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Investing > Japanese Candlestick Charting > Flashcards

Japanese Candlestick Charting Flashcards

1
Q

Upper and lower shadow

A

Upper shadow is the difference between the high and the real body. Lower shadow is the difference between the low and the real body

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2
Q

Takuri

A

Testing the water- when a lower shadow tests where the critical support level is or the upper shadow tests where the critical resistance is

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3
Q

What is the significance of the length of the shadow

A

The longer the shadow, the more important the level

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4
Q

Standard line candlestick

A

Strong real body and small shadows indicates trend continuation

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5
Q

Spinning top candlestick

A

Small body with long shadows top and bottom. Indicates neutral pattern with no directional conviction

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6
Q

Types of doji

A

Long legged
Gravestone
Dragonfly
Star

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7
Q

What are doji

A

Candlesticks that open and close at the same level

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8
Q

Long legged doji

A

No real body, long upper and lower shadows. Potential turning point, shows indecision

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9
Q

Gravestone doji

A

No real body, long upper shadow, no lower shadow. Signals the end of a bullish attack. Market rejects the top of the shadow with strong selling pressure

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10
Q

Dragonfly doji

A

No real body, no upper shadow, long lower shadow. Signals the end of a bearish attack, found at market bottoms. Strong buying at the bottom of the lower shadow

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11
Q

Star doji

A

No real body, small upper and lower shadows. Strong reversal pattern found at tops and bottoms of markets. A gap between the real body of the previous candlestick and the star increases the significance of it.

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12
Q

Morning star

A

Bullish reversal

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13
Q

Evening star

A

Bearish reversal

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14
Q

Types of Umbrellas

A

Hanging man

Hammer

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15
Q

What does an umbrella look like

A

Small real body with little or no upper shadow, lower shadow 2-3 times longer than length of real body.

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16
Q

What does the umbrella tell us?

A

Potential reversal but confirmation is required. Colour of real body not so important. Pay attention to the direction of the closing

17
Q

Hanging man

A

Umbrella with prior up-trend. Market shows signs of weakness but closes well above low. Confirmation if there’s a close below support in next 2 periods or a break of a trend line or support level

18
Q

Hammer

A

Umbrella with prior downtrend. Strong buying off a low and and close near the high. Long shadow illustrates sentiment shift. Real body colour less important for hanging man

19
Q

Inverted hammer and shooting star are…

A

Opposite of umbrellas. They have small real body, small or no lower shadow and a large upper shadow.

20
Q

Shooting star

A

Upside down umbrella. Powerful reversal signal in an uptrend but only on a new high.

21
Q

Inverted hammer

A

Upside down umbrellas. Indicates potential support in downtrend but needs confirmation.

22
Q

Marubozu

A

A candle with no upper or lower shadow. Very strong continuation pattern, most common in short term charts

23
Q

What does a Bearish engulfing line look like?

A

Prior upward trend. Next period gaps up but then closes below the real body of the previous candlestick. Shadows aren’t considered.

24
Q

What does a bearish engulfing line mean for the market.

A

Strongest reversal pattern, huge sentiment shift.

25
Q

What does a bullish engulfing line look like?

A

Prior downward trend. Next period gaps down but closes above the real body of the previous period.

26
Q

What does Dark cloud cover look like?

A

Prior upward trend. Next period gaps up but then closes lower than the midpoint of the previous period’s real body. The greater the penetration into the previous period the stronger the signal.

27
Q

What does dark cloud cover mean for the market?

A

Quite strong reversal pattern but not as strong as engulfing line

28
Q

What does bullish engulfing line mean for the market?

A

Very strong reversal pattern

29
Q

Trading strategy for bullish engulfing line?

A

Square trades that are positioned with the prevailing trend and get ready to reverse if second day follows through

30
Q

Dark cloud cover trading strategy

A

Close long positions, go short when the trend reversal is confirmed

31
Q

Piercing patterns

A

Prior down trend. Price gaps down but then closes above the midpoint of the previous period. The greater the penetration into the previous period’s body the greater the reversal

32
Q

Trading strategy for piercing patterns

A

Close short positions, go long when trend is confirmed

33
Q

How can you add further conviction to candlestick patterns

A

Use slow stochastics with parameters of 10-6-6 or 10-6-3. Look for reversal candlestick pattern with slow stochastic in an extreme zone. Bullish candle with stochastic <25%. Bearish candle with stochastic >75%

Investing (15 decks)

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