How to Make Money Trading with Candlestick Charts

Unconfirmed and confirmed
Doji in Hindalco
The first two Doji did not have any
confirmation selling following them. What
can be inferred from that? It shows that after
the up trend, the bulls merely rested. The day
of indecision was followed by more buying,
implying strength in the up trend. However,

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after the third Doji the bears assumed control
of the stock as seen by the big dark candle.
There was no doubt after seeing this candle
that the bulls had lost the battle.
Such analysis is what will distinguish you
from traders who are not aware of the
nuances of candlestick trading. It is not just a
matter of visually recognizing a signal. You
have to learn to analyze the signal in the
proper perspective. This book will help you
do that.
Let us conclude the discussion with 
Figure
3.6
. The chart shows Hinduja stock rallying
after a Doji stopped its downtrend.

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Figure 3.6:
A spinning top candle in
Hinduja
The candlestick trader would have entered
the position after the Doji was confirmed by
the next day’s buying. The ride from 
`
305 to
about the 
`
360 area would have generated
handsome profits. Where would the trader
have sold? Note the spinning top at the top of

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the trend. The trader would have sold after
the spinning top was confirmed by the dark
candle the day after.

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4
Hammer and Hanging Man
Signals
The Hammer and the Hanging Man are one-
day reversal signals. Traders should gear up
to enter positions as soon as these signals get
confirmed the following day.

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Hammer
Description
Figure 4.1
shows a Hammer formation. As
can be seen, an ideal Hammer has a small
body and a tail which is at least twice the
size of the candle’s body.
Figure 4.1:
Hammer signal

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Criteria
In order for the Hammer signal to be valid,
the following conditions must exist:
The price must have been in a definite
downtrend before this signal occurs. This
can be visually seen on the chart.
The lower shadow must be at least twice
the size of the body.
The day after the Hammer is formed, one
should witness continued buying.
There should be no upper shadow or a
very small upper shadow. The colour of
the body does not matter, but a white
body would be more positive than a

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black body.