I just finished reading Japanese Candlestick Charting Techniques, Second Edition by Steve Nison, and this book has helped tremendously in demystifying candlestick chart reading.
Many sites today teach candlestick reading, but through further research, I discovered that these web resources often use this book as their primary reference.
Interestingly, since the practice originated in Japan, the American author himself disclaims that this book is based only on material translated into English. (Oriental mysticism is indeed alive and well.)
The more I study trading, the more I realize it's closer to an art than a science. Like any art form, practice and experience are the true paths to developing one's skill.
With this book's help, I have a better understanding of support and resistance lines (or "lines of least resistance," as Jesse Livermore puts it). The concept suggests that market psychology will move back and forth within a range, manifesting as support and resistance lines.
A technician identifies these lines and monitors them as the price develops patterns called flags or pennants.
Like a coil winding up, the price action building into this pent-up pattern is expected to break out to a price level dramatically different from where it was coiling.
The key is to anticipate the direction - will it be a bearish or bullish breakout?
Happy trading!
This is a reprint from my Paragraph
