. Close Send. Remember me Forgot password? Our partners will collect data and use cookies for ad personalization and measurement. Learn how we and our ad partner Google, collect and use data. I wrote follow-up articles, gave numerous presentations, taught classes, and was interviewed on televi- sion and by newspapers across the country.
In early , I wrote a short reference piece for my Chartered Market Technician thesis about candle- stick charts. It contained very basic introductory material, but it was the only readily available information on candlestick charts in the United States.
This handout became very popular. Within a few months, Merrill Lynch, the publisher of the booklet, received over 10, requests. Was it the lack of information in the United States? I don't know the answer, but it has taken years of research to fit all the pieces together.
I was fortunate in several ways. Introduction Perhaps my perseverance and serendipity were the unique combination needed that others did not have. In , I became acquainted with a Japanese broker. One day, while I was with her in her office, she was looking at one of her Japanese stock chart books Japanese chart books are in candlestick form.
She exclaimed, "look, a window. She told me a window was the same as a gap in Western technicals. She went on to explain that while Western technicians use the expression "filling in the gap" the Japanese would say "closing the window. I spent the next few years exploring, researching, and analyz- ing anything I could about candlestick charts. It was not easy. There are scant English publications on the subject. My initial education was with the help of a Japanese broker and through drawing and analyzing candlestick charts on my own.
It was a Japanese booklet which had been translated into English. Unfortunately, there were just ten pages on interpreting candlestick charts. Nonetheless, I finally had some English candlestick material.
A few months later, I borrowed a book that has had a major influence on my professional life. It contains about 70 pages on candle- stick charts and is written in English. Reading it was like finding an oasis in a desert. As I discovered, while the book yielded a harvest of information, it took some effort and time to get comfortable with its concepts.
They were all so new. I also had to become comfortable with the Japanese ter- minology. The writing style was sometimes obscure. Part of this might have resulted from the translation. The book was originally written in Japanese about 25 years ago for a Japanese audience. I also found out, when I had my own material translated, that it is dreadfully difficult to translate such a specialized subject from Japanese to English.
Nonethe- less, I had some written reference material. This book became my "Rosetta Stone. I chewed and grinded away at the new ideas and terminology. I was fortunate in another sense. Although Mr. Shimizu does not speak English, the translator of the book, Greg Nicholson, graciously acted as our intermediary via fax messages. The Japanese Chart of Charts provided the foundation for the rest of my inves- tigation into candlesticks.
Without that book, this book would not have been possible. In order to continually develop my abilities in candlestick charting techniques, I sought out Japanese candlestick practitioners who would have the time and inclination to speak with me about the subject.
I met a Japanese trader, Morihiko who had been using candlestick charts and who was willing to share his valuable time and insights. This was exciting enough! Then he told me that his family had been using candle- stick charts for generations! We spent many hours discussing the history and the uses of candlestick charts. He was an invaluable storehouse of knowledge. I also had an extensive amount of Japanese candlestick literature translated.
Obtaining the original Japanese candlestick information was one problem. Getting it translated was another. Based on one estimate there are probably fewer than full-time Japanese-to-English transla- tors in America this includes part-time translators ' I had to find a trans- lator who could not only translate routine material, but also the highly specialized subject of technical analysis. The direc- tor, Richard provided indispensable help to this project. He was a rarity. He was an American fluent in Japanese who understood, and used, technical analysis.
Not only did Richard do a wonderful job of translating, but he helped me hunt down and obtain Japanese candle- stick literature. Thanks to his help I might have the largest collection of Japanese books on candlesticks in the country. Without Richard this book would have been much less extensive.
Before my introductory article on candlestick charts appeared in late , there were few services offering candlestick charts in the United States. Now a plethora of services offer these charts. These include: Bloomberg L. Their popularity grows stronger every day.
The profusion of services offering the candlestick charts attests to both their popularity and their usefulness. I have had calls and faxs from around the world requesting more infor- mation about candlestick techniques. Why the extensive interest? There are many reasons and a few are: 1.
Candlestick charts are flexible. Users run the spectrum from first-time chartists to seasoned professionals. This is because candlestick charts can be used alone or in combination with other technical analysis techniques. A significant advantage attributed to candlestick charting techniques is that these techniques can be used in addition to, not instead of, other technical tools. I am not trying to convince veteran technicians that this system is superior to whatever else they may be using.
That is not my claim. My claim is that candlestick charting techniques provide an extra dimension of analysis. Candlestick charting techniques are for the most part unused in the United States. Yet, this technical approach enjoys a centuries-old tra- dition in the Far East, a tradition which has evolved from centuries of trial and error.
Then there are the picturesque terms used to describe the patterns. Would the expression "hanging-man line" spark your interest? This is only one example of how Japanese terminology gives candlesticks a flavor all their own and, once you get a taste, you will not be able to do without them. The Japanese probably know all the Western methods of technical analysis, yet we know almost nothing about theirs.
Now it is our turn to benefit from their knowledge. The Japanese use a combination of candlestick charting techniques along with Western technical tools. The primary reason for the widespread attention aroused by candle- stick charts is that using them instead of, or in addition to, bar charts is a win-win situation.
Introduction 5 As we will see in Chapter 3 on drawing candlestick lines, the same data is required in order to draw the candlestick charts as that which is needed for our bar charts that is, the open, high, low, and close. This is very significant since it means that any of the technical analysis used with bar charting such as moving averages, trendlines, Elliott Wave, retracements, and so on can be employed with candlestick charts. But, and this is the key point, candlestick charts can send signals not avail- able from bar charts.
In addition, there are some patterns that may allow you to get the jump on those who use traditional Western charting tech- niques. By employing candlestick charting instead of bar charting you have the ability to use all the same analyses as you would with bar charting.
But candlestick charts provide a unique avenue of analysis not available anywhere else. Part I of the book reveals the basics on constructing, reading, and inter- preting over 50 candlestick chart lines and patterns.
Part explains how to meld candlestick charts with Western technical analysis techniques. This is where the true power of candlecharts is manifested. This is how I use them. I have drawn illustrations of candlestick patterns to assist in the edu- cational process. These illustrations are representative examples only. The drawn exhibits should be viewed in the context that they show cer- tain guidelines and principles.
The actual patterns do not have to look exactly as they do in the exhibits in order to provide the reader with a valid signal. This is emphasized throughout the book in the many chart examples.
You will see how variations of the patterns can still provide 'mportant clues about the state of the markets. Thus, there is some subjectivity in deciding whether a certain candle- stick formation meets the guidelines for that particular formation, but this subjectivity is no different than that used with other charting tech- niques. You will have to decide these answers based on your trading temperment, your risk adversity, and your market philoso- phy.
Likewise, through text, illustrations and real examples I will pro- vide the general principles and guidelines for recognizing the candlestick formations. But you should not expect the real-world examples to always match their ideal formations. Consequently, I have included many such examples.
These examples span the entire investment spectrum from futures, fixed-income, equity, London metal markets and foreign exchange markets. Since my background is in the futures markets, most of my charts are from this arena. I also look at the entire time from intra-day to daily, weekly, and monthly candlestick charts. For this book, when I describe the candlestick lines and patterns, I will often refer to daily data.
For instance, I may say that in order to complete a candlestick pattern the market has to open above the prior day's high. But the same principles will be valid for all time frames. Two glossaries are at the end of the text. The first includes candle- stick terms and the second Western technical terms used in the book. The candlestick glossary includes a visual glossary of all the patterns. As with any subjective form of technical analysis, there are, at times, variable definitions which will be defined according to the users' experi- ence and background.
This is true of some candlestick patterns. Depend- ing on my source of information, these were instances in which I came across different, albeit usually minor, definitions of what constitutes a certain pattern. For example, one Japanese author writes that the open has to be above the prior close in order to complete a dark-cloud cover pattern see Chapter 4.
Other written and oral sources say that, for this pattern, the open should be above the prior high. In cases where there were different definitions, I chose the rules that increased the probability that the pattern's forecast would be correct. For example, the pattern referred to in the prior paragraph is a reversal sig- nal that appears at tops.
Thus, I chose the definition that the market has to open above the prior day's high. It is more bearish if the market opens above the prior day's high and then fails, then it would be if the market just opens above the prior day's close and then failed.
Much of the Japanese material I had translated is than specific. Part of this might be the result of the Japanese penchant for being vague. The penchant may have its origins in the feudal ages when it was accept- able for a samurai to behead any commoner who did not treat him as expected.
The commoner did not always know how a samurai expected him to act or to answer. By being vague, many heads were spared. However, I think the more important reason for the somewhat ous explanations has to do with fact that technical analysis is more of an art than a science. You should not expect rigid rules with most forms of technical analysis-just guideposts. Yet, because of this uncertainty, some of the ideas in this book may be swayed by the author's trading philosophy.
Another example of subjectivity: In the Japa- nese literature many candlestick patterns are described as important at a high-price area or at a low-price area. Obviously what constitutes a "high-price" or "low-price" area is open to interpretation. This could be viewed as a limitation.
Extended experience with candlestick charting in your market specialty will show you which of the patterns, and variations of these patterns, work best. In this sense, subjectivity may not be a liability. As you gain experience in candlestick techniques, you will discover which candlestick combinations work best in your market. This may give you an advantage over those who have not devoted the time and energy in tracking your markets as closely as you have. As discussed later in the text, drawing the individual candlestick chart lines requires a close.
Therefore, you may have to wait for the close to get a valid trading signal. This may mean a market on close order may be needed or you may have to try and anticipate what the close will be and place an order a few minutes prior to the close. You may also prefer to wait for the next day's opening before placing an order. This aspect may be a problem but there are many technical systems especially those based on moving averages of closing prices which require a closing price for a signal.
This is why there is often a surge in activity during the final few minutes of a trading session as computer- ized trading signals, based on closing prices, kick into play. Some tech- nicians consider only a close above resistance a valid buy signal so they have to wait until the close for confirmation. This aspect of waiting for a close is not unique to candlestick charts. On occasion, I can use the hourly candlestick charts to get a trade signal rather than waiting for the close of that day.
For instance, there could be a potentially bullish candlestick pattern on the daily chart. Yet, I would have to wait for the close before the candlestick pattern is com- pleted. If the hourly charts also show a bullish candlestick indicator dur- ing that day, I may recommend buying if the prevalent trend is up even before the close. The opening price is also in the candlestick lines. I hope that, as candlestick charts become more common, more newspapers will include openings individual stocks.
Candlestick charts provide many useful trading signals. They do not, however, provide price targets. There are other methods to forecast tar- gets such as prior support or resistance levels, retracements, swing objectives, and so on.
Some Japanese candlestick practitioners place a trade based on a candlestick signal. Candlestick patterns should always be viewed in the context as to what occurred before and in rela- tion to other technical evidence.
With the hundreds of charts throughout this book, do not be sur- prised if you see patterns that I have missed within charts. There will also be examples of patterns that, at times, did not work. Candlesticks will not provide an infallible trading tool. They do, however, add a vibrant color to your technical palette.
Candlestick charts allow you to use the same technical devices that you use with bar charts. But the candlestick charts give you signals not available with bar charts.
So why use a bar chart? In the near future, candlestick charts may become as standard as the bar chart. In fact, I am going to make a bold prediction: A s more technicians become comfortable with candlestick charts, they will no longer use bar charts. I have been a tech- nical analyst for nearly 20 years. And now, after discovering all their benefits, I only use candlestick charts. I still use all the traditional West- ern technical tools, but the candlesticks have given me a unique perspec- tive into the markets.
Before I delve into the topic of candlestick charts, I will briefly discuss the importance of technical analysis as a separate discipline. For those of you who are new to this topic, the following section is meant to empha- size why technical analysis is so important. It is not an in-depth discus- sion.
If you are already familiar with the benefits of technical analysis, you can skip this section. Do not worry, if you do not read the following sec- tion, it will not interfere with later candlestick chart analysis information.
Yet the markets are influenced at times, to a major extent, by emotionalism. An ounce of emotion can be worth a pound of facts. As John Keynes stated, "there is nothing so disastrous as a rational investment policy in an irra- tional Technical analysis provides the only mechanism to mea- sure the "irrational" emotional component present in all markets.
Here is an entertaining story about strongly psychology can affect a market. Soybeans were sharply higher. There was a drought in the Illinois Soy- bean Belt. And unless it ended soon, there would be a severe shortage of beans.
Suddenly a few drops of water slid down a window. More than pairs of eyes [the traders- editor's note] shifted to the big windows. Then came a steady trickle which turned into a steady downpour.
It was raining in downtown Chi- cago. The shouts cascaded from the traders' lips with a roar that matched the thunder outside. And the price of soybeans began to slowly move down. Then the price of soybeans broke like some tropic fever. It was pouring in Chicago all right, but no one grows soybeans in Chi- cago. In the heart of the Soybean Belt, some miles south of Chicago the sky was blue, sunny and very dry. But even if it wasn't raining on the soybean fields it was in the heads of the traders, and that is all that counts [emphasis added].
To the market nothing matters unless the market reacts to it. The game is played with the mind and the emotions [emphasis added]. In order to drive home the point about the importance of mass psy- chology, think about what happens when you exchange a piece of paper called "money" for some item like food or clothing?
Why is that paper, with no intrinsic value, exchanged for something tangible? It is because of a shared psychology. Everyone believes it will be accepted, so it is. Once this shared psychology evaporates, when people stop believing in money, it becomes worthless.
Second, technicals are also an important component of disciplined trading. Discipline helps mitigate the nemesis of all traders, namely, emotion. As soon as you have money in the market, emotionalism is in the driver's seat and rationale and objectivity are merely passengers.
If you doubt this, try paper trading. Then try trading with your own funds. Technicals can put objectivity back into the drivers seat. They provide a mechanism to set entry and exit points, to set ratios, or levels. Covered topics address theory and history, markets, market indicators, construction, confirmation, cycles, selection and decision, system testing, statistical analysis, and ethics.
The Level I exam emphasizes trend, chart, and pattern analysis. The investment world is full of different methods for understanding how to best grow your rates of return and minimize risk. The Candlestick Charting method, first developed by Japanese rice traders in the middle of the 19th century, has become one of the favorite modern methods of analyzing and understanding the market through careful plotting and analysis of the data provided. This book will guide you through the seemingly complex, but revolutionary, useful method of candlestick charting to gain the highest possible rates of return while ensuring your risks are as minimal as possible.
Candlestick charting is a complex language all in itself and for that reason, this book will guide you through the entire process of understanding the language, starting with the very origins of the technique.
You will learn how it was developed and why it is still used today, including what changes have been made to the methods by Western investors. You will learn how the candlestick charts are prepared and what the different line constructions signify. Additionally, you will be shown how to read and differentiate between the different bodies, including the short and long white and black bodies, to measure high and low price levels, support, and resistance.
You will be shown the various additional forms such as spinning tops, shadows, and doji. Next, the various different candle lines are outlined in full detail, showing you dozens of different formations including the single candle lines of "the hammer", "the hanging man", and "the shooting star", the dual candle lines of "dark cloud over", "the piercing pattern", "the engulfing pattern", "last engulfing pattern", and "harami".
You will also learn the window candle lines, as well as the formations of three or more candle lines. By interviewing dozens of experts in the reading and analysis of candle charts, this book is able to provide a comprehensive perspective of candle charts and how you can start using moving averages, analyzing three line break charts, renko charts, and kagi charts.
You will be provided with practice charts for all three major types and additional resources to help you learn how to read and analyze each type. For anyone interested in the centuries old Japanese style of market analysis that is candlestick charting, this book provides a comprehensive overview from the very origins to the most modern of interpretations. Atlantic Publishing is a small, independent publishing company based in Ocala, Florida.
Today, over titles are in print covering subjects such as small business, healthy living, management, finance, careers, and real estate. Atlantic Publishing prides itself on producing award winning, high-quality manuals that give readers up-to-date, pertinent information, real-world examples, and case studies with expert advice.
Every book has resources, contact information, and web sites of the products or companies discussed. Encyclopedia of Candlestick Charts also includes chapters that contain important discoveries and statistical summaries, as well as a glossary of relevant terms and a visual index to make candlestick identification easy.
A thorough trading guide from a professional trader The Complete Guide to Technical Trading Tactics can help the newindividual investor understand the mechanics of the markets. Filledwith in-depth insights and practical advice, this book details whatit takes to trade and shows readers how they can broaden theirhorizons by investing in the futures and options markets.
TheComplete Guide to Technical Trading Tactics outlines a variety ofproven methodologies-pivot points, candlesticks, and other topindicators-so readers may use those that work best for them as wellas make their own trading decisions without a second thought.
Author John Person also shares his insights on a variety of tradingtechnologies that will allow readers to gain a competitive edge inthe market. I needed several months to finish reading and studying this book. Spencer rated it really liked it Feb 05, The man who revolutionized technical analysis by introducing Japanese candlestick charting techniques to Western traders is back—this time with a quartet of powerful Bfyond techniques never before published or used in the West. Stunningly effective on their own, these new techniques pack an even greater wallop when teamed up with traditional trading, investing, or hedging strategies, and Steve Nison shows you how to do it.
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