One of the basic concepts of Technical Analysis is Candlesticks.
Candlesticks provide a graphical representation of the open/close price of a stock and are a good indicator of buying selling selling pressure of the stock.
What are Candlesticks ?
This youtube video provides a good introduction to what Candlesticks are. It is under 10 minutes and easy to understand.
How to tell the market sentiment of a specific stock using candlesticks?
This is a good video on understanding market sentiment using candlesticks.
Candlesticks can be for various time periods. From a day , to an hour , to 15 minutes etc. This video provides a good introduction on how one time periods’ Candlestick can be further broken down to smaller time periods . Many of the strategies of day trading are based on patterns identified using multiple Candlesticks.
Patterns using Candlestick – Good video to introduce the concept of patterns.
Candle Stick Patterns:
- Shooting Star – This pattern can be used to enter to short a stock – I don’t currently short anything so I would most likely use this as an exit indicators.
- Hanging Man – This indicator can also be used to short a stock or as an exit indicator
- Hammer – Can be used as an entry signal
- Inverted Hammer – Can be used as an entry signal. #3 is a better signal compared to #4.
- Doji – Can be used as an entry or an exit indicator
- Harami – Can be used an entry or an exist indicator
- Dark Cloud Cover – Exist indicator
There are many many more patterns – I thought seven might be a good starting point. I will post follow up shares of the use of some of these patterns in my short term and long term trades.
Some sites you can use to do charting. I currently don’t want to use a paid charting site. I will be using yahoo for doing my charting and will share my experience.
The amount of information online for Technical Analysis can be overwhelming. My approach is to pick some of the most commonly used one and try it on small trades or on a simulator. Happy Trading !