Candlestick Trading Basics

TradingPub Admin | March 28, 2014

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We have summarized some of our best sessions from past trading events and coupled them with the videos used to produce the summary.  Hopefully this will help you browse through the content and see if this is something you can benefit from reading and/or watching.

This summary is synthesized from a Candlestick Trading Forum presentation by Steve Bigalow. According to him, the two hardest things about trading are:

1.) To learn a trading method.

2.) To learn how to control your emotions.

Watching this webinar will help you learn more about powerful candlestick formations.  Here are a few of the main points:

  • This webinar reveals the simple logic that is incorporated into the signals and patterns that have the highest probabilities.
  • Teaches the basics of how to prepare for big price moves based upon the historic results of specific signals and patterns.
  • Knowing the information from above can help you become better prepared for potential explosive price moves based upon the historic results using Steve's signals and patterns.

Candlesticks are a greatly utilized tool by investors as they graphically depict the sentiment and reflect the conditions in any given market. They help draw a picture of whatever market they are applied to. The Japanese rice traders, who developed the candlesticks, incorporated the benefit of depicting the signal and including the sentiment behind the signal to help identify trends.

Initially, candlestick signals were not popular among traders due to the fact there were over 60 patterns to learn and apply. Steve Bigalow, after years of working with them has sifted through all of the patterns and narrowed it down to the 12 top candlestick signals that actually work.

Steve Bigalow uses those candlesticks for his daily trading along with the 200 day, 50 day, 20 day simple moving averages. As most money managers around the world do, Steve uses the combination of all those to make decisions about his portfolio.

In the video below you will see Steve's discussion on some of those 12 signals that are most commonly used.

Candle Stick Signals Basics

The  charts seen in the video are following a simple rule of candlestick analysis where the signals are the cumulative knowledge of everyone's buying and selling during a given time frame.

Here are some of the most commonly used candlestick signals.

  • Doji Start- depicts where the price opens and closes at the same level during a specific time frame.
  • Long-legged Doji- depict long trading range where open and close price is at a nearly equilibrium despite of its movement throughout the trading period in which they are applied.
  • Dragonfly Doji -opens at the top of the trading range and trades down and closes right back at the top looking like a dragonfly.
  • Gravestone Doji- was named this by the Japanese race traders because it reminded them of a battlefield at the end of a log day.

Spinning Top

Another version of candlestick signals are the spinning tops which are depicted with small bodies relative to the shadows. These demonstrate some indecision on the part of the bulls and bears and are considered neutral when trading in a sideways market. However, in a trending or oscillating market, a relatively good rule of thumb is that the next day's trading will probably move in the direction of the opening price. The size of the shadow is not as important as the size of the body for forming a Spinning Top.

The main characteristic of those signals is that there is indecision in the bulls and the bears (especially if you see a Doji in the oversold condition), followed by a gap up likely could potentially result in big profits, see image below:

Best Friend Condition Morning Star Steve Bigalow

With candlestick signals you can identify quickly what the gap is predicting and act accordingly.

This is a morning star signal. It occurs on a down day and at the bottom of that downtrend with a Doji followed by a third day where the close is more than the candle of the previous day. If they gap it up with a Doji it is practically hard evidence that traders have had a reversal in their sentiment. In this case you stay long till you see a sell signal.

Morning Star Doji With Steve Bigalow

The optimal criteria for identifying a trade with high probability for success:

1. Signals

2. Stochastic oversold

3. Gap up from the Doji/signal

4. Close above the T-line

High Probability Steve Bigalow

look For the Criteria Steve bigalow

If you would like to learn more about Steve's patterns, check his Major Signals Package that will teach you:

  • Over 8 hours of concentrated Candlestick chart analysis on 12 highly informative training videos covering everything from The Dynamic Doji, to the Morning and Evening Stars.
  • Each video contains expert insight and analysis from me, Stephen Bigalow, of where the signals work most effectively in a trend. Spending 45 minutes with each signal will produce a visual recognition of where a major reversal is occurring with an extremely high degree of accuracy.
  • Learn how professional traders know to buy at the bottom. Learn how they know when to sell. Learn the 12 major signals and how to incorporate common sense into your investment practices. Learn to eliminate emotions from your investing.
  • Candlestick signals illustrate what investor sentiment is doing right now!

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PLUS, Steve is going to ‘throw in’ a FREE 30-Day Trial To Candlestick Forum’s membership site. (a $97 value)


View Educational Video Here

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