Steve Nison Candlestick Basics

The candle chart phenomenon has caught fire around the world with all kinds of traders, from institutional power players to individual part-timers, because of their simplicity and effectiveness. In fact, when combined with your current trading stragies, candle charts can actually enhance the effectiveness!

1. When used properly, candle charts are reliable and can really work in your favor.
2. Candle charts are like having a quick x-ray of the supply and emand conditions of the market.
3. Some of the simplest concepts, like candle charts, are also the most profound. Top traders and market makers use candle charts.

This section only briefly discusses a few of the scores of candle chart patterns. There are many important tenants to candle patterns and trading tactics not discussed in this basic introduction. As such, do not trade based on the limited information given here.

The broadest part of the candlestick line is the real body. It represents the range between the session's open and close. If the close is lower than the open the real body is black. The real body is white if the close is higher than the open.

The thin lines above and below the real body are called the shadows. The peak of the upper shadow is the high of the session and the bottom of the lower shadow is the low of the session.

The color and length of the real body reveals whether the bulls or the bears are in charge. Note that the candle lines use the same data as a bar chart; the open, high, low and close.

Exhibit 1 (below) is a bar chart. In the circled area the stock looks strong since it is making consecutively higher closes. Based on this aspect, it looks like a stock to buy.

Exhibit 2 (below) uses the same data as the bar chart above; open, high, low, and close. But in the candles chart, the circle area displays a series of small real bodies (which the Japanese nicknamed spinning tops). Small real bodies hint that the prior trend (i.e. the rally) could be losing momentum.

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Nison Research International, Inc. does not guarantee or warrant that readers who use the strategies herein will achieve favorable results. Nison Research international Inc. disclaims responsibility for any adverse consequences that might arise directly or indirectly from the use of strategies discussed in this publication.