Learning candlestick analysis

Discussion in 'Technical Analysis' started by emgineering, Feb 7, 2011.

  1. Hello everyone, I'm new in the stock world and I'm trying to learn about candlestick analysis. If I'm posting in the incorrect side of the forum, sorry!!

    The following is a chart for OPXA, as you can see i have marked the resistance, support, and current trend. In addition, the last two days have formed into a hanging man, and inverse hammer which would lead me to believe that this stock will be going up from now on.

    I would appreciate feedback/comments/additions on this analysis, as I am new to all of this. Thanx for reading my post!
    • opxa.pdf
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  2. wrbtrader


    First, you must backtest this pattern in that particular price action situation as you would do anything else. Most likely your backtesting will involve manually doing such because you've merged two specific types of Japanese Candlestick patterns (identified incorrectly as explained later) with a specific type of support/resistance analysis.

    My point, there's more going on in your chart as shown by you then just Japanese Candlestick Analysis. Here's an analogy...pretend you've baked a pizza with 4 ingredients and you're now asking us how good is the pizza base upon 1 or 2 specific ingredients. Thus, you could have also started a thread "Learning Support/Resistance" and mentioned nothing about the candlestick patterns on your chart. :cool:

    However, I'm not saying don't merge Japanese Candlestick Analysis with other types of price action analysis. In contrast, I highly recommend such instead of making trade decisions based upon Japanese Candlestick patterns alone especially when you're new at it and having identification problems with the patterns. By the way, I say the same about support/resistance analysis...don't use it alone.

    In addition, your basic research or first steps sort'uv speak should always be via comparing the position of your Hanging Man and Inverted Hammer to text book examples shown freely on the internet. Do you see any differences or similarities with what you see on your chart in comparison? In addition, you should get yourself any popular Japanese Candlestick book (new, used or library) and learn only a few patterns so that you can at least properly identify them even though you may not understand how to trade them.


    Therefore, had you done basic research...you'll know that the Inverted Hammer and Hanging Man Japanese Candlestick patterns are opposite of each other. You should also learn that there's a great difference between candlestick LINES versus candlestick PATTERNS. Thus, there's a difference between Inverted Hammer Line versus Inverted Hammer Pattern...one shouldn't be traded because the trade will be based upon one single interval (as in LINE) instead of within context of the overall price action it's involved in (as in PATTERN).

    Last of all, your identification of the Hanging Man in your chart is incorrect and your Inverted Hammer is not in proper position nor proper size in relationship to the price action in your chart to make any type of analysis. Simply, that leaves only the support/resistance analysis on your chart and we both already know how I feel about making trade decisions alone via such.

  3. wrbtrader


    Two completely different topics....one a general discussion about edge and the other a specific discussion about proper identification that he wanted feedback. That's like saying if someone ask about how fast a car can go and then someone else ask if those are goodyear tires being used...you show up and say the "subject has been debated to death in the past" just because the commonality is an auto.

    If so, please post a direct link to a topic about "proper identification of the Hanging Man or Inverted Hammer Lines or Patterns" involving this particular price action shown on his chart.

  4. risky63


    heres a good picto lesson....
    a freind called me up and said it was a screamin buy....I told him to learn to read charts....he laughed.
  5. risky63


  6. If you look at the tittle it is about "learning candlectick analysis". The specific formation was an example.