How to Make Money Trading with Candlestick Charts

It is vital to emphasize at this point that
the use of any indicator is secondary in
nature. The candlestick signals are the
primary source for decision making.
The key is to find candlestick buy signals in
oversold conditions and candlestick sell
signals in overbought conditions. As you
read the following chapters, you will notice
that most of the charts will focus on the
overbought-oversold conditions. For the
beginner candlestick trader, these situations
will be plentiful to take advantage of. They
will enhance your confidence level while
simultaneously increasing your portfolio

---

returns.

---

PART I
The first part of this book will focus on the
explanation of the major candlestick signals.
The nuances associated with individual
signal formations are explained along with
plenty of charts. Sometimes, you will see the
important points being repeated in many
places. Believe me, it will add to your
mental reinforcement of the psychology of
the signals. The goal here is to get your eyes
trained to the signal patterns to the point
where you instantly recognize and analyze
the underlying demand-supply equation in
that stock.
The following major signals will be covered

---

in depth:
The Doji.
The Hanging Man and the Hammer.
The Inverted Hammer and the Shooting
Star.
The Bullish Engulfing and Bearish
Engulfing signal.
The Dark Cloud and the Piercing signal.
The Harami.
The Morning Star and Evening Star
signals.
Please read and re-read these chapters
before going on to Part II of this book. A

---

thorough understanding of the signal
formations is of the utmost importance if you
want to successfully trade with them.

---

3
The Doji
The Doji is one of the most important
candlestick signals. The Japanese say that
whenever you see a Doji, pay heed.

---

Doji
Description
Figure 3.1
shows a Doji formation. Notice
that the open and the close of the stock are at
about the same price.
Figure 3.1:
Doji signal

---

Criteria
For the Doji to be valid, the following
conditions need to be met:
The open and the close of the stock must
be almost at the same price level.
There can be an upper shadow or a
lower shadow, or both.
Figure 3.2
shows a few Doji variations:

---

Figure 3.2: