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Book Summary: Candlestick Charts PDF
Candlestick Charts PDF by Clive Lambert is a book that introduces the use of candlestick charts for analyzing the price movements of stocks, commodities, and other financial instruments.
The book explains the origin, construction, and interpretation of candlestick patterns, as well as the psychological factors that influence the market behavior. The book also provides practical examples and tips for applying candlestick analysis to various trading scenarios and strategies.
The book summary is as follows:
- Chapter 1: What Are Candlesticks? This chapter gives a brief history of candlestick charts, their basic components, and the advantages of using them over other types of charts.
- Chapter 2: What Candles Tell Us About The State Of Mind Of The Market. This chapter explores the meaning of different candle shapes and sizes, and how they reflect the balance of power between the buyers and sellers in the market.
- Chapter 3: Single Reversal Patterns. This chapter covers the most common and reliable single candle patterns that indicate a potential reversal of the prevailing trend, such as the hammer, the shooting star, the hanging man, the inverted hammer, and the doji.
- Chapter 4: Multiple Reversal Patterns. This chapter covers the more complex and powerful multiple candle patterns that signal a change in the market direction, such as the engulfing pattern, the piercing pattern, the dark cloud cover, the morning star, the evening star, and the harami.
- Chapter 5: Continuation Patterns. This chapter covers the candle patterns that suggest a continuation of the existing trend, such as the marubozu, the three white soldiers, the three black crows, the rising three methods, the falling three methods, and the three inside up and down.
- Chapter 6: Consolidation Patterns. This chapter covers the candle patterns that indicate a period of indecision or consolidation in the market, such as the spinning top, the high wave, the long-legged doji, the four price doji, and the tasuki gap.
- Chapter 7: Blended Candles. This chapter introduces the concept of blending two or more candles into one to simplify the analysis and identify the dominant trend, such as the bullish and bearish belt hold, the bullish and bearish separating lines, the bullish and bearish kicker, and the bullish and bearish meeting lines.
- Chapter 8: Gaps. This chapter explains the significance of gaps, or empty spaces, between the candles, and how they can be used to confirm or invalidate the candle patterns, such as the breakaway gap, the runaway gap, the exhaustion gap, and the island reversal.
You can download the Candlestick Charts Book PDF through the link given below.
Excerpts From the Book
What Are Candlesticks?
A Potted History
Candlesticks have a rich history, predating similar practices in the Western world. The Japanese were already utilizing charting techniques as early as the 17th century, while the earliest known charts in the US didn’t emerge until the late 19th century. Rice trading had firmly established itself in Japan by 1654, with commodities like gold, silver, and rape seed oil quickly following suit. During this period, rice markets held significant sway in Japan, often overshadowing the importance of hard currency.
Munehisa Homma, also known as Sokyu Honma, was a Japanese rice trader born in the early 1700s, widely recognized as one of the early pioneers of price action analysis. He possessed a deep understanding of basic supply and demand principles but also recognized the influence of emotion on price setting. Homma sought to gauge the market players’ emotional sentiment, laying the groundwork for what would later become known as candlestick analysis. His expertise was so esteemed that he was eventually promoted to Samurai status.
For centuries, the Japanese adeptly guarded their candlestick techniques from the prying eyes of the Western world, until the 1980s when there was a significant globalization of banks and financial institutions. It was during this time that Westerners stumbled upon these enigmatic charts. Coincidentally, this era also witnessed a surge in the accessibility of charting tools, thanks to the widespread adoption of personal computers.
By the late 1980s, candlestick analysis began to pique the interest of Western analysts. In the UK, Michael Feeny, then head of Technical Analysis in London for Sumitomo, incorporated candlesticks into his daily work and began introducing the concepts to London professionals. The December 1989 edition of Futures magazine featured Steve Nison, a technical analyst at Merrill Lynch in New York, produced a paper that showed a series of candlestick reversal patterns and explained their predictive powers. He went on to write a book on the subject, and a fine book it is too. Thank you Messrs Feeny and Nison.