Technical Analysis For Dummies, 3rd Edition

Part III

Observing Market Behavior

The Top Five Advantages for Understanding Candlestick Patterns

• Many candlesticks are simple to use and interpret, making them a splendid place for a beginner to start figuring out bar analysis.
• Candlesticks and candlestick patterns have delightfully descriptive and memorable names, such as “abandoned baby,” “dark cloud cover,” and “spinning top.”
• Candlestick bar patterns and their interpretation are widely known, so you can expect other market participants to respond in a specific way to specific patterns.
• You can use candlesticks on any chart, with any other indicators, just like standard bars.
• Candlestick shapes can be dramatic, so they can bring your attention to a trend change earlier than standard bars do.

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In this part…

• Use price bar combinations to determine whether your security is starting a trend, staying on a trend, or losing its grip on the trend.
• Learn the advantages of using candlesticks, from being simple to use and interpret to identifying strategic market turning points — reversals from an uptrend to a downtrend or a downtrend to an uptrend.