Working with Candlestick Patterns

The components of a candlestick may be the bones of candlestick charting, but candlestick patterns are the heart and soul. Patterns appear on candlestick charts as simple, single-stick occurrences or complex, multi-stick formations, and many different types of patterns can tell you what may be in store for a security that you’ve had your eye on for trading or investing. And knowing what may lie ahead can be the difference between a profitable trade and a flop.

Candlestick patterns indicate when prevailing trends reverse or when they continue. Both types of patterns are very useful because they tell you when to get into a trade, when to get out of a trade, when a trade you’re in may make no sense, and even when to hang onto a trade you’re already in. Check out Chapters 5 through 10 for more info on identifying and trading on a wide variety of candlestick patterns.

Simple patterns

Some candlestick patterns are very simple: A single candlestick on a chart can serve as a candlestick pattern. A single candlestick that signifies time to buy or sell is very appealing to traders who are just starting to work with candlestick charts because after you understand the basics of candlestick construction, you can immediately start identifying simple patterns and using them to make more informed trading decisions. Flip to Chapters 5 and 6 for several great ...

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