Encyclopedia of Candlestick Charts E-Book

Thomas N. Bulkowski

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Trading Series
• Sprache: Englisch
• Veröffentlichungsjahr: 2008

Seitenzahl: 1086

Beschreibung

Following in the footsteps of author Thomas Bulkowski's bestselling Encyclopedia of Chart Patterns--and structured in the same way--this easy-to-read and -use resource takes an in-depth look at 103 candlestick formations, from identification guidelines and statistical analysis of their behavior to detailed trading tactics. 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.

Leseprobe

Contents

Preface

Acknowledgments

Introduction

Chapter 1: Findings

A Number of Candles Do Not Work as Expected

An Unusually Tall Candle Often Has a Minor High or Minor Low Occurring within One Day of It

The Best Performance Comes from Candles with Breakouts within a Third of the Yearly Low

Gaps Don’t Work Well as Support or Resistance Zones

Reversals Occur Most Often Near Price Extremes

Opening Gap Confirmation Gives the Best Entry Signal

Candles with Breakouts below the 50-Day Moving Average Give the Best Performance

Candles with Long Bodies Sometimes Show Support or Resistance

Tall Candles Outperform Short Ones

Candles with Tall Shadows Get Better Performance

Trade Bullish Candles in a Rising Primary Trend

Trade Bearish Candles in a Falling Primary Trend

Candle Volume Is a Poor Predictor of Performance Except for Breakout Volume

Reversals Perform Better than Continuations

Most Candlestick Patterns Perform Better in a Bear Market, Regardless of the Breakout Direction

Price Has to Have Something to Reverse

More Candles Appear within a Third of the Yearly High than Elsewhere in the Yearly Trading Range

Where Price Closes in the Last Candle Line of the Pattern Helps Determine Performance

Chapter 2: Statistics Summary

Overall Rank

Reversals: Bull Market

Continuations: Bull Market

Reversals: Bear Market

Continuations: Bear Market

Performance after 10 Days: Bull Market/Up Breakouts

Performance after 10 Days: Bear Market/Up Breakouts

Performance after 10 Days: Bull Market/Down Breakouts

Performance after 10 Days: Bear Market/Down Breakouts

Chapter 3: 8 New Price Lines

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 4: 10 New Price Lines

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 5: 12 New Price Lines

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 6: 13 New Price Lines

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 7: Abandoned Baby, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 8: Abandoned Baby, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 9: Above the Stomach

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 10: Advance Block

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 11: Below the Stomach

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 12: Belt Hold, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 13: Belt Hold, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 14: Breakaway, Bearish

Behavior and Rank

Identification Guidelines

Sample Trade

Chapter 15: Breakaway, Bullish

Behavior and Rank

Identification Guidelines

Trading Tactics

Sample Trade

Chapter 16: Candle, Black

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 17: Candle, Short Black

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 18: Candle, Short White

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 19: Candle, White

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 20: Concealing Baby Swallow

Behavior and Rank

Identification Guidelines

Trading Tactics

Chapter 21: Dark Cloud Cover

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 22: Deliberation

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 23: Doji, Dragonfly

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 24: Doji, Gapping Down

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 25: Doji, Gapping Up

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 26: Doji, Gravestone

Behavior and Rank

Identification Guidelines

Trading Tactics

Sample Trade

For Best Performance

Chapter 27: Doji, Long-Legged

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 28: Doji, Northern

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 29: Doji, Southern

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 30: Doji Star, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 31: Doji Star, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 32: Doji Star, Collapsing

Behavior and Rank

Identification Guidelines

Chapter 33: Downside Gap Three Methods

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 34: Downside Tasuki Gap

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 35: Engulfing, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 36: Engulfing, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 37: Evening Doji Star

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 38: Evening Star

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 39: Falling Three Methods

Behavior and Rank

Identification Guidelines

Sample Trade

Chapter 40: Hammer

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 41: Hammer, Inverted

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 42: Hanging Man

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 43: Harami, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 44: Harami, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 45: Harami Cross, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 46: Harami Cross, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 47: High Wave

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 48: Homing Pigeon

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 49: Identical Three Crows

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 50: In Neck

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 51: Kicking, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 52: Kicking, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 53: Ladder Bottom

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 54: Last Engulfing Bottom

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 55: Last Engulfing Top

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 56: Long Black Day

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 57: Long White Day

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 58: Marubozu, Black

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 59: Marubozu, Closing Black

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 60: Marubozu, Closing White

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 61: Marubozu, Opening Black

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 62: Marubozu, Opening White

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 63: Marubozu, White

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 64: Mat Hold

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 65: Matching Low

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 66: Meeting Lines, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 67: Meeting Lines, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 68: Morning Doji Star

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 69: Morning Star

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 70: On Neck

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 71: Piercing Pattern

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 72: Rickshaw Man

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 73: Rising Three Methods

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 74: Separating Lines, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 75: Separating Lines, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 76: Shooting Star, One-Candle

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 77: Shooting Star, Two-Candle

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 78: Side-by-Side White Lines, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 79: Side-by-Side White Lines, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 80: Spinning Top, Black

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 81: Spinning Top, White

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 82: Stick Sandwich

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 83: Takuri Line

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 84: Three Black Crows

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 85: Three Inside Down

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 86: Three Inside Up

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 87: Three-Line Strike, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 88: Three-Line Strike, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 89: Three Outside Down

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 90: Three Outside Up

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 91: Three Stars in the South

Behavior and Rank

Identification Guidelines

Chapter 92: Three White Soldiers

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 93: Thrusting

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 94: Tri-Star, Bearish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 95: Tri-Star, Bullish

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 96: Tweezers Bottom

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 97: Tweezers Top

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 98: Two Black Gapping Candles

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 99: Two Crows

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 100: Unique Three-River Bottom

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 101: Upside Gap Three Methods

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 102: Upside Gap Two Crows

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 103: Upside Tasuki Gap

Behavior and Rank

Identification Guidelines

Statistics

Trading Tactics

Sample Trade

For Best Performance

Chapter 104: Window, Falling

Behavior and Rank

Identification Guidelines

Statistics

Chapter 105: Window, Rising

Behavior and Rank

Identification Guidelines

Statistics

Bibliography

Glossary and Methodology

Visual Index

Subject Index

Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding.

The Wiley Trading series features books by traders who have survived the market’s ever-changing temperament and have prospered—some by reinventing systems, others by getting back to basics. Whether a novice trader, professional, or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future.

For a list of available titles, visit our web site at www.WileyFinance.com.

Copyright © 2008 by Thomas N. Bulkowski. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data

Bulkowski, Thomas N., 1957–

Encyclopedia of candlestick charts / Thomas N. Bulkowski.

p. cm. – (Wiley trading series)

Includes index.

ISBN 978-0-470-18201-7 (cloth)

1. Stocks—Charts, diagrams, etc. 2. Commodity futures—Charts, diagrams, etc. 3. Investment analysis. I. Title.

HG4638.B84 2008

332.63′2042—dc22

2007040692

Twenty years ago,Susan Blackburncame to my aid after a car accident. She helped smooth the runway that would be my future. She is a priceless treasure, a dear friend.

Six years ago,Barbara Rockefellerwas the wind beneath my wings, carrying me aloft. An incalculable amount of my publishing success I owe to her.

These two women are the engines that have kept my airplane moving forward, and to them I dedicate this book.

Preface

Let me tell you a story. Over a decade ago, I was playing with a stock market program I wrote and decided to see if I could get candlesticks to display. I knew it was possible, because the company that wrote the charting module said so. They just didn’t tell me how to do it. I read the manual written by someone for whom English was a second language and then struggled with programming the darn thing for countless hours with no success. I gave up.

Several years later, I tried again. This time I stumbled upon the right combination of elements to get the charting module to work. I drew my first candlestick.

The excitement I felt was not like riding the world’s fastest roller coaster but more like learning that the stock you purchased yesterday will be taken over for a 40% premium. I scared my dog with a little cheering, which was followed by a warm fuzzy feeling that pervaded my body.

It took less than an hour for me to fall in love with candles.

I used my charting discovery and incorporated it into another program called Patternz that recognizes all of the candles in this book and provides performance tips. It’s available free at my web site: ThePatternSite.com.

In helping a friend analyze the stock market, I would send the candle tips Patternz provides and added my own two cents. “This is a bearish engulfing candle, so that means price is likely to close lower tomorrow,” I wrote in an e-mail. The stock turned into a fireworks display as it exploded upward. This happened not just once but practically every time I tried depending on candles to help determine future performance.

The more I used candles, the more I grew to distrust them. They just didn’t work as advertised. “Here’s a hanging man with overhead resistance set up by a rising window with prior minor highs and lows blocking price movement. That means price will go down in the coming days.” The stock became a moon shot.

I had already read half a dozen candle books and pored over Internet sites to develop my Patternz program. The sources I checked couldn’t even agree on candlestick configuration. Take an inverted hammer. One Internet site said, “The upper shadow should be at least two times the length of the body.” Another site said, “The upper shadow is no more than two times as long as the body.” Is a shooting star a single candle line or two? The answer depends on which source you check. I found a spelling error for one candle pattern duplicated letter for letter on at least two other web sites.

I decided to do my own research to find out how candles worked, and the result is this book. I didn’t write this book for the money. I didn’t write it to achieve fame or glory. I wrote it because I need this information to trade better. Candlesticks can help you do that, but only if you know what to look for, learn how they work, and understand the trading setups that bring out the best performance. This book covers all that and more.

If you’ve ever felt frustrated with candlestick performance or just want to learn how they behave, then this book is for you. No other book covers all of the candlesticks and includes statistical performance data for both bull and bear markets in an easy-to-understand format, as this one does.

Whether you’re a novice trader or an experienced hedge fund manager, you can profit from this book. For a quick sample, read Chapter 1, “Findings.” There I discuss the many discoveries I uncovered along the way. That chapter alone is worth more to your bank account than the cost of this book.

Use this book as a reference work. Don’t try to read it from cover to cover. In the writing and publishing process, I’ll have to do that several times, so I know what I’m talking about. I’ve taken liberties to keep the text lively, just in case.

Most candle chapters follow the same format, so once you become accustomed to the layout, everything will become familiar. A “Glossary and Methodology” chapter at the end of the book explains each table entry in detail and defines terms. Back there you’ll also find a visual index with little pictures of all the candles to make recognition easier.

Here’s a brief snapshot of the good stuff I cover for over 100 candle patterns:

Identification guidelines describe what to look for.

General statistics include performance over time and where performance is best in the yearly price range.

Height statistics explore the performance of tall versus short candles, tall or short shadows, and a measure rule to help set price targets.

Additional statistics look at volume trend, average volume, and breakout volume.

The reversal rates table covers three methods of confirmation to detect reversals, the likely breakout direction based on the existing price trend, and where reversals or continuations are most likely to appear in the yearly price range.

Performance indicators describe which of three entry methods give the best trading signals, how a 50-day moving average can help improve performance, and whether the position of the closing price indicates better performance.

All statistics cover both bull and bear markets using more than 4.7 million candle lines in the research.

The tested performance of a surprising number of candles is opposite popular belief. Many candlesticks perform little better than randomly. Others are so rare that you may see only one in a lifetime—if you are lucky. But don’t take my word for it. Do your own research and form your own conclusions. That’s the real way to learn about candlesticks. Or you can save yourself the work and just buy this book.

Thomas N. Bulkowski

June 2007

Acknowledgments

Thanks to:

James Bulkowski for listening to me complain about redoing the first 50 chapters;

Tom Helget for assistance when I struggled with technical issues;

Ronda Palm for encouraging words and unbounded enthusiasm; and

The Wiley workers: Mary Daniello and Pamela van Giessen.

Good eggs, all.

Introduction

The candlestick trade I’m about to describe made me enough money to pay for three months of living expenses. That’s not bad for an hour’s work! In a moment, I’ll outline the trading setup so you can tailor it to your liking.

On May 16, 2007, I went shopping for a stock to buy and found one in the diversified chemicals aisle of the market. What caught my eye first was a consolidation pattern called a descending triangle. Figure I.1 shows the chart pattern in May. Descending triangles have a flat bottom and a downward-sloping top. They break out downward 64% of the time, but upward breakouts can post spectacular results. I was looking for an upward breakout.

Figure I.1 The combination of a descending triangle, Big W, and morning doji star set up a profitable trade.

The next pattern I noticed was the Big W. A tall left side (C to A) leads to a reversal pattern, such as the Eve & Eve double bottom AB. Eve bottoms are wide, rounded turns, unlike Adam bottoms, which are narrow, often pointed—a single spike or two wide. Eve can have spikes like that shown at B, but the spikes are shorter and more numerous than what you see on Adam. The Eve & Eve double bottom is one of the more powerful and successful chart patterns. The theory behind a Big W is that the right side will mimic the left and price will climb after that.