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Trading with Candlesticks: Visual Tools for Improved Technical Analysis and Timing

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Trading with Candlesticks: Visual Tools for Improved Technical Analysis and Timing


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The easy, practical guide to candlesticks that integrates traditional technical analysis to gain far stronger entry and exit signals.

  • Non-technical presentation is accessible for traders on all levels.
  • Packed with charts and examples: emerging price moves, trend reversals, confirmations, impending signal failures, and more.
  • The author's system for recognizing candlestick signals and confirming them with other technical signs makes technical analysis more accurate than any other technical method used by itself.
  • Description

    • Copyright 2011
    • Edition: 1st
    • Book
    • ISBN-10: 0-13-138094-X
    • ISBN-13: 978-0-13-138094-3

    Traders who use charts to time their moves rely on strong and clear signals. Unfortunately, price levels and traditional technical indicators alone aren't always reliable. There is a solution: candlestick signs, moves, and patterns. When these visual signs of reversal or continuation are integrated with other signals, they provide the strongest possible entry and exit timing: both the signal and the means for confirming it. In this easy-to-use book, renowned trader Michael C. Thomsett demystifies candlesticks and shows active traders exactly how to use them. In Trading with Candlesticks, Thomsett explains how each leading candlestick works, how they appear, and how to interpret them to discover emerging price moves and trend reversals, as well as confirmations of existing trends. Trading with Candlesticks shows dozens of examples of candlestick signs, moves and patterns in action, explaining them not in isolation, but as part of broader, developing price trends on real stock charts. Thomsett also discusses failed signals, and offers guidelines for identifying the likely impending failure or success of each pattern. While no investing approach is 100% foolproof, Thomsett's system for recognizing candlestick signals and confirming them with other technical signs makes technical analysis more accurate than it's ever been before.

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    Introduction to Trading with Candlesticks: Visual Tools for Improved Technical Analysis and Timing

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    Table of Contents

    Acknowledgments . . . viii

    About the Author . . . ix

    Introduction . . . 1

    Chapter 1 The Basic Candlestick . . . 5

    The Origin and Meaning of the Candlestick . . . 6

    Strengths and Weaknesses of Candlesticks . . . 9

    Paper Trading as a Testing Ground . . . 12

    The Skills Every Trader Needs . . . 14

    Candlesticks: General Observations Concerning Their Use . . . 18

    Expanding the Information Pool Effectively . . . 20

    Endnotes . . . 22

    Chapter 2 Single-Stick Signs . . . 25

    Uptrends and Downtrends . . . 25

    The Significance of a Candlestick’s Shape . . . 28

    Variations on the Bullish Long Candlestick . . . 30

    The Mistake Pattern . . . 32

    The Spinning Top, Hanging Man, and Hammer . . . 37

    The Significance of Tails . . . 42

    Chapter 3 Double-Stick Moves . . . 47

    Two Reversal Moves: Engulfing and Harami . . . 48

    More Reversals: The Inverted Hammer and Doji Star . . . 53

    Even More Reversals: Meeting Lines and Piercing Lines . . . 56

    Confirming Patterns: Thrusting, Separating, and Neck Lines . . . 60

    Reversal and Confirming Moves–Relative Values . . . 66

    Chapter 4 Complex Stick Patterns . . . 69

    Reversal Trend Change Patterns . . . 71

    Reversal Trend Inside and Outside Formations . . . 74

    Reversal Stars and Abandoned Babies . . . 78

    Complex Trend Patterns . . . 82

    Complex Gap Trends . . . 86

    Chapter 5 Reversal Pattern Analysis . . . 91

    Recognizing the Bull Reversal . . . 91

    Recognizing the Bear Reversal . . . 94

    The Doji as a Reversal Signal . . . 97

    Reversal Patterns with Gaps . . . 101

    Reversals Setting New Support or Resistance . . . 104

    More Resistance and Support Reversals . . . 108

    Multisession Gap Reversals . . . 111

    Chapter 6 Volume and Volatility . . . 119

    Volume as a Price Indicator . . . 119

    Volume Indicators . . . 122

    Volume Indicators and Candlesticks . . . 126

    Testing Price Volatility . . . 131

    Chapter 7 Buy and Sell Setup Signals . . . 141

    Price Spikes and Reaction Swings . . . 143

    Percentage Swing Systems . . . 146

    Short-Term Gapping Behavior . . . 149

    Anticipating the Trend During Consolidation . . . 153

    The Setup Pattern and Swing . . . 156

    Support and Resistance in the Swing Trade . . . 165

    Chapter 8 Swing Trading with Candlesticks . . . 171

    A Swing Trading Overview . . . 171

    Quantifying Price Movement with Candlesticks . . . 174

    The Importance of Convergence and Divergence . . .. 178

    Primary Trends and Candlestick-Based Entry or Exit . . . 182

    Setup Criteria and Action Points . . . 186

    Selling Short in Swing Trades . . . 190

    Chapter 9 Spotting Trends and Using Trendlines . . . 193

    Identifying the Trendline . . . 194

    Trendlines and Candlesticks as Confirmation . . . 200

    Applying Moving Averages to Candlestick Analysis . . . 203

    Chapter 10 Technical Indicators . . . 207

    The Value of Confirmation . . . 207

    A Review: Technical Analysis Basics . . . 209

    The Significance of Gaps . . . 212

    A Key Framework: Support and Resistance . . . 215

    Overbought and Oversold Indicators . . . 217

    The Potential of Candlestick Signals . . . 222

    Glossary . . . 225

    Index . . . 235


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