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ÿþB a s i c s o f J a p a n e s e C a n d l e s t i c k C h a r t i n g : A S i m p l e S t r a t e g y o n C u r r e n c y T r a d i n g
from:D u r i n g t h e 1 7 t h c e n t u r y , t h e r e w a s a J a p a n e s e m a n w h o b e c a m e f a m o u s w i t h r e g a r d s t o r i c e t r a d i n g . I t i s b e l i e v e d t h a t t h i s m a n w o n o v e r o n e h u n d r e d t r a d e s . H i s s e c r e t w a s u s i n g c a n d l e s t i c k c h a r t i n g .
Y o u m a y h a v e a c o m m o n q u e r y w h i c h m o s t p e o p l e h a v e i n m i n d : W h a t a r e c a n d l e s t i c k s ?
C a n d l e s t i c k s c a n b e v i s u a l i z e d a s y o u r t y p i c a l b a r c h a r t o u t l i n e d i n t w o d i m e n s i o n s . M a n y a r e a w a r e t h a t t h e u s u a l b a r c h a r t h a s i t s c o m p o n e n t s , j u s t l i k e u s i n g t h e c a n d l e s t i c k c h a r t .
T h e m a j o r c o m p o n e n t s i n c a n d l e s t i c k c h a r t i n g a r e :
1 . R e a l B o d y t h i s t e r m r e f e r s t o t h e m a i n b o d y o f t h e c a n d l e s t i c k w h e r e i n i t c o r r e s p o n d s t o t h e o p e n i n g a n d c l o s i n g o f p r i c e s . R e a l b o d y i s a g a i n s u b d i v i d e d i n t o t w o c a t e g o r i e s :
§ð B l a c k b o d y , t h i s i s s o m e t i m e s c a l l e d f i l l e d - i n b o d y . B l a c k b o d y s i g n i f i e s t h a t t h e c l o s e i n a c e r t a i n p e r i o d o f t i m e i s l o w e r t h a n t h e o p e n .
§ð W h i t e b o d y , w h i c h i s s o m e t i m e s r e f e r r e d t o a s o p e n d e n o t e s t h a t t h e c l o s e i s o n t o p o f o p e n .
2 . S h a d o w i t i s a n a r r o w v e r t i c a l l i n e w h i c h c h a r a c t e r i z e s t h e i n c r e a s e a n d d e c r e a s e o f p r i c e i n a g i v e n p e r i o d o f t i m e . S h a d o w s a r e a s w e l l s u b d i v i d e d i n t o t w o c a t e g o r i e s : ( 1 ) l o w e r s h a d o w ; a n d ( 2 ) u p p e r s h a d o w .
N o w t h a t y o u h a v e a b a s i c b a c k g r o u n d w i t h r e g a r d s t o t h e c o m p o n e n t s o f c a n d l e s t i c k c h a r t i n g , t h e n e x t s t e p i s t o h a v e a n i d e a o f c a n d l e s t i c k c h a r t i n g p a t t e r n s . T h e r e a r e s i x c o m m o n p a t t e r n s t o l o o k i n t o :
1 . H a m m e r p a t t e r n t h i s i s a c a n d l e s t i c k w i t h a s m a l l r e a l b o d y a n d a l e n g t h y l o w s h a d o w . T h i s p a t t e r n c a n u s u a l l y b e v i e w e d w h e n e v e r t h e r e i s a d o w n t r e n d i n t h e m a r k e t .
2 . E n g u l f i n g p a t t e r n w i t h t h i s t y p e o f p a t t e r n , t h e m a r k e t t r e n d c a n b e v e r y w e l l d e f i n e d d u e t o t h e c a n d l e s t i c k s w h i t e r e a l b o d y w h i c h s u r r o u n d s t h e p r e c e d i n g d a y s r e a l b o d y .
3 . D a r k - c l o u d c o v e r p a t t e r n t h i s c a n b e v i e w e d w h e r e t h e p a t t e r n d u r i n g t h e f i r s t m a r k e t d a y i s c o m p o s e d o f r e s i l i e n t w h i t e r e a l b o d y i n a t o p r e v e r s e f o r m .
4 . H a n g i n g m a n p a t t e r n t h e f e a t u r e s o f a h a n g i n g m a n p a t t e r n r e s e m b l e s t h a t o f t h e h a m m e r p a t t e r n , t h e o n l y d i f f e r e n c e i s t h a t t h e f r a m e w o r k i s o n a n u p t r e n d f o r m .
5 . B e a r i s h p a t t e r n i n s t e a d o f a w h i t e r e a l b o d y , a b l a c k r e a l b o d y s u r r o u n d s t h e p r e c e d i n g d a y s r e a l b o d y .
6 . P i e r c i n g p a t t e r n t h i s t y p e o f p a t t e r n i s t h e e x a c t r e v e r s e o f d a r k - c l o u d p a t t e r n w h e r e i n s t e a d o f a n u p t r e n d , a d o w n t r e n d o c c u r s .
E a c h p a t t e r n i s d i s t i n c t f r o m o n e a n o t h e r . Y o u r a d v a n t a g e t h o u g h i s y o u c a n e x p e r i m e n t m i x i n g t w o o r m o r e p a t t e r n s . Y o u c a n a l s o m o d i f y t h e p a t t e r n s f r o m i t s o r i g i n a l t o c o m e u p w i t h a s t r a t e g y w h i c h s u i t s y o u r p r e f e r e n c e .
T h e a b o v e - m e n t i o n e d i n f o r m a t i o n i s m e r e l y a p r o l o g u e t o J a p a n e s e c a n d l e s t i c k c h a r t i n g . T h e r e a r e s t i l l s o m a n y i n f o r m a t i o n t o d e c i p h e r , t h e r e a r e s t i l l s o m a n y p a t t e r n s t o d e t a i l o u t , a n d t h e r e a r e s t i l l s o m u c h t h i n g s t o l e a r n . W h a t y o u c a n d o i s h a v e a n i n - d e p t h s t u d y o f t h i s t y p e o f c u r r e n c y t r a d i n g s t r a t e g y b y r e a d i n g b o o k s a b o u t J a p a n e s e c a n d l e s t i c k c h a r t i n g . A d d i t i o n a l l y , y o u c a n a l s o e n r o l l i n a n i n s t i t u t i o n w h e r e t h e s a i d t r a d i n g s t r a t e g y i s b e i n g t a u g h t .
W i t h p r o p e r e d u c a t i o n a n d a c c u r a t e a p p l i c a t i o n o f l e a r n e d t h e o r i e s a b o u t J a p a n e s e c a n d l e s t i c k , m a n y t r a d e r s w i l l b e a b l e t o s u c c e e d w i t h t h e i r g o a l s o f g a i n i n g p r o f i t a n d s t r a t e g i c a l l y l e a r n i n g t h e m a r k e t . W h o k n o w s y o u w o u l d b e a b l e t o w i n o v e r o n e h u n d r e d t r a d e s j u s t l i k e w h a t t h e J a p a n e s e m a n d i d .
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