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Japanese Candlesticks

Japanese Candlesticks. Ron William Technical Analyst Email: rwilliam@investorsintelligence.com investorsintelligence.com. Brief History . Market timing , charting , behavioural finance & quantitative analysis .

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Japanese Candlesticks

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  1. Japanese Candlesticks Ron William Technical Analyst Email:rwilliam@investorsintelligence.com investorsintelligence.com

  2. Brief History • Market timing, charting, behavioural finance & quantitative analysis. • Methodology dates back to 1600s, originally used by Japanese rice farmers to monitor and forecast crop prices. • Famous trader named Homma (aware of supply/demand links), realised the markets were strongly influenced by emotions. • Introduced to the west in 1990 by Steve Nison, a leading expert in candlestick analysis.

  3. Constructing the Candle Line BullishCandle White Real Body BearishCandle Black Real Body High High Upper Shadow Close Open Real Body Close Open Lower Shadow Low Low

  4. The Real Body is the essence of market psychology

  5. Basic Candles Long Day Doji Spinning Top High Wave 1. Small real body 2. Colour not imp. Prior trend weak Open and close are narrow/same Market is tired 1. Small real body 2. Colour not imp. 3. Long shadows Strong buy/sell Midpoint used as support/resistance Indicates confusion

  6. Powerful Candles

  7. Doji Criteria: Open and close are narrow or the same Psychology: Market is “tired”

  8. Doji Silver (Weekly Chart) Doji hints market is “tired” 5 3 4 2 1

  9. Doji in box range USD/ZAR (Daily Chart) Series of doji within box range merely sets tone

  10. Single Line Hammer Shooting Star 1. Lower Shadow 2X length of Real Body 2. RB at upper end, colour not important 3. No/very small upper shadow 4. Confirmed with a strong bullish day 1. Upper Shadow 2X length of Real Body 2. RB at lower end, colour not important 3. No/very small lower shadow 4. Confirmed with a strong bearish day Hammering a base Trouble overhead

  11. Hammer GBP/USD (Daily Chart) Support

  12. Shooting Star Wheat (Weekly Chart) Risk? Selling on close implies risking the pattern high Sell? Preferred Sell

  13. Dual Line Piercing Line Engulfing Dark Cloud Cover 1. Downtrend evident 2. Session opens < prior low 3. Bullish RB closes >50% into bearish RB 1. Uptrend evident 2. Session opens > prior high 3. Bearish RB closes > 50% into bullish RB 1. Large RB wraps around small RB 2. Opposite colours 3. Up/Down trend Sentiment reversal Sentiment reversal Arresting control

  14. Bullish Engulfing Kuwait Stk Mkt (Weekly Chart)

  15. Dark Cloud Cover Palladium (Weekly Chart) Midpoint Sell

  16. Three Line Evening Star Morning Star 3 White Soldiers 3 Black Crows 1. Downtrend evident 2. Bearish session is followed by indecision. 3. Bulls close > 50% into prior Bear RB 1. Three bullish RB’s, all of similar size 2. Prior trend is down 3. Each session opens with recent RB & closes near high 1. Three bearish RB’s, all of similar size 2. Prior trend is up 3. Each session opens with recent RB & closes near lows 1. Uptrend evident 2. Bullish session is followed by indecision. 3. Bears close > 50% into prior Bull RB Downtrend Upside reversal Downside reversal Uptrend

  17. Western charting Optimises and confirms Price targets • Support and Resistance • Trend-lines • Price Patterns • Moving Averages • Oscillators • Elliott Wave

  18. Moving Averages Gold (Weekly Chart) Hammer Piercing Line High-wave 70-week average Piercing Line

  19. Price Patterns Soybean (Daily Chart) 3 White Soldiers Shooting Star Shooting Star 3 White Soldiers Morning Star Bullish Engulfing 3 White Soldiers (variant)

  20. Confluence EUR/USD (Daily Chart) 61.8% 50% Measured Objective 38.2%

  21. Relative Strength Index CRB (Weekly Chart)

  22. Bollinger Bands Oil (Daily Chart) Bearish Engulfing Hammer Hammer Dark Cloud Cover Dark Cloud Cover Bullish Engulfing High-Wave Hammer

  23. Elliott Wave (3) Gold (Daily Chart) (4)? (1) (2)

  24. Corrective Wave (4)? Gold (Weekly Chart) (3) Dark Cloud Cover Hanging Man (4)? Hammer Piercing Line

  25. Trading Rules • Wait for the session’s close to confirm • DO NOT use candles in isolation • Always consider Risk/Reward ratios before placing a trade with a candle signal • Candles DO NOT offer price targets • Remember the importance of stops

  26. Human Emotion Drives the Market Candle Analysis Unrivaled in Gauging Market Psychology Presentation slidesdesigned by Ron William

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