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Wayne A. Corbitt - Candlestick Charting DeMystified

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Wayne A. Corbitt Candlestick Charting DeMystified
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Copyright 2013 by The McGraw-Hill Companies Inc All rights reserved Except - photo 3

Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

ISBN 978-0-07-179988-1

MHID 0-07-179988-5

The material in this eBook also appears in the print version of this title: ISBN 978-0-07-179987-4, MHID 0-07-179987-7

All trademarks are trademarks of their respective owners. Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefit of the trademark owner, with no intention of infringement of the trademark. Where such designations appear in this book, they have been printed with initial caps.

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TERMS OF USE

This is a copyrighted work and The McGraw-Hill Companies, Inc. (McGraw-Hill) and its licensors reserve all rights in and to the work. Use of this work is subject to these terms. Except as permitted under the Copyright Act of 1976 and the right to store and retrieve one copy of the work, you may not decompile, disassemble, reverse engineer, reproduce, modify, create derivative works based upon, transmit, distribute, disseminate, sell, publish or sublicense the work or any part of it without McGraw-Hills prior consent. You may use the work for your own noncommercial and personal use; any other use of the work is strictly prohibited. Your right to use the work may be terminated if you fail to comply with these terms.

THE WORK IS PROVIDED AS IS. McGRAW-HILL AND ITS LICENSORS MAKE NO GUARANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUDING ANY INFORMATION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPERLINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. McGraw-Hill and its licensors do not warrant or guarantee that the functions contained in the work will meet your requirements or that its operation will be uninterrupted or error free. Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inaccuracy, error or omission, regardless of cause, in the work or for any damages resulting therefrom. McGraw-Hill has no responsibility for the content of any information accessed through the work. Under no circumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or similar damages that result from the use of or inability to use the work, even if any of them has been advised of the possibility of such damages. This limitation of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise.

To Caitlin, Christian, Emily, and Dustinas you each leave

the nest and spread your wings, may you fly with

confidence and always seek the wisdom of God.

About the Author

Wayne Corbitt is a Chartered Market Technician whose programming background has enabled him to work with a number of money managers over the past 13 years to automate their trading systems. He has also worked for a hedge fund as a Research Programmer and at the RIA level as an Investment Strategist and Managing Director. Wayne also actively trades his own account. This wide range of experience makes him uniquely qualified to help others reach their financial goals. He is the author of All About Candlestick Charting .

Contents

Buy and Hold Leads to Unnecessary Losses

Trader Psychology

History of Candlestick Charting

Summary

The Role of Technical Analysis in Trading

Charting Styles

Summary

Candlestick Construction and Components

Candle Types

Summary

Strong Signal Patterns

More Subtle Patterns

Summary

Windows

Tasuki Gaps

Separating Lines

Neck Lines

Thrusting Lines

Rising and Falling Three Methods

Summary

Sakatas Strategies

Longer Term Candle Patterns

Summary

Trends

Support and Resistance

Gaps

Summary

Momentum Indicator Basics

Oscillators

Summary

Volume Patterns

Money Flow Index

Accumulation/Distribution Line

Chaikin AD Oscillator

Chaikin Money Flow

Volume Percent Positive

Summary

Trade Presentation Format

Summary

Introduction

Trading is a business. Just as in the sports or corporate worlds, those that take the time to practice and prepare increase their chance of success. Ardent preparation is the key to navigating the markets successfully for profit. The goal of this book is to help you learn to read and understand the daily messages sent by the market. The more knowledge you have, the better you can prepare for whatever scenario the market presents.

Candlestick charting fits nicely into this environment. The broader picture provided by technical analysis is complemented by the deeper look into the mindset of traders that candlestick charting can provide. By combining these elements into a macro-micro combination, the macro messages sent by the market meld well with the micro messages given by candlestick charting. Defining candlestick charting as micro does not diminish its importance. On the contrary, the micro, or short-term, aspect of candlestick charting can allow a trader to enter trades or take profits much more quickly than those who rely on broad-based methodologies. In other words, using candlestick charts allows a trader to execute his or her plan with the precision of a surgeons scalpel instead of a lumberjacks chainsaw.

No book on candlestick charting would be complete without a tip of the cap to the pioneers who brought this methodology to the United States from Japan. Greg Morris and Steve Nison did the early work in obtaining the early Japanese literature and working with their Japanese counterparts to translate and understand these concepts. The candlestick patterns and their names presented in this book are the result of their tireless work to introduce candlestick charting into the broader body of Western technical analysis.

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