japanese candlesticks ron william technical analyst email: [email protected]...
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Japanese Japanese CandlesticksCandlesticks
Ron William
Technical AnalystEmail: [email protected]
investorsintelligence.com
• 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.
Brief History Brief History
Bullish Candle White Real
BodyHigh
Close
Open
Low
Bearish Candle
Black Real Body
Low
Close
Open
High
Real Body
Upper Shadow
Lower Shadow
Constructing the Candle Constructing the Candle LineLine
The The Real BodyReal Body is the essence is the essenceof market psychologyof market psychology
Basic CandlesBasic Candles
Long Day Doji Spinning Top High Wave
1. Small real body 2. Colour not imp. 3. Long shadows
Strong buy/sell Midpoint used asMidpoint used as support/resistancesupport/resistance
Open and close are narrow/same Market is tiredMarket is tired
1. Small real body 2. Colour not imp. Prior trend weakPrior trend weak
Indicates confusionIndicates confusion
DojiDoji
Criteria: Open and close are narrow or the same
Psychology: Market is “tired”
DojiDoji Doji hints market is “tired”
Silver (Weekly Chart)
11 22
4433
55
Doji in box rangeDoji in box range
Series of doji within box range merely sets tone
USD/ZAR (Daily Chart)
Single LineSingle Line
1. Lower Shadow 2X length of Real Body2. RB at upper end, colour not important3. No/very small upper shadow4. Confirmed with a strong bullish day
Hammer Shooting Star
1. Upper Shadow 2X length of Real Body2. RB at lower end, colour not important3. No/very small lower shadow4. Confirmed with a strong bearish day
Hammering a baseHammering a base Trouble overheadTrouble overhead
HammerHammerGBP/USD (Daily Chart)
Support
Preferred Sell
Risk?
Shooting StarShooting StarWheat (Weekly Chart)
Sell?
Selling on closeimplies riskingthe pattern high
Dual LineDual Line
Engulfing Dark Cloud Cover Piercing Line
1. Uptrend evident2. Session opens > prior high3. Bearish RB closes > 50% into bullish RB
1. Downtrend evident2. Session opens < prior low3. Bullish RB closes >50% into bearish RB
1. Large RB wraps around small RB2. Opposite colours3. Up/Down trend
Arresting control Sentiment reversal Sentiment reversal
Kuwait Stk Mkt (Weekly Chart)
Bullish EngulfingBullish Engulfing
Sell
Dark Cloud CoverDark Cloud CoverPalladium (Weekly Chart)
Midpoint
Three LineThree Line
Morning Star Evening Star 3 White Soldiers 3 Black Crows
1. Three bullish RB’s, all of similar size2. Prior trend is down3. Each session opens with recent RB & closes near high
1. Downtrend evident2. Bearish session is followed by indecision.3. Bulls close > 50% into prior Bear RB
1. Uptrend evident2. Bullish session is followed by indecision.3. Bears close > 50% into prior Bull RB
1. Three bearish RB’s, all of similar size2. Prior trend is up3. Each session opens with recent RB & closes near lows
Upside reversal Downside reversal Uptrend Downtrend
Support and ResistanceSupport and Resistance Trend-linesTrend-lines Price PatternsPrice Patterns Moving AveragesMoving Averages OscillatorsOscillators Elliott WaveElliott Wave
Optimises and confirmsOptimises and confirms Price targetsPrice targets
Western chartingWestern charting
Moving Moving AveragesAverages
Gold (Weekly Chart)
Piercing LinePiercing Line
High-waveHigh-wave
Piercing LinePiercing Line HammerHammer
70-week average
Soybean (Daily Chart)
Price PatternsPrice Patterns
3 White 3 White SoldiersSoldiers
Morning StarMorning Star Bullish Bullish EngulfingEngulfing
3 White 3 White SoldiersSoldiers
Shooting StarShooting Star
Shooting StarShooting Star
3 White 3 White Soldiers Soldiers (variant)(variant)
38.2%38.2%
50%50%
EUR/USD (Daily Chart)
ConfluenceConfluence
61.8%61.8%
Measured Objective
Relative Strength Relative Strength IndexIndex
CRB (Weekly Chart)
Bollinger BandsBollinger Bands
Dark Cloud Dark Cloud CoverCover
HammerHammer
Dark Cloud Dark Cloud CoverCover
High-WaveHigh-WaveBullish Bullish
EngulfingEngulfing
Bearish Bearish EngulfingEngulfing
HammerHammer HammerHammer
Oil (Daily Chart)
Elliott Wave Elliott Wave Gold (Daily Chart)
(1)(1)
(2)(2)
(3)(3)
(4)?(4)?
Corrective Wave Corrective Wave (4)?(4)?
Gold (Weekly Chart) (3)(3)Hanging Hanging
ManMan
Piercing Piercing LineLine
Dark Cloud Dark Cloud CoverCover
(4)?(4)?HammerHammer
Trading RulesTrading Rules
Wait for the Wait for the session’s closesession’s close to confirm to confirm
DO NOT use candles in DO NOT use candles in isolationisolation
Always consider Always consider RiskRisk//RewardReward ratios ratios before placing a trade with a candle before placing a trade with a candle signalsignal
Candles DO NOT offer Candles DO NOT offer price targetsprice targets
Remember the importance of Remember the importance of stopsstops
Human Human EmotionEmotion Drives the MarketDrives the Market
Candle AnalysisCandle Analysis Unrivaled in Gauging Unrivaled in Gauging
Market PsychologyMarket Psychology
Presentation slidesPresentation slidesdesigned by Ron Williamdesigned by Ron William