Getting Started in Candlestick Charting E-Book

Tina Logan

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: The Getting Started In Series
• Sprache: Englisch

Seitenzahl: 326

Veröffentlichungsjahr: 2011

Beschreibung

If you want to gain an edge in today's competitive markets, adding the candlestick methodology to your repertoire of technical analysis skills is essential. Getting Started in Candlestick Charting can help you achieve this goal, whether you're new to chart analysis or looking to enhance your understanding of the approach. This reliable resource covers thirty of the most widely recognized candlestick patterns and includes real-world charting examples backed by informative commentary.

Leseprobe

Table of Contents

The Getting Started in Series

Title Page

Copyright Page

Preface

Acknowledgments

Part 1 - Candlestick Charting

Chapter 1 - Introduction to Candlestick Charting

Evolution of Candlesticks

Strengths of Candlesticks

Limitations of Candlesticks

Getting Started with Candlestick Charting

Additional Introductory Comments

Chapter 2 - Constructing Candlestick Lines

Distinguishing between the Real Body and the Range

Distinctive Candlestick Lines

Candle Lines Evolve throughout the Session

Time Frames

Chapter 3 - Candlestick Reversal Patterns

Common Reversal Patterns

Umbrella Lines: Hanging Man and Hammer

Shooting Star and Inverted Hammer

Doji

Distinctive Doji

Dark Cloud Cover and Piercing Pattern

Engulfing Patterns

Harami

Stars

Multiple Signals

Putting the Reversal Patterns to Work

Chapter 4 - More on Reversal Patterns

The Pattern Must Have Something to Reverse

Factors That May Strengthen the Reversal Signal

Reversal Patterns May Not Reverse a Trend

Beware of Thin Markets

Chapter 5 - Tails

Tails at Support and Resistance

Tails in Overbought or Oversold Conditions

Part 2 - East Meets West

Chapter 6 - Price, Volume, and Volatility

Price

Volume

Volatility

Chapter 7 - Trend Analysis

Trend Direction

Trend Duration

Probability and Reversion to the Mean

Momentum of the Trend

Enhanced Candlestick Signals

Chapter 8 - Gaps

Price Gaps

The Morning Gap

The Opening Gap’s Role in Swing Trading

Chapter 9 - Support and Resistance

Resistance and Support at Peaks and Bottoms

Other Areas of Support and Resistance

Support and Resistance Areas Are Not Rigid Barriers

Failure of Support or Resistance Levels

Support and Resistance Reverse Roles

Candlesticks at Support and Resistance

Chapter 10 - Putting Candlestick Reversal Patterns to Work

Practice Spotting Candlestick Patterns

Reversal Patterns Provide Trading Opportunities

Reward versus Risk

Reversal Patterns May Reinforce Other Setups

Reversal Patterns can Provide Warnings

Short Selling

Trading Requires Commitment

Chapter 11 - Practice Sets

Pattern Recognition Quiz

Detailed Chart Analysis

Moving Forward

Conclusion

Appendix A

Appendix B S&P 500 LARGE-CAP INDEX COMPONENTS (AS OF OCTOBER 2007)

Glossary

Bibliography

About the Author

Index

TheGetting Started inSeries

Getting Started in Online Day Trading by Kassandra Bentley

Getting Started in Asset Allocation by Bill Bresnan and Eric P. Gelb

Getting Started in Online Investing by David L. Brown and Kassandra Bentley

Getting Started in Investment Clubs by Marsha Bertrand

Getting Started in Internet Auctions by Alan Elliott

Getting Started in Stocks by Alvin D. Hall

Getting Started in Mutual Funds by Alvin D. Hall

Getting Started in Estate Planning by Kerry Hannon

Getting Started in Online Personal Finance by Brad Hill

Getting Started in 401(k) Investing by Paul Katzeff

Getting Started in Internet Investing by Paul Katzeff

Getting Started in Security Analysis by Peter J. Klein

Getting Started in Global Investing by Robert P. Kreitler

Getting Started in Futures, Fifth Edition, by Todd Lofton

Getting Started in Financial Information by Daniel Moreau and Tracey Longo

Getting Started in Emerging Markets by Christopher Poillon

Getting Started in Technical Analysis by Jack D. Schwager

Getting Started in Real Estate Investing by Michael C. Thomsett and Jean Freestone Thomsett

Getting Started in Tax-Savvy Investing by Andrew Westham and Don Korn

Getting Started in Annuities by Gordon M. Williamson

Getting Started in Bonds, Second Edition, by Sharon Saltzgiver Wright

Getting Started in Retirement Planning by Ronald M. Yolles and Murray Yolles

Getting Started in Online Brokers by Kristine DeForge

Getting Started in Project Management by Paula Martin and Karen Tate

Getting Started in Six Sigma by Michael C. Thomsett

Getting Started in Currency Trading by Michael D. Archer and James L. Bickford

Getting Started in Rental Income by Michael C. Thomsett

Getting Started in REITs by Richard Imperiale

Getting Started in Property Flipping by Michael C. Thomsett

Getting Started in Fundamental Analysis by Michael C. Thomsett

Getting Started in Hedge Funds, Second Edition by Daniel A. Strachman

Getting Started in Chart Patterns by Thomas N. Bulkowski

Getting Started in ETFs by Todd K. Lofton

Getting Started in Swing Trading by Michael C. Thomsett

Getting Started in Options, Seventh Edition by Michael C. Thomsett

Getting Started in A Financially Secure Retirement by Henry Hebeler

Getting Started in Candlestick Charting by Tina Logan

Copyright © 2008 by Tina Logan. 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:

Logan, Tina.

Getting started in candlestick charting / Tina Logan.

p. cm.—(The getting started in series)

Includes bibliographical references and index.

ISBN 978-0-470-18200-0 (pbk.)

1. Stocks—Charts, diagrams, etc. 2. Stocks—Prices—Forecasting.

3. Investment analysis. I. Title.

HG4638.L64 2008

332.63’2042—dc22

2008002758

Preface

If the markets moved in a logical fashion, anyone could learn a few basics and make money trading. But that is not the case. It is the emotional crowd that moves markets. Traders’ and investors’ greed and fear, imprinted on charts, are like a road map to the markets. Those who learn to read and decipher the underlying messages of that price movement can gain a much-needed edge in a competitive environment.

That’s where Getting Started in Candlestick Charting comes in. This book will provide you with a solid foundation from which to begin using candlestick charts. You’ll learn to recognize candlestick reversal patterns and embed them in your mind through an understanding of how they reflect the messages of crowd sentiment. Candlesticks will help you gauge the strength of price moves and spot potential reversals early, before the crowd reacts.

If you have steered clear of candlestick charting until now because it seems like there is a mind-numbing number of patterns to learn, you can put that concern to rest. It is not necessary to learn dozens of candlestick patterns. This book narrows the focus to several commonly formed candlestick reversal patterns that you can learn to recognize in short order. You can start right away utilizing candlesticks to improve your chart analysis skills, and, of course, to increase your profitability.

You will find this book very helpful if you desire to:

• Learn candlestick charting but don’t want to get overwhelmed.

• Learn to recognize high probability trade setups.

• Improve your swing trading techniques. Candlestick charting is a stellar tool for fine-tuning swing trading strategies.

• Learn how to improve the timing of your entries and exits.

• Develop a knowledge base in classic Western technical analysis and understand the role of candlesticks within that broader framework.

Every effort was made to produce this important learning resource in a user-friendly format. The chapters are organized in a manner in which they build one upon the other. The content is written in layman’s terms with a level of detail that ensures understanding by beginning and intermediate-level traders. I make no apologies for defining technical terms and describing concepts that advanced level chartists might consider to be familiar territory. However, even advanced chartists who choose this book with the intent of adding candlesticks to their technical skill set will find that it suits their purpose. Since a picture is worth a thousand words, there are numerous illustrations and real-world charting examples included throughout the chapters. Through careful dissection of the charts, and the commentary and analysis included with them, you’ll already be recognizing the key Japanese candlestick patterns and Western technical events before you finish the last page of this book.

In Part I of the book you’ll learn about candlestick charting. Chapter 2 demonstrates how the candlestick lines are constructed. In Chapter 3 you’ll be introduced to several common candlestick reversal patterns. You’ll learn their definitions and the psychology behind each formation. The patterns are well illustrated to help you train your eye to recognize them when analyzing charts. A summary of the candlestick patterns presented is included in Appendix A. Once you have thoroughly studied the details of each pattern in Chapter 3, use this guide for quick reference until you are so familiar with the patterns that you no longer need it. Chapter 4 will solidify your understanding of how the reversal patterns are formed and factors that may impact their signals. Chapter 5 wraps up Part I with a discussion of “tails” and how their presence sends a message about the current market sentiment.

Part II of the book shows you how to put candlestick charting to work. You’ll learn how to blend Eastern candlestick charting with classic Western technical analysis. Candlesticks are not a complete trading system. In order to recognize their full potential you must understand how they fit into the broader picture. It is crucial to realize the important roles played by volume, volatility, trends, gaps, support, and resistance. These topics are covered in Chapters 6 through 9. If you are new to chart analysis in general, you’ll find these chapters to be invaluable. Even if you are already well versed in Western technical analysis, you’ll learn how to merge candlestick charting with Western techniques to gauge market movement and locate high probability setups. Chapter 10 shows you how to find the reversal signals and how to put them to work in your trading strategies.

After gaining new knowledge, it is imperative that you immediately practice applying what you have learned. To assess your newfound skills, several practice sets are included in Chapter 11. There is an old proverb that states: “I hear and I forget. I see and I remember. I do and I understand.” You’ll test your ability to recognize the candlestick patterns and Western technical occurrences introduced throughout the book. It will be time well spent. The answer keys and author’s commentary are provided for you to check your work.

As its title suggests, Getting Started in Candlestick Charting will provide you enough detailed instruction to get right to work using candlestick charting techniques. Once you have mastered the common reversal signals, if you wish to learn more patterns there are several resources listed in the bibliography at the back of this book. Getting Started in Candlestick Charting will also help you start to build your foundation of knowledge of Western technical analysis. If you wish to add to that foundation with more advanced analysis, trade management techniques and implementing trading strategies, I offer additional training in these areas. Feel free to contact me by e-mail at [email protected] or visit my website at www.Tinalogan.com.

I sincerely wish you the best of luck with your trading.

TINA LOGAN San Diego, CA2007

Acknowledgments

First I wish to thank Steve Nison for his perseverance in bringing candlestick charting to the Western hemisphere. His groundbreaking books Japanese Candlestick Charting Techniques and Beyond Candlesticks convinced me to add candlestick charting to my repertoire of technical analysis skills. I’ve never looked at a chart the same since. Stephen Bigalow was also instrumental in my candlestick journey. His candlestick books are written based on his experience using the candlesticks in the trading trenches. Mr. Bigalow generously invited me to contribute a chapter to his second book High Profit Candlestick Patterns. Thanks also to authors Gregory Morris and John Person for their fine contributions on the subject of candlestick charting.

Special recognition goes to two traders who, thankfully, arrived just at the right times in my trading career. First, Chris Manning who is responsible for getting me hooked on technical analysis. He had a knack for taking a tough, and sometimes dry, subject and making it come alive. His teachings were instrumental in encouraging me to develop a strong knowledge base in Western technical analysis. Later I was introduced to Herbert Otto, a nearly 40-year veteran of the markets. I continue to marvel at, and appreciate, how he generously shares his vast knowledge of both fundamental and technical analysis.

Without the support of my dear friends Michele Furlong and Jelaine Whipple, who believe in me and constantly encourage me, I may not have survived the writing of this book! Pat Johnson and Donna Love deserve praise for all they have done in assisting me in so many ways. They have a genuine interest in helping people and it does not go unnoticed. And thanks to my friends and colleagues at the Anthony Robbins Companies. I am certain that I would not be trading today had I not made that critical stop in my life’s journey.

Thanks to my family for not complaining as I indulge my obsession with the markets. Although they may not share my enthusiasm for analyzing stock charts for countless hours each week, they seem to have accepted that I will continue to do so.

I would like to recognize three amazing women who were mentors at pivotal times in my life: Mrs. Muriel Gamble, Mrs. Roberta Cave, and Dr. Deborah Ballard-Reisch. They all contributed greatly to pushing me forward and upward.

Thank you to Jennifer MacDonald and the John Wiley & Sons team, who were willing to give me this opportunity to make a contribution to their Getting Started in series of books. I am amazed at all that goes into writing a book and how organized they are at getting the final product to the presses.

And last but not least, thanks to my many special clients. Their loyalty and encouragement has allowed me to continue to indulge my passion for training and trading.

Part 1

Candlestick Charting

Chapter 1

Introduction to Candlestick Charting

When I first began using technical analysis years ago, I used the standard bar chart. Eventually, though, I discovered the candlestick chart with its unique display of price action. Just switching from bar charts to candlestick lines alone helped my chart analysis tremendously. Candlesticks light up the chart’s canvas, making it very quick and easy to see price trends and changes in the sentiment of market participants.

The next step was to learn the candlestick patterns with their unusual yet interesting names. After I understood the psychology behind the various patterns, I never went back to using bar charts. Once you learn to put this powerful charting tool to work, I am confident that you, too, will get hooked on candlesticks.

As valuable as candlesticks are as a chart analysis tool, they are simply that—one tool. They should not be viewed in isolation, but instead in the context of the surrounding chart landscape. Japanese candlestick charting should be blended with classic Western technical analysis methods rather than replacing them. It is the synergy of the two methods—Eastern merged with Western—that provides the means for superior technical analysis.