Candlestick Chart Tutorial

If you've spent any time playing around with charting software, you're probably familiar with the candlestick chart, one of the most popular ways to visually depict the movement of a market within and between specified time periods. In fact, candlestick charts are just about the fastest, user-friendliest, and most colorful way to get a clear picture of market behavior.

When I was just learning about this type of chart, one of my favorite resources was this tutorial provided by TradingDay.com. Here I learned the fascinating origins of candlestick charting in the Japanese rice markets of the 17th Century, when Homma, a trader in rice futures, invented these charts to help in his analysis of rice prices. The tutorial also teaches you how to spot bullish and bearish candlestick signals, such as the Harami, the Three Black Crows, the Three White Soldiers, and other indicators that date back centuries (no, the markets don't really change that much, just the traders.) It includes diagrams of each chart formation with pointers on when to enter short and long trades, as well as this helpful comparison of candlestick charting with the Western bar and line chart formats.

Looking to combine a candlestick chart with other indicators? I'd recommend 5 and 20-period moving averages and Bollinger Bands, as well as Stark Bands and Parabolic SAR if your charting software provides them. But don't let your charts get too cluttered -- you may find yourself getting burnt out on all the data. No matter how great your charts are, one of the most valuable skills you can develop is knowing when to take a break.

Related topic:
Know Your Candlestick Patterns