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Candlestick Charts : An introduction to using candlestick charts by Clive Lambert

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2. What Candles Tell Us About The State Of Mind Of The Market

Marabuzo v Doji candles

Pattern recognition is a cornerstone of technical analysis. Western practitioners have been spotting things like Dow Theory signals, and all sorts of patterns with names like Rounded Bottom and Head & Shoulders, for years. This is why viewing candlestick charts can be an easy transition for technical analysts, because it’s a similar practice: you look for recurring patterns, and use the assumption that price patterns repeat themselves, so similar behaviour will be seen after these price patterns when they occur in the future.

Let’s begin our journey into pattern recognition of candlestick charts.

Look at the three candlesticks in the following figure, ...

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