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Candlestick charting is the Japanese version of bar charting. The Japanese used the technique to trade in rice in the 17th
century. Candlestick charts and bar charts give you the same
information but presented in different graphic forms. Each stick or bar
gives you four information, i.e., the opening price; the closing price;
the high price; and the low price. The volume is shown at the bottom. A
white candlestick is one that closes higher than the opening price. A
black candlestick is the other way round, i.e., the closing price is
lower than the opening price. A white candlestick is bullish. a black
candlestick is bearish. Thus, in chart reading, the closing price is
important. Candlesticks
have many fanciful names. To name a few there are: marubozu, spinning
top, dogi, hammer, hanging man, dragon fly and grave-stone doji . Each
name suggests a different kind of candle and carries with it a
different value. By looking
at a daily candle, we can know whether the bull or the bear is in
control or whether they are about evenly matched on that day only. This
one day information is of little use. So we have to look at the
previous candles to get more information. By looking at the past
actions, we try to predict what is likely to happen going forward. A
doctor will listen at your heartbeats, take your blood pressure, and
give you and overall examination to evaluate your overall health. But
to give you an operation, he has to do many other things as well, like
a blood test, x-ray, etc. Likewise,
in the stock market, if you want to buy or sell, by looking at a few
candles is not enough to enable you to make a good decision. Hence, you
have to look at the patterns formed by the individual candles. These
patterns are many and varied. Each has its own meaning and
interpretation. It is beyond
the scope of this commentary to explain the meaning of each pattern as
this will probably go into more than a hundred page. If you are keen to
learn, get yourself a good book and study it like studying for a
degree. It is not easy to become proficient in chart reading. Once you
are good at it, your return can be enormous. At
Metastock, we have the monthly charts, weekly charts and daily charts.
Normally, I like to look at the weekly chart to get an overall view of
the stock and then to look at the daily chart for the details. If we
can include a half-hourly chart into it, it will be very useful as we
can get the breakdown figures as well. Any genius out there?
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