The Power of Japanese Candlestick ChartsAdvanced Filtering Techniques for Trading Stocks, Futures and Forex
Wiley Trading Revised Edition
A practical, must-read guide to candlestick charting techniques Japanese candlestick charting is a highly effective method for timing the market for short-term profits. Unlike most western techniques—moving average, relative strength index, MACD, stochastic, Bollinger bands, or Elliot waves—candlestick charting signals are based on very close analysis of product price, producing accurate buy or sell signals between two and ten periods earlier than other techniques. In The Power of Japanese Candlestick Charts, noted author and futures trading expert Fred Tam offers a full and sophisticated range of charting techniques using candlestick methodology. Written by Fred K. H. Tam, a noted pioneer in exploring the Japanese candlestick methodology Ideal for anyone who wants to invest or trade in both the futures and stock markets Includes hundreds of illustrated charts The Power of Japanese Candlestick Charts is a comprehensive and valuable guide to candlestick charting that is perfect for analysts, stock or day traders, and short-term position traders.
Index of Reversal Patterns ix Index of Continuation Patterns xi Preface xiii Acknowledgments xxi Part I Basic Candlestick Techniques Chapter 1 Introduction 3 Historical Background 4 Reasons Candlestick Charts Are So Popular Today 5 Construction of the Candlestick Chart 7 Construction of a Bar Chart 8 Chapter 2 Single Candle Types 11 Single Candles 11 The Doji 35 Chapter 3 The Umbrella Group 59 White Hammer or Hanging Man (Also Called White Umbrella Candle) 59 Black Hammer or Hanging Man (Also Called Black Umbrella Candle) 60 White Inverted Hammer or Shooting Star (Also Called Inverted White Umbrella Candle) 60 Black Inverted Hammer or Shooting Star (Also Called Inverted Black Umbrella Candle) 61 Chapter 4 Reversal Patterns 67 Introduction 67 Index of Reversal Patterns 69 Single Candlestick Patterns 70 Double Candlestick Patterns 90 Triple Candlestick Patterns 119 Multiple Candlestick Patterns 156 Chapter 5 Continuation Patterns 171 Introduction 171 Double Candlestick Patterns 172 Multiple Candlestick Patterns 185 Windows (Gaps) 192 Chapter 6 Summarizing Part I 209 Can One Trade the Market and Profit Just by Applying Candlestick Chart Analysis? 210 Candlestick Chart Analysis Is Best Used in Conjunction with Technical Indicators 210 Conclusion 211Part II A dvanced Candlestick Techniques Chapter 7 Filtering with Western Indicators 215 Using Filtering or the Rule of Multiple Techniques 216 Scenario 1: In the Case of a Bull Market or Bullish Trend 216 Scenario 2: In the Case of a Bear Market or Bearish Trend 216 Scenario 3: In the Case of Overbought or Oversold Situations 216 Filtering with Moving Averages 217 Filtering with MACD (Moving Average Convergence Divergence) 218 Filtering with Relative Strength Index 221 Filtering with Stochastic 224 Filtering with Momentum 229 Filtering with Williams’ Percentage Retracement 229 Filtering with Directional Movement Index 232 Filtering with Commodity Channel Index 235 Filtering with Volume 238 Filtering with Bollinger Bands 238 Filtering with Elliott Wave Theory 240Chapter 8 P.I. System Trader 247 The P.I. System Trader Mimics Candlesticks 248 Trading Rules for P.I. System Trader 250 Advantages of P.I. System Trader 250 Chapter 9 Sakata’s Five Methods 253 Sakata’s Constitution and Sakata’s Five Methods 253 Sakata’s Constitution (Soba Sani No Den) 254 The Japanese Method of Three 254 Conclusion 267 Chapter 10 Computerized Candlestick Forecasting 273 The Era of Computerized Candlestick Scanning 274 Features of the Nison Candle Scanner 275 Nison Candle Highlighter on MetaTrader 4 Platform 280 Chapter 11 Conclusion: Facts about Candlesticks 285 About the Author 287 Reading List 289 Index 291
FRED K. H. TAM is a gold, silver, forex, stock indices, and stock trader for 30 years, and is the author of six books on the financial markets. He is a full member of the Society of Technical Analysts, U.K., a Certified Financial Technician, and a Master of Financial Technical Analysis from IFTA. He is the first Malaysian to receive the MFTA award. Fred holds another Master of Philosophy (Technical Analysis) from Multimedia University, Cyberjaya, Malaysia. He also served as the principal lecturer of the Certificate in Financial Technical Analysis course at Open University Malaysia from 2007 to 2010. His students take the MSTA (UK) and CFTe (USA) exams, and passes have been impressive. Fred uses a combination of Japanese candlestick and Western technical indicators to track the markets, and he has developed his own computerised trading system called the P.I. System Trader, which mimics candlestick reversal patterns and is excellent for trading fast-moving markets. He teaches and promotes technical analysis and makes speaking appearances in Indonesia, Singapore, as well as Malaysia. Mr Tam is now collaborating with Asia e University (AeU) to offer Malaysia's first EMBA (Financial Technical Analysis) Course. www.f1traderacademy.com
For over 300 years, Japanese candlestick charts have been accurately predicting market movements and helping traders to profit from optimally timed market entries and exits. With The Power of Japanese Candlestick Charts, author Fred Tam explains how to integrate the visual, predictive power of candlestick charts with proven technical analysis to help traders, analysts, and investors maximize returns in any market. The Japanese candlestick methodology is a very powerful short-term trading technique, and part of the reason is because it routinely triggers accurate buy or sell signals at least two periods, and sometimes up to ten periods, earlier than traditional Western indicators. This is because candlestick signals are based on a close analysis of the product price as related to an underlying knowledge of how greed, fear, and other factors drive investors' behavior in certain market conditions. The same technique can be equally successful when applied to long-term trading strategies, with only minor adjustments. Traders will be convinced from the hundreds of charts illustrated in this book that Japanese candlestick signals lead Western technical indicators in timing market entry and exit. With examples taken directly from charts of leading international companies, currencies, and commodities, Fred Tam explains in detail how to create, read, and profit from candlestick charts. Candlestick charts provide numerous advantages over other charting techniques, including their unlimited versatility across time dimensions and multiple market applications, and readers will gain an understanding of how to leverage those advantages in stocks, futures, and currency trading. The Power of Japanese Candlestick Charts delves into the effectiveness of the methodology as a stand-alone technique, but Fred Tam contends that candlesticks are most profitable when integrated with trend analysis and technical indicators such as Moving Average, RSI, Momentum, MACD, Stochastic, DMI, CCI, Percent R, Bollinger Bands, and Elliott Wave Theory, among others. It is this holistic and integrated investment approach that Mr. Tam is uniquely positioned to provide to readers, and it is why this book is an invaluable resource for profit-driven traders, technical analysts, and investors.
"Fred Tam's new book is a welcome addition to the field of Japanese Candle Charting. This book has the same attributes as candle charts; they are both clear, concise, and give powerful insights. Whether you are new to candle charting or an expert, this book will arm you with the weapons needed to help you win your battle of the markets." —Steve Nison, CMT, President and Founder, Candlecharts.com A comprehensive guide to profiting from candlestick charting techniques Japanese candlestick charting is a time-tested and highly effective method for timing the market for short-term and long-term profits. With hundreds of illustrated charts taken from leading international companies, currencies, and commodities, noted author and futures trading expert Fred Tam demonstrates the predictive power of candlestick charting signals and how to properly integrate them with proven Western technical analysis techniques to maximize returns in any market. The Power of Japanese Candlestick Charts explores the many advantages of the candlestick charting methodology, including: Leading Indicator – the ability to show reversal signals earlier than Western charting techniques Visual – pictorial chart construction allows traders to immediately recognize buy and sell signals Versatile – can be used alone or with Western technical analysis techniques Flexible – can be used across any time dimension and with any market or multiple markets simultaneously Candlestick charting is a proven methodology as a stand-alone market analysis tool, but Fred Tam contends that it is even more powerful when combined with trend analysis and technical indicators like Moving Average, RSI, Momentum, MACD, Stochastic, DMI, CCI, Percent R, Bollinger Bands, and Elliott Wave Theory. The Power of Japanese Candlestick Charts is a comprehensive and valuable guide to candlestick charting that is perfect for analysts, stock or day traders, and short-term position traders.