Japanese Candlestick Trading Signals

Japanese Candlestick
Trading Signals
By www.ProfitableInvestingTips.com

https://profitableinvestingtips.com/investi
ng-trading/japanese-candlestick-trading-
signals
An excellent technical analysis tool for
trading stocks, options, futures, or Forex
is the collection of Japanese Candlestick
trading signals. Since the days of the
Samurai, these signals have guided
traders to reliable profits.

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Candlesticks are not only a reliable trading
signal but also easy to read and use.
There are a dozen major signals and
many secondary signals that rice traders
in Japan used centuries ago and these
patterns work just as well today in the
fast-moving stock market.

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The Secret Code of Japanese
Candlesticks

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The fact is that Japanese Candlesticks are a
mystery only to those who have not bothered
to learn them. The way the system works is like
this. A “candlestick” is a rectangle with lines
extending from the top and/or from the bottom.
These symbols represent the range of trading
of a stock or other equity over a defined period
such an hour, a day, a week, or a month.

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The candlestick is superimposed on a price chart
to help interpretation of evolving price patterns.
The candle represents the opening and closing
prices for the equity. So, when these were
close together, the candle is very short and
when they were far apart, the candle is very
long. The lines (like wicks of a candle and
called shadows) represent the total range of
trading. When the equity closes higher than its
opening the candle is white and when it closes
lower the candle is black.

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How to Read Japanese Candlestick
Charts

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Once you know how to read a single
candlestick, the next step to
understanding Japanese Candlestick
signals is to understand the implications
of a single size and color of candlestick
and what it means when two, three, or
more are found in sequence.

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Experts at trading with candlesticks rely of
clear signals and never “reach” to try to
make a signal meet their expectations or
wishes. When you trade this way, you will
only make trades that have a high
likelihood of success. A basic and
extremely important signal is the Doji
candlestick.

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Doji Candlestick

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When markets are undecided as to
whether a trend is about to end and
reverse, the opening and closing prices
for a day will be very close together. This
gives you a candlestick that looks like a
burned out candle with very little height
or even just a line.

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This may be accompanied by very long
upper or lower shadows which indicates
that the market tried to move up or down
but came back to its beginning level at
the end of the trading period. This signal,
by itself, does not tell you where the
market is going next. But it does tell you
to expect a jump either up or down when
the market makes up its mind.

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Japanese Candlestick Reversal Patterns

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What many traders find profitable are
Japanese Candlestick reversal patterns.
A good example is the bullish engulfing
pattern which commonly occurs at the
bottom of downward market trend. It
signals that the bad news has been all
squeezed out of the tube of toothpaste
and the market is likely to start an
upward rally.

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The signal includes three downward days,
a day when an upward rally started and
then fizzed out, and then a day that starts
by gapping lower and then rallying to
“engulf” the previous downward day.

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Japanese Rice Traders Candlesticks

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These signals worked for trading in the
Japanese rice markets centuries ago and
still work today. However, they are
applicable to virtually any traded market.
These are purely technical trading tools
and do not rely on any fundamental
analysis input to interpret them.

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However, most traders use candlesticks as
part of their trading arsenal along with
tools like the important moving averages.
Even folks who are experts at candlestick
trading will typically wait for a confirming
day or two before jumping in completely
on what may be an impressive bull
market rally.

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Trading Applications of Japanese
Candlestick Charting

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Candlesticks are technical analysis tools.
They have been around for centuries and
provide an accurate indication of market
direction when there are clear signals.
However, the majority of traders who use
candlesticks do so because the signals
are easy to read.

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They are used in conjunction with things like
moving averages and a basic understanding of
intrinsic stock value. Many times value
investors will have their eye on a stock that has
excellent long term potential but which has
been somewhat unfairly driven down by a
negative market. The use of Japanese
Candlesticks is meant to signal when to pull
the trigger at the most profitable time to start
buying that equity.

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History of Japanese Candlesticks

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Back in the Samurai era in Japan there
was a legendary rice trader, Munehisa
Homma. He realized that emotions of
other traders had a big effect on prices,
often as much as the forces of supply
and demand. He simply kept track of how
certain price patterns were followed by
predictable market movement.

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And, he used a simple design, which is the same
rectangle and line configuration used today.
His system came into general use and, when
the Japanese stock market opened in the mid-
1800s, it came into use there as well. It took
more than a hundred years for the rest of the
world to realize the value of this excellent
trading tool and put it to use outside of Japan.

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Japanese Candlestick Tutorial

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You can learn this system on your own by
reading and practicing or you can get help from
an expert. The best Japanese Candlestick
Tutorial material we have found comes from
Stephen Bigalow at
www.CandlestickForum.com. There are several
membership options that allow you to take
advantage of both Japanese Candlestick
trading and Mr. Bigalow’s expertise.

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Mr. Bigalow published a book entitled
Profitable Candlestick Trading which is
an excellent base from which you can
start your journey to profits with
Candlestick signals.

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For more insights and useful information
about investments and investing, visit
www.ProfitableInvestingTips.com.

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Japanese Candlestick Trading Signals

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Japanese Candlestick Trading Signals