Candle Charts and Top Reversal Patterns

Candlestick charting is an extremely pronounced and effective method for tracking and examining the four most important price points: the open, the high, the low, and the close. Using candlestick charting helps me visually to better compare current price activity in relation to past price points of interest. The advantage of using candlestick charting in place of bar charting is that you can use the same techniques and analysis that you do with bar charts and have the diversity and unique signals that candlesticks generate. As you learn this method of charting, you will come to see how it is a great barometer of human emotion, namely, fear and greed.

In addition, this is a simple, yet certainly more specialized format of charting. It has gained in popularity in the United States and is currently followed by more and more analysts. My first book covered most of the top formations, and I want to review what I believe are the more frequent and reliable patterns. This chapter will show some statistical evidence that there are certain patterns that develop over and over again. Candlestick charting is extremely easy to learn; and once you remember the sequence of events that form a trending market condition, the candles will certainly be your best tool in spotting market reversals at tops and bottoms. Having that information will certainly stack the odds in your favor for making money consistently in the markets as an independent trader.

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