CHAPTER 4

Candlestick Charting

Candlestick charts offer a depth of information on supply and demand that visually leaps off the chart at the trader, offering insights that simple bar or line charts do not reveal. Not only can candlestick charts reveal better insight into the current supply and demand balance than traditional bar charts, they can also help us confirm or even trigger entry into a trade setup. As we will see, we do not need to learn intricate or obscure candle patterns, but need only to identify insights into the changing supply/demand relationship between buyers and sellers, particularly at expected turning points such as major support or resistance levels on the charts. A candle trigger can be the final piece of the puzzle that calls for position entry within the context of where the candle signal occurs.

This chapter will explain the benefits of candlestick charts, describe some of the most effective signals, and explain how reversal candles can be used as trade triggers to draw us into trades with other sources of confluence across non-correlated methods such as we will discover in the next few chapters.

BENEFITS OF USING CANDLESTICK CHARTS

Many beginning traders start analyzing stock price charts by viewing simple bar charts, which are default in most charting websites or software programs. Bar charts graphically represent the open, high, low, and close of a stock price or index as a single line with the height or range of the bar representing the difference ...

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