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Trading with Candlesticks: Visual Tools for Improved Technical Analysis and Timing
- By Michael C. Thomsett
- Published Aug 10, 2010 by FT Press.
- Copyright 2011
- Dimensions: 7" x 9-1/8"
- Pages: 300
- Edition: 1st
- eBook (Watermarked)
- ISBN-10: 0-13-264380-4
- ISBN-13: 978-0-13-264380-1
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Product Author Bios
Michael C. Thomsett has authored more than 70 financial books, including The Options Trading Body of Knowledge; Options Trading for the Conservative Investor, Second Edition; “Put” Option Strategies for Smarter Trading; Winning with Options; The LEAPS Strategist; and the best-selling Getting Started in Options, now in its 8th edition with 250,000+ copies sold. His book The Investment and Securities Dictionary was named by Choice as an Outstanding Academic Book for 1988. Before starting his professional writing career in 1978, Thomsett was an accountant. He has actively traded options since the mid-1970s.
Traders who use charts to time their moves rely on strong and clear signals. Unfortunately, price levels and traditional technical indicators alone aren't always reliable. There is a solution: candlestick signs, moves, and patterns. When these visual signs of reversal or continuation are integrated with other signals, they provide the strongest possible entry and exit timing: both the signal and the means for confirming it. In this easy-to-use book, renowned trader Michael C. Thomsett demystifies candlesticks and shows active traders exactly how to use them. In Trading with Candlesticks, Thomsett explains how each leading candlestick works, how they appear, and how to interpret them to discover emerging price moves and trend reversals, as well as confirmations of existing trends. Trading with Candlesticks shows dozens of examples of candlestick signs, moves and patterns in action, explaining them not in isolation, but as part of broader, developing price trends on real stock charts. Thomsett also discusses failed signals, and offers guidelines for identifying the likely impending failure or success of each pattern. While no investing approach is 100% foolproof, Thomsett's system for recognizing candlestick signals and confirming them with other technical signs makes technical analysis more accurate than it's ever been before.
Table of Contents
Acknowledgments . . . viii
About the Author . . . ix
Introduction . . . 1
Chapter 1 The Basic Candlestick . . . 5
The Origin and Meaning of the Candlestick . . . 6
Strengths and Weaknesses of Candlesticks . . . 9
Paper Trading as a Testing Ground . . . 12
The Skills Every Trader Needs . . . 14
Candlesticks: General Observations Concerning Their Use . . . 18
Expanding the Information Pool Effectively . . . 20
Endnotes . . . 22
Chapter 2 Single-Stick Signs . . . 25
Uptrends and Downtrends . . . 25
The Significance of a Candlestick’s Shape . . . 28
Variations on the Bullish Long Candlestick . . . 30
The Mistake Pattern . . . 32
The Spinning Top, Hanging Man, and Hammer . . . 37
The Significance of Tails . . . 42
Chapter 3 Double-Stick Moves . . . 47
Two Reversal Moves: Engulfing and Harami . . . 48
More Reversals: The Inverted Hammer and Doji Star . . . 53
Even More Reversals: Meeting Lines and Piercing Lines . . . 56
Confirming Patterns: Thrusting, Separating, and Neck Lines . . . 60
Reversal and Confirming Moves–Relative Values . . . 66
Chapter 4 Complex Stick Patterns . . . 69
Reversal Trend Change Patterns . . . 71
Reversal Trend Inside and Outside Formations . . . 74
Reversal Stars and Abandoned Babies . . . 78
Complex Trend Patterns . . . 82
Complex Gap Trends . . . 86
Chapter 5 Reversal Pattern Analysis . . . 91
Recognizing the Bull Reversal . . . 91
Recognizing the Bear Reversal . . . 94
The Doji as a Reversal Signal . . . 97
Reversal Patterns with Gaps . . . 101
Reversals Setting New Support or Resistance . . . 104
More Resistance and Support Reversals . . . 108
Multisession Gap Reversals . . . 111
Chapter 6 Volume and Volatility . . . 119
Volume as a Price Indicator . . . 119
Volume Indicators . . . 122
Volume Indicators and Candlesticks . . . 126
Testing Price Volatility . . . 131
Chapter 7 Buy and Sell Setup Signals . . . 141
Price Spikes and Reaction Swings . . . 143
Percentage Swing Systems . . . 146
Short-Term Gapping Behavior . . . 149
Anticipating the Trend During Consolidation . . . 153
The Setup Pattern and Swing . . . 156
Support and Resistance in the Swing Trade . . . 165
Chapter 8 Swing Trading with Candlesticks . . . 171
A Swing Trading Overview . . . 171
Quantifying Price Movement with Candlesticks . . . 174
The Importance of Convergence and Divergence . . .. 178
Primary Trends and Candlestick-Based Entry or Exit . . . 182
Setup Criteria and Action Points . . . 186
Selling Short in Swing Trades . . . 190
Chapter 9 Spotting Trends and Using Trendlines . . . 193
Identifying the Trendline . . . 194
Trendlines and Candlesticks as Confirmation . . . 200
Applying Moving Averages to Candlestick Analysis . . . 203
Chapter 10 Technical Indicators . . . 207
The Value of Confirmation . . . 207
A Review: Technical Analysis Basics . . . 209
The Significance of Gaps . . . 212
A Key Framework: Support and Resistance . . . 215
Overbought and Oversold Indicators . . . 217
The Potential of Candlestick Signals . . . 222
Glossary . . . 225
Index . . . 235
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