Developed by the Japanese
and popularised in the west by Steven Nison, Candlestick charts
are an alternative to standard price charting styles. Like a standard
'bar chart', they display the open, high, low, and closing prices
but use a solid or empty body to visually reinforce whether the
bar rose or fell. This reinforcement may be useful or not, depending
on your trading style. Some short term investors claim that unless
one is in strong control of one's emotions, candlestick charts may
panic a trader into trading when he should be sitting on the sidelines.
We disagree, finding them very illuminating, and so from a day trading
strategy perspective, we use them a lot, although we pay no heed
to 'patterns'. Many 'patterns' have been documented over the years,
all with fanciful Japansese-sounding names, and all purporting to
tell a trader what is about to happen. Opinion is divided on the
validity of these patterns, our own statistical research leads us
to believe that 'they work when they work, and don't when they don't.'.