Candlesticks that Help You Make Money

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A Deep Dive into the Murky Waters of Candlestick Analysis

We discussed the uncharted waters of investing and we touched on candlestick charts in previous articles. It's time for a “deep dive” into the sometimes murky waters of candlestick charting. Many value-based traders intentionally avoid technical analysis techniques like candlesticks because they don't understand their value. They may, in fact, be leaving money on the table by not using one of the oldest trading tools ever developed.

This article will shed some light on the murkiness of candlesticks and show you how technical analysis and candlesticks can help in your efforts to build your wealth tree by more accurately timing your entries and exits.

History of Candlesticks

According to the 3rd Edition of Candlestick Charting Explained by Gregory L. Morris, Candlestick Charting offers “Timeless Techniques for Trading Stocks and Futures.” In his article at Learn to Trade the Market, Nial Fullers says that a Japanese rice trader, Munehisa Homma, was the “Most Successful’ Price Action Trader in History.

Homma developed his innovative technique of charting price movements to amass a personal fortune of over $10 Billion measured in today’s dollars. Known as the “Samurai Trader, he lived from 1724-1803 and used his method in the rice markets of Japan, recording price movements on paper made out of rice plants.

He carefully recorded the open and close of rice prices at the end of each trading day using a rectangular shape that looked like a candle and when he added the highs and lows to the rectangle, it looked like a candle with wicks.

As he charted the candles, he saw how historical patterns developed and created a naming system to help him predict future price movements based on these patterns. Considered the “Father of Technical Analysis,” he once predicted over one hundred price movements a row. The very same candlesticks can light your way into making money in modern ...

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