Candlestick Charting For Dummies, 2nd Edition

Introduction

When I wrote the first version of this book, candlestick charts were a known method of displaying and analyzing price data but weren’t the default charting method for most traders. Now, more than ten years later, the charts shown in the business media are often candlestick charts. This situation is fully understandable, because candlestick charts are better visuals than line charts or bar charts. But even though candlestick charts are common nowadays, most traders still don’t understand candlestick patterns, much less use them in day-to-day trading.

After the first edition of this book was published, I received some criticism that I spent too much time discussing instances in which candlestick patterns didn’t work out. One of the top reasons why traders fail, however, is that they don’t take losses even when it makes sense. Whenever a trader enters a trade, they should have an exit plan that involves taking either losses or profits. This book sticks with the format of showing both profitable and losing trades for each pattern.

About This Book

This book isn’t intended to be an end-all-and-be-all guide to profitable trading. It’s meant to provide readers some insight into how candlesticks are created and how they can be used to analyze the psychology behind what happens over the course of trading days. (When I say psychology, I’m not trying to conjure up images of Freud and Rorschach tests; I’m talking about the motivating factors that determine how the market behaves.) ...