Steve Nison’s Candle Charting Essentials and Beyond Volume 1 of the Nison Educational Series 1 www.candlecharts.com Founder and President: Candlecharts.com The Framework & Real Bodies and Shadows 1 open close open Real Body high low Shadow Real Bodies / Shadows close 2 Open Close 3
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Steve Nison’s Candle Charting Essentials and Beyond Volume ... · • Correctly using candlesticks When to pull trigger When to ignore • Lack of confidence pulling the trigger
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Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
1
www.candlecharts.comFounder and President: Candlecharts.com
The Framework &Real Bodies and
Shadows
1
open close
open
RealBody
high
low
Shadow
Real Bodies / Shadows
close
2
Open
Close
3
Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
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Reading the market Psychology
Bullish Engulfingpatterns as support
Bear Stearns Collapse
4
Helping youovercomingyour tradingchallenges
5
• Entering trades too late
• Knowing when to exit
• Preserving trading capital
• Quickly recognizing the candle signals
• Paralysis by analysis
• Quickly recognizing candle signals
• Correctly using candlesticks
When to pull trigger
When to ignore
• Lack of confidence pulling the trigger
Trading Challenges:Trading Challenges:
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Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
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Helping youovercomingyour tradingchallenges
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• Easy to Understand• Early Reversals• “Safety First”• East + West• All markets• All Time Frames• Accelerates Analysis
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Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
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CandlestickCharting
Techniques
WesternCharting
Tools
Trade Management
www.candlecharts.com 10
ROCK SOLID CONFIDENCE
Seize tradingopportunities beforethey becomeapparent to others
Information isPower! Learn how toavoid losing trades
Pinpoint turningsignals with razorsharp accuracy
The Result:
11
What we learned:What we learned:
The Popularity of Candles
The Anatomy of the Candle Line
Candles and market psychology
History of candles
Benefits of Candles
Candles are a tool – not a tradingsystem
Importance of Education
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Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
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CandlestickCharting
Techniques
WesternCharting
Tools
Trade Management
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1
• Early reversals
• “Safety First” Trading
• Quickly read themarket’s message
Candlestick Charts
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www.candlecharts.com
The Framework:Analyzing Real Bodies
and Shadows
The Framework:Analyzing Real Bodies
and Shadows
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Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
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The longer the realbody the strongerthe momentum.
The relative sizeand position of theshadow displaysthe extent of pricerejection.
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Who’s in control?
“The Real Body is the Essence of the Price Movement”
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Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
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www.candlecharts.com
Single Candle Lines:The Bear Signals
Single Candle Lines:The Bear Signals
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Basic Criteria:• Market in up trend
• Small real body (black or white) at,or near, bottom of session
• Upper shadow at least twice heightof the real body
Market Implication:Potential top reversal
Support or Resistance:High of signal as resistance
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www.candlecharts.com
Shooting Star “signals trouble overhead”
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Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
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Hammer as buy at $166.92
Shooting staras exitat $168.12
Education = Confidence = $uccess
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What iswrong withthis so called“shootingstar?”
Hint: look at upper shadow
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“A crack has entered the market”
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Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
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Shooting Stars as Resistance
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Shooting Stars
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Which three prices ofthe session are on thelow?
What happened duringthe session and bysession’s end?
Gravestone Doji
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Gravestone
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Gravestone
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Gravestone Doji
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Shooting star
Hammer
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“If it appears from below,buy. If it appears fromabove then sell.”
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Basic CriteriaSame shape as Hammer but marketin uptrend
Market ImplicationIn theory, potential top reversal
Support or ResistanceNot used as resistance
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www.candlecharts.com
There must be bearish confirmation forthe hanging man. This means waiting foran open– or even better – a close underthe bottom of the hanging man’s realbody.
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Hanging Man
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Hanging Man
confirmation
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Using Candles in a “Box” Range
Who has more control here? Who has more control here?
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Box range – which way?
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Box range – which way?
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Reading the Market’s Message
Hammer
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Using the insights of single candle lines
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Using Single Candle Lines
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Reading the Market’s Message
Who’s in charge with the red arrows?
Who’s in charge with the green arrows?
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Reading Market Psychology
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What we learned:What we learned:
Most candles are reversals
High wave candles
One sided shadow candles: bull and bear
Less emphasis on hanging man and invertedhammer
Box ranges and single candle lines
Single candle lines to read the market’s message
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Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
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www.candlecharts.comFounder and President: Candlecharts.com
Essentials of MultipleCandle Lines
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Double Candle Lines:The Bull Signals
Double Candle Lines:The Bull Signals
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Basic Criteria• Market in down trend
• White real body wraps around priorsession black real body
Market ImplicationBottom reversal
SupportThe lowest low of the two sessionsof the pattern
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Classic Bull Engulf
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Shadows for Insights
Lower closes, butwhat are shadowshinting?
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Bullish Engulfing Pattern
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How many black candles didthis wrap around?
Bullish Engulfing Pattern
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Bullish Engulfing Pattern
Anythinghinting bearslosing force?
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close
openopen
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Bullish Engulfing Pattern
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Series of Bullish Engulfing Patterns
Shooting stars
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Bullish Engulfing Pattern as Support
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Bull Engulf as Support
Bullish Engulfing
Patterns
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Basic Criteria• Market in down trend
• Opens below prior low (or close)
• White candle closes more than 50%into prior black real body
Market ImplicationBottom reversal
SupportThe lowest low of the twocandlestick lines
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Piercing Pattern
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Piercing Pattern
Not Piercing Patterns
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Early clues of shifting supply/demand
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On–neckclose=
prior low
PiercingPattern
In–neckclose=
prior close(small white
candle)
Thrustingclose above
prior low(small white
candle)
1 2 3
Patterns 1,2 and 3 are viewed as small, reactionary rallies where the bulls counter driveis weak. “Selling chase begins” under any of these patterns for momentum traders. 108
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Basic Criteria• Market in down trend
• First candle is an unusually longblack real body
• Second relatively small real body(either color) within prior real body
Market ImplicationPrior trend is “losing its breath”
SupportNot used
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Bull Harami
Not harami
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Bull Harami
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Bull Harami
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Double Candle Lines:The Bear Signals
Double Candle Lines:The Bear Signals
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Basic Criteria• Market in up trend
• Black real body wraps around priorsession opposite color real body
Market ImplicationTop Reversal
ResistanceThe highest high of the two sessionsof the pattern
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Bearish Engulfing Pattern
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Bearish Engulfing pattern as resistance
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Candles: Support and Resistance
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Candles: Support and Resistance
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Topoutsidereversal
Bottomoutsidereversal
Western Outside Reversals
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Engulfing Patterns and Outside reversals
Topoutsidereversal
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Engulfing Patterns and Outside Reversals
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Engulfing pattern and trends
stops!
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Basic Criteria• Market in up trend
• Opens above prior high (or close)
• Black candle closes deeply intoprior long white candle
Market ImplicationTop reversal
Support or ResistanceThe highest high of the two linesthat make up the pattern
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Dark Cloud Cover
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Dark Cloud Cover as Resistance- FX
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Dark Cloud Cover- Futures
Chart courtesy of Genesis FT
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Dark Cloud Cover - Stock
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Dark Cloud Cover as Resistance - Intraday
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Basic Criteria• Market in up trend
• First candle is an unusually longwhite real body
• Second relatively small real body(either color) within prior real body
Market ImplicationBears losing momentum
Support or ResistanceNot used
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Bear harami
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Bear Harami
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Bull and Bear Harami
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Triple Candle Lines:The Bull Signals
Triple Candle Lines:The Bull Signals
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Criteria• Market in downtrend
• First candle is long black
• Second candle small real body thatdoesn’t (or slightly) overlaps first realbody
• Third candle is white real body thatgets deeply into first real body
Market ImplicationBulls now in control
SupportLow of three candles
white or black
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Morning Star as Support
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Morning Stars
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Morning Star as Support
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Moring Star as Support
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Steve Nison’s Candle Charting Essentials and BeyondVolume 1 of the Nison Educational Series
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Morning Star
Variation
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Morning Star as Support
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Triple Candle Lines:The Bear Signals
Triple Candle Lines:The Bear Signals
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white or blackCriteria• Market in uptrend
• First candle is long white
• Second candle small real body thatdoesn’t (or slightly) overlaps first realbody
• Third candle black real body that getsdeeply into first real body
Market ImplicationBears are now in control
ResistanceHighest high of three candle lines
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Evening Star
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Evening Star
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Evening Star
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Evening star
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Evening Star and Flexibility
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Evening Star as Resistance
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Evening Star Variation
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On this 1 minute chartlook at the candlesignals sent by RIMMat 129.80/.90
Reading the Market’s Message Quickly and Accurately
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Reading the Market’s Message Quickly and Accurately
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Reading the Market’s Message
1
2
3
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Reading the Market’s Psychology
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www.candlecharts.com
Criteria• Market in a downtrend
• Three relatively long white candles
• Last two open within, or over, priorwhite real body
• Each candle closes at, or near, its high
Market ImplicationBottom reversal
Support or ResistanceNot used as support
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Three Soldiers
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Criteria• Market in uptrend
• Three long black candles
• Open of last two within, or below, priorblack real bodies
• Each candle closes at, or near, its low
Market ImplicationTop reversal
Support or ResistanceNot used as resistance
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Three Black Crows
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What we learned:What we learned:
Bullish and Bearish EngulfingPatterns
Brief description difference withcandles in FX
Piercing Pattern
Simplifying Candle Analysis
Dark Cloud Cover
Bull and Bear Harami
Reading the market’s messagewith dual candle patterns
Morning and Evening Stars
Being flexible in chart readings
Soldiers and Black Crows
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The trend before the signal continues after the signal
Three Methods
Windows
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Rising and Falling Three Methods
Falling ThreeRising Three
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Rising Three Methods
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Falling Three Methods
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Gap Higher =Rising Window
Gap Lower =Falling Window
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A rising window is support
SupportZone
Most importantsupport level
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Rising Window
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Rising Windows
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Broken Windows
Once the window is brokenit is no longer potential support
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Candles in Context
ShootingStar, but…
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Candles in Context
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How education SAVES you money
Bearish engulfingpattern, but you mustnot sell here!
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Rising Window
Rising Window Hammer
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A falling window is resistance
ResistanceZone
Most importantresistance level
www.candlecharts.com 173
Falling Window
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Breaking Falling window’s Resistance
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Falling Window
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Falling window
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Small Windows
2 cents
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When the market gaps above resistance – or below support
Breakaway Gap
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Breakaway Gap
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Breakaway gap
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Safety first Trading
Strong candles
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Fry Pan Bottom Dumpling Top
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Fry pan bottom
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Fry Pan Bottom
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Dumpling top
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Upside gapping tasuki
downward gapping tasuki
Down gap parallelwhite lines
Up gap parallelwhite lines
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What we learned:What we learned:
Continuation candles
Rising and falling threemethods
Window essentials
Large vs. small windows
Windows and roundingtops/bottoms
Simplifying candle analysiswith windows
188
How NOT to use candlesticks
Oh my goodness! Themarket rallied after theshooting star!