How to Make Money Trading with Candlestick Charts

Point 6:
This illustrates the previous trend

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channel now acting as resistance.
The examples above show how candlesticks
work with support and resistance lines. If as
a trader you anticipate a reversal situation at
a particular point on the chart, then the
knowledge of candlesticks will add
confirmation to your expectation. If you
expect a stock to turn lower at a resistance
point but candlesticks show a tall white
candle breaching that point, then your
expectation should be negated. You should
realize at that point that the stock has broken
resistance with good force. On the other
hand, if you see a Doji followed by a
Hanging Man and a lower close at that
resistance point, you know your expectation
is fulfilled. The probabilities are in the

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favour of the stock heading down.

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Moving Averages
Moving averages essentially provide a
directional trend to a stock or the market.
They smooth out the ups and downs of the
trend and provide the immediate direction
the stock is headed in. Moving averages have
a lot of applications in technical trading. The
most common way traders have used them in
the past is to buy a stock whenever a shorter
term moving average (MA) crosses upward
through a longer term moving average.
Conversely, they would sell a stock
whenever the shorter term MA crossed
below the longer term MA.
This application of moving averages is,
however, usually not the best technique to

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follow as it is a lagging method. What this
means is that the signal to buy is often
generated too late in the trend.