Chapter 2

Candlestick Analysis

Using the Language of Candles to Profit from Market Moves

When I first began my study of technical analysis, candlestick charts were rarely heard of or used. The few books you could find on technical analysis all had bar charts that displayed the basic patterns like rising wedges, flags, head and shoulders, tops and bottoms, and others that can be found in hundreds of books today. The first charting software program I used didn't even have candlestick charts, can you imagine? That's unheard of today. In time, I found a more advanced program that was able to scan stocks within my database for specific criteria, which was a huge advancement at the time, and it had candlesticks. However, the data provider did not provide the opening price at the time. What was available was only the high, low, and the closing price, which leaves you with a candle that has incomplete information.

Years ago, if you wanted to have your own charts you had to buy data from a vendor and download it into your computer over a 2400-baud modem each day and then copy that data with DOS commands to a file within the charting program. Of course, this was after downloading the several years of historical data you wanted, which took all night. Yes, all night! This process of downloading that day's data and then scanning several hundred stocks on what was a fast computer at the time, an ATT 286, would take about an hour. Today that happens in seconds.

The charting of stocks was coming ...

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