Why Have Candle Charts Become So Popular?

Monday August 30, 2010 • Leave a Comment 

Why are the flames of interest in Japanese candlestick charts growing brighter each day? Some reasons include:

1) Candlestick charting tools are so versatile that they can be fused with any Western technical tool you now use. As will be shown later the same data that is required to draw the candlestick charts is that for the bar charts (the high, low, open and close). This is very significant. It means that any of the technical analyses used with bar charts (such as moving averages, trendlines, retracements, Advance/ Decline statistics, etc.) can be employed with candlestick charts. But, and this is the key point, candlestick charts can send signals not available with bar charts. In addition there are candlestick chart patterns that will allow you to get the jump on those who use traditional Western charting techniques. Candlestick charting tools provide powerful avenues of analysis not available anywhere else for the stock market, futures market, forex market, commodities or even with the use of options.

2) Candlestick charting tools can be used alone or combined with any other technical techniques. Users run the spectrum from first-time chartists to seasoned professionals and from investors to day trading. Candlestick charting techniques can be used for speculation, investing and for hedging, they can be used for futures, equities, options– anywhere technical analysis is applied.

3) Candle charting techniques, while new to the West, have been refined by generations of use in Japan.

4) There is strong interest in how the Japanese use their technical analysis to trade. The Japanese are major players in most of the world’s markets, and the Japanese use the candlestick charts to trade in all the markets. Think about it, although billions are traded every day based on the candlestick chart patterns, until recently we didn’t have a clue how the Japanese viewed the market with their technicals. That is unbelievable. The candlestick chart in Japan is as popular as the bar chart is here. And understanding how the Japanese use their most popular technical tool may help answer question, “what are the Japanese going to do next?”

5) Then there are the picturesque terms used to describe the patterns. There are “doji”, “engulfing patterns”, “hammers” and “evening stars.” The Japanese terminology give candlesticks patterns a flavor all their own, and once you get a taste, you can’t do without them.

6) The Japanese know all our methods of technical analysis. In my six years of prying open the “secrets of the orient” I’ve had over a dozen books translated from Japanese to English. These were books that explained candlestick charting techniques, yet in each there were large sections that discussed American technical tools. Thus, the Japanese are very knowledgeable about the technical tools used in the West. Now it is our turn to learn from them.

We can see from this statement that the Japanese use a combination of candlestick charting techniques and Western technical tools. Why shouldn’t we do the same? By merging the best of the East and the West we can have what I call a powerful synergy of technical techniques.

Steve Nison, CMT
President- CANDLECHARTS.COM
Steve Nison’s Candlecharts.com
Candlestick Training the Right Way

Filed Under Candle Charts


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