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Investors and traders seek methods to identify reversal and continuation to better time their trades. This applies for virtually everyone, whether employing a swing trading strategy, engaging in options trading, or timing entry and exit to spot bull and bear reversals. Key signals are found in the dozens of candlesticks, combined with technical signals such as gaps and moves outside of the trading range; size of wicks (shadows) and size of real bodies. The science of candlestick analysis has a proven track record not only from its inception in 17th century Japan, but today as well.

This book explains and demonstrates candlestick signals, including both the appearance of each but in context on an actual stock chart. It further takes the reader through the rationale of reversal and continuation signals and demonstrates the crucial importance of confirmation (in the form of other candlesticks, traditional technical signals, volume, momentum and moving averages).

Michael C. Thomsett is a market expert, author, speaker and coach. His many books include Mathematics of Options , Real Estate Investor´s Pocket Calculator , and A Technical Approach to Trend Analysis .

A video of the author titled "Candlesticks for Option Timing" can be found here:

https://www.youtube.com/watch?v=IItH6OLh7TI

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Chapter 1: The Basic Candlestick 1

The Origin and Meaning of the Candlestick 2

Strengths and Weaknesses of Candlesticks 7

Paper Trading as a Testing Ground 12

The Skills Every Trader Needs 15

Candlesticks: General Observations Concerning Their Use 19

Expanding the Information Pool Effectively 22

Chapter 2: Single Stick Signs 27

Uptrends and Downtrends 28

The Significance of a Candlestick´s Shape 31

Variations on the Bullish Long Candlestick 33

The Mistake Pattern 35

The Spinning Top, Hanging Man, and Hammer 41

Line Signals 44

The Significance of Tails 45

Chapter 3: Double Stick Moves 49

Two Reversal Moves: Engulfing and Harami 50

More Reversals: The Inverted Hammer and Doji Star 56

Gaps and Lines 60

Neck Lines, Crows, and Rabbits 68

Reversal and Confirming Moves-Relative Values 78

Chapter 4: Complex Stick Patterns 81

Reversal Trend Change Patterns 82

Inside and Outside Formations 88

Reversal Stars and Abandoned Babies 91

Line and Gap Continuation Signals 95

Tower Tops and Bottoms 105

Chapter 5: Reversal and Continuation Pattern Analysis 109

Strong Top and Bottom Signals 111

Stars, Kicks, Swallows, and Sandwiches 117

Matching and Star Reversals 126

Ladders and "Major" Reversals 130

Sakata´s Five Methods 134

Price Patterns with Low Reliability 142

Strong Price Line Reversals 150

Recognizing the False Signal 165

Chapter 6: Volume and Volatility 169

Volume as a Price Indicator 169

Volume Indicators 174

Testing Price Volatility 183

Triangles and Wedges 185

Chapter 7: Buy and Sell Set-Up Signals 193

Price Spikes and Reaction Swings 196

Percentage Swing Systems 200

Short-Term Gapping Behavior 202

Anticipating the Trend During Consolidation 206

The False Indicator 210

Support and Resistance in the Swing Trade 214

Chapter 8: Swing Trading with Candlesticks 219

A Swing Trading Overview 220

Quantifying Price Movement with Candlesticks 223

The Importance of Convergence and Divergence 226

Primary Trends and Candlestick-Based Entry or Exit 230

Set-Up Criteria and Action Points 234

Selling Short in Swing Trades 239

Chapter 9: Spotting Trends and Using Trendlines 243

Identifying the Trendline 244

Trendlines and Confirmation Signals 249

Applying Moving Averages to Candlestick Analysis 252

The Channel Line 254

Chapter 10: Technical Indicators 257

The Value of Confirmation 258

A Review: Technical Analysis Basics 261

The Significance of Gaps 264

A Framework for Interpretation: Support and Resistance 267

Overbought and Oversold Indicators 270

Relative Strength Index (RSI) 270

Stochastics 272

MACD 273

Bollinger Bands 274

The Potential of Candlestick Signals 278

Glossary 281

Index 297

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