Using Candlestick Charting In Your Commodity Trading SystemCandlestick chartingpatterns give signals so that a potential investor can understand the strength or weakness of investment opportunities. Knowing which way a market is going to move by itself creates a multitude of investment opportunities. A candlestick charting pattern is a simple indicator that not only helps to confirm trend reversals but also reveals that the new trend has great force to it. Each candlestick has a different characteristic that represents the difference between the high, low, open and close. It does not tell if the close is higher or lower than the previous period, rather it only indicates whether the close is higher or lower than the open. Why Use Candlestick ChartsA candlestick signal often provides an alert that a trend change may be in process. Gaps reveal powerful, high-profit trades. Candlestick signals correlated with the appearance of a gap provide valuable profit-making set-ups.NASDAQ 100 Tracking Unit chart shows the Open, High, Low, and Close. The rectangle is black if the closing price is lower than the opening price, indicating a down day. The rectangle is white if the closing price is higher than the opening price, indicating an up day. The high and low price extremes extend out as vertical lines above and below the rectangles, forming the wicks to the bodies of the candles represented by the rectangles. History of Candlestick Chartinghe Japanese began using technical analysis to trade rice in the 17th century. While this early version of technical analysis may have been different from the US version many of the guiding principles were very similar.Several basics of Candlestick Charting are as follows: * The "what" (price action) is more important than the "why" (news, earnings, and so on). * All known information is reflected in the price. Buyers and sellers move markets based on expectations and emotions (fear and greed). * Markets fluctuate. * The actual price may not reflect the underlying value. Candlestick charting came later and probably began sometime after 1850. Much of the credit for candlestick development and charting goes to Homma, a legendary rice trader from Sakata. Even though it is not exactly clear "who" created candlesticks, they likely resulted from a collective effort developed over many years of trading. Benefits of candlestick analysis:* Candlestick charting techniques can be used for whatever time period you are trading.* If a surprise announcement occurs, the candlestick trader can take advantage of the price movement immediately rather than wait to see what direction the trend will take eventually. * Having the foresight of which candlestick signal is forming creates great opportunities to profit. Day-Trading-Strategy .com, P.O. Box 89029, Houston Texas 77289 info@day-trading-strategy.com |