Learning How to Read Stock Charts Using Candlestick Signals
VINAYAK SHARES
-- http://stocklearners.blogspot.com/2007/08/explanation-of-doji-signal.html
Learning How to Read Stock Charts Using Candlestick Signals
The Doji Signal–
Learning
how to read stock charts can be a very simple process. The major
signals clearly illustrate trend reversals. Most investors, when
learning how to read stock charts, feel that they need a multitude of
indicators on one chart. Candlestick analysis does not require numerous
indicators. When utilizing the major candlestick signals, chart
analysis becomes very easy. The major signals reveal an immense amount
of information. When learning how to read stock charts, the process
should be as simple as possible.
The Doji is one of the most
revealing signals in Candlestick trading. It clearly indicates that the
Bulls and the Bears are at an equilibrium, a state of indecision. The
Doji, appearing at the end of an extended trend, has significant
implications. The trend may be ending. Just this fact alone creates a
multitude of investment programs that can produce inordinate profits.
What is the best method for making big trading profits? Knowing how to
read the stock charts! Knowing the direction of a trading entity and
the strength of that move! Candlestick analysis perfects that trading
strategy. Candlestick charts reveal high probability profitable
reversals. Hundreds of years of investing refinement have proven that
point.
The
Japanese say that whenever a Doji appears, always take notice. A
well-founded rule of Candlestick charts followers is that when a Doji
appears at the top of a trend, in an overbought area, sell immediately.
Conversely, a Doji seen at the bottom of an extended downtrend requires
buying signals the next day to confirm the reversal. Otherwise, the
weight of the market could take the trend lower. Knowing how to read
the stock charts reveals the parameters that make a major signal most
effective.
The Doji signal is comprised of one candle. It is formed when the open and the close occur at the same level or very close to the same level in a specific timeframe. In candlestick charting, this essentially creates a cross formation. As the following illustration demonstrates, the horizontal line represents the open and close occurring at the same level. The vertical line represents the total trading range during that time.
DOJI STAR
Upon seeing a doji in an over-bought or oversold conditions, (over-bought or oversold conditions can be defined using other indicators such as stochastics), becomes an extremely high probability reversal situation. When a doji appears, it is demonstrating that there is indecision now occurring at an extreme portion of a trend. This indecision can be portrayed in a few variations of the doji.
Criteria 1. The open and close are the same or nearly the same
2. The length of the shadow should not be excessively long, especially when viewed at the end of a bullish trend.
Signal Enhancements
1. A gap away from the previous day's close sets up for a stronger reversal move.
2. Large volume on the signal day increases the chances that a blowoff day has occurred, although it is not a necessity.
3.
It is more effective after a long candle body, usually an exagerated
daily move compared to the normal daily trading range seen in the
majority of the trend.
The Dynamic Doji - A Clear Trend Reversal Signal
The Doji is one of the most revealing signals in Candlestick trading. It clearly indicates that the bulls and the bears are at an equilibrium, a state of indecision. The Doji, appearing at the end of an extended trend, has significant implications. The trend may be ending. Just this fact alone creates a multitude of investment programs that produce inordinate profits. What is the best method for making big trading profits? Knowing the direction of a trading entity and the strength of that move, Candlestick analysis perfects the trading strategy. Candlestick formations reveal high probability profitable reversals. Hundreds of years of investing refinement have proven that point.
Candlestick
analysis incorporates approximately 50 to 60 Candlestick signals.
However, twelve of the signals, considered the major signals, will
produce the vast majority of the trend reversals. Recognizing and
understanding the psychology that formed these major signals will
provide completely new insights for investors in understanding optimal
times to buy and sell. Japanese rice traders realized that prices do
not move based on fundamentals, they move based on the investor
perception of those fundamentals. The Doji signal is one of the most
predominant reversal indicators. It is very effective in all-time
frames, whether using a one-minute, five-minute, or fifteen-minute
chart for day trading or daily, weekly, and monthly charts for the
swing trader and long-term investor.
The Japanese say that whenever a Doji appears, always take notice. A well-founded rule of Candlestick followers is that when a Doji appears at the top of a trend, in an overbought area, sell immediately. Conversely, a Doji seen at the bottom of an extended downtrend requires buying signals the next day to confirm the reversal. Otherwise, the weight of the market could take the trend lower.
The Doji signal is composed of one candle. It is formed when they open and the close occur at the same level or very close to the same level in a specific timeframe. In Candlestick charting, this essentially creates a "cross" formation. As the following illustration demonstrates, the horizontal line represents the open and close occurring at the same level. The vertical line represents the total trading range during that time.
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VINAYAK
ADMINISTRATOR,
TEAM STOCKRESEARCHERS
PERFORMANCE SPEAKS