Chapter 6 – Introduction to Japanese Candlesticks

This in an excerpt from the Liberated Stock Trader Academy Pro Training Course.

The theories behind candlestick charts are so abundant that one could write a book about it and in fact many have.

At first candlesticks look very difficult to understand and there are at least 60 different main patterns.  Who has the time to learn the name of every pattern and its meaning?  Not you I can imagine.

In this section I will show you how they work and also focus on what they are trying to tell us.  There are a few psychological principles involved with Candlesticks and when you know them you can understand the meaning of all the patterns without having to learn them all.

Let’s start with the 2 types of Candlestick.

The first Candle has a black or filled body.  This indicates the day was a price down day.  A white or hollow candlestick indicates an up day.  The lines above and below the main body are referred to as the “Shadows” or “Wicks”.

Also worthy of note is that candlesticks show the days price pictorially quite nicely as the extent of the surge or “Trading Range” from Opening Price to Closing Price can be seen very clearly. japanese-candlesticks-ohlc

Once you get used to Candlesticks I am sure you will never go back to OHLC Bars again.

Candlesticks are used to allow us to try to predict the movement of price of the course of the next few days.  Candlesticks are of 2 types, “Reversal Patters” and Continuation Patterns”

In this graphic you can see one of the most popular uses of a candlestick chart, to spot a “reversal”

The “Doji” is when the opening price and the closing price are very close together.  Doji-candlestick

You can see the price pattern here, price was going down then the Doji appeared and then price reversed and proceeded upwards.

This is one of the most common reversal patterns and when you understand it you will see it everywhere.

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11 COMMENTS

  1. I dont use candlestick much,but i read in books and seen, when Doji with low volume is sign downtrend- doji with high volume is sign of uptrend. Doji when compared with volume, makes powerful. I am not sure how far this is valid and true. Any thoughts on this.

  2. A Doji is a sign of indecision, perhaps change of trend, from up to down, up to sideways etc. Volume is also good to know. A gravestone doji at the top of an uptrend is considered the end of the trend.

  3. Just want to say your article is striking. The clarity in your post is simply striking and i can take for granted you are an expert on this subject. Well with your permission allow me to grab your rss feed to keep up to date with forthcoming post. Thanks a million and please keep up the accomplished work. Excuse my poor English. English is not my mother tongue.

  4. hello Barry–i’m assuming that a gravestone doji has the body(what there is of it) at the bottom of the shadow–just to be sure—praises again for this site!–S.

  5. You you could make changes to the page title Chapter 6 – Introduction to Japanese Candlesticks :: Stock Market Training Course,Technical Analysis Course,Share Market Education to something more suited for your content you create. I enjoyed the post nevertheless.

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