Japanese Candlestick Charting Techniques: A Contemporary Guide to the Ancient Investment Techniques of the Far East
by Steve Nison

Aug 2000

Covers it all

Reading charts is really just an advanced form of poll taking. A chart is almost a visual snapshot of crowd psychology (greed and fear) graphically represented.

This book explains how candlesticks take reading crowd psychology to the next level. Not only does Nison teach recognition of the important patterns, he explains the psychological motivation behind those patterns… the emotions and sentiments unfolding as those patterns are created.

It has been my experience that candlesticks are most effective at giving advance warning of a reversing or flatlining trend—thus I apply the patterns more to my exits than my entries. But I take information from candlesticks on a regular basis regardless.

Just as an example, if you look at a bar chart, you can't really tell which of those bars were up closes and which were down closes unless you look extremely closely. With candlesticks you get this info at a glance, adding to an intuitive feel for price movement that can enhance profitability. You also get more specific and accurate signals, with minimal distraction in terms of information bloat. There's just no comparison.

I wouldn't trade without candlestick charts any more readily than I would without streaming quotes. They simply provide another dimension to market action that bar charts miss. Nison's book offers entry and grounding into this world.