The Power of Japanese Candlestick Charts

Advanced Filtering Techniques for Trading Stocks, Futures, and Forex

Fred K. H. Tam

• Publisher: Wiley
• Year: 2015
• Print ISBN: 9781118732922
• eBook ISBN: 9781118732953
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

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.

PART I

BASIC CANDLESTICK TECHNIQUES

CHAPTER 1

Introduction

The Japanese candlestick charting technique dates back to the 1700s when bar charting and point-and-figure charting were not even discovered. Japanese traders, on the other hand, were already using this technique to trade their rice markets. Yet this technique of charting was confined strictly to Japan until the Americans discovered this technique from Japanese traders who traded the U.S. financial markets in the 1980s.

What fascinated the U.S. traders in the late 1980s was its uncanny trading accuracy in the purchase and sale of stocks, stock index and commodity futures, currency and treasury bonds on the New York and Chicago exchanges. Yet, the Americans were unaware of the techniques used by the Japanese. Strong interest emerged amongst the U.S. traders as to how the Japanese arrived at their buy and sell decisions.

They reasoned that if they were going to beat the Japanese at their game, the American traders would have to fully understand how the Japanese traders’ minds worked. That entails knowing their charting technique. Understanding how Japanese traders use their charts would help the American traders answer the question “What are the Japanese going to do next?” This accounts for the resurgence of interest in the West into this previously obscure technique of technical analysis.

More information is now available on candlestick charting after extensive research by an American analyst, Steve Nison. His two books, Japanese Candlestick Charting Techniques and Beyond Candles, offered the outside world a first glimpse into this ancient methodology of the Japanese traders.

As Nison’s research into this mystically obscure charting technique became available through his two books, traders in the United States and the rest of the world began to realise its forecasting value. When combined with Western technical concepts, forecasting and trading the markets can be—in the words of Steve Nison—exciting, powerful, fun, and much more rewarding.

Even as recently as the late 1980s, real-time quote and chart services offered to investors in the United States, Europe, and the rest of the world did not feature candlestick charts—only bar charts. Yet within two years after Nison’s first book, published in 1991, almost every real-time technical service and end-of-day technical analysis software package offered candlestick charts to their clients. In Malaysia, every major real-time technical chart service provider such as Thomson-Reuters, Bloomberg, Updata, Meta-Trader, and Bursa Station supports real-time candlestick charts. The inclusion candlestick charts into these companies’ services underscores their popularity and usefulness.

■ Historical Background

After the unification of Japan under the Tokugawa Shogunate (Eighth Shogunate) from 1615 to 1867, its agrarian economy grew. By the seventeenth century, Osaka was regarded as Japan’s capital and commercial centre. Osaka’s easy access to the sea made it a national port for the shipping of supplies, including rice. Strategically located, Osaka soon became the centre for the rice trade, and rice brokerage became the foundation of Osaka’s prosperity. The Dojima Rice Exchange became the centre of rice trade for physical delivery.

Into this background, Munehisa Homma (1716–1803) was born in the city of Sakata, Yamagata Prefecture, Japan. His real name was Kosaku Kato, but he took up the name Munehisa Homma later in his life after ...

Table of contents

• COVER
• SERIES
• TITLEPAGE
• COPYRIGHT
• INDEX OF REVERSAL PATTERNS
• INDEX OF CONTINUATION PATTERNS
• PREFACE
• ACKNOWLEDGMENTS
• PART I: BASIC CANDLESTICK TECHNIQUES
• PART II: ADVANCED CANDLESTICK TECHNIQUES
• ABOUT THE AUTHOR
• READING LIST
• INDEX
• EULA