By Lambert Clive
- Adam Sorab, Chairman, Society of Technical Analysts (STA)
the purpose of this booklet is to introduce candlestick research to someone from an absolute newbie to an skilled marketplace specialist. The textual content is written to be basic adequate for somebody new to the subject, yet aren't exclude people with extra event. The author's target is to alter the easy viewing of a candlestick chart right into a look for the reply to the perennial query: ''Who's controlling the industry; the Bulls or the Bears?''
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Additional info for Candlestick Charts: An Introduction to Using Candlestick Charts
So you had a strategy to get you into good trades as well as keep you out of bad ones; to deselect or negatively select those that needed staying away from. In the case of this chart we can take it a step further and redefine our criteria to give us better trade opportunities. We can say that if the market moves above the high from the Hammer week, then we will go long. With this filter we would still stay out of the market after candles B and C (a sigh of relief once again), get into the long trade much earlier after the Hammer D (nice), and get in slightly earlier after Candle G (still nice).
This time the long upper shadow is at the top end of the day’s range, and the real body is near the bottom. Also, we’re looking for this pattern in a rising market as opposed to a downtrend. So let’s think about the price action that goes into the construction of a Shooting Star. Let’s do the same thing as we did with the Hammer, and look at a live market example. Below is a daily candlestick chart for gold in May 2006 when highs not seen since the early 1980s were hit. Source: CQG, Inc. © 2008 All rights reserved worldwide.
It represents a “V” shaped direction of travel over the course of the life of the candle. As with the Inverted Hammer the idea of this being a reversal is a little tough to grasp at first as we’re talking about a candlestick that’s formed by a market that sold off early on, but was rising neatly again by the time the session ended. Psychology The reasoning behind this pattern is akin to the Inverted Hammer, but in reverse: the long lower shadow shows that the bears managed to push things lower, even if they couldn’t sustain the push over the course of the whole day.