Candlestick Charts by SJ Options

In this excerpt from our options mentoring course, Duane gives us some tips on Candlestick charts.
Our mentor Duane has over 26 years of retail trading experience.

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Candlestick Charts by SJ Options

Video Transcript

Let’s go on and fill up a few of these. First off, let me just kind of go over the basics behind it. Hang on a second. I have here the introduction to candle sticks. You’ve seen this on our profit charts but maybe not really thought what it’s really telling you. The essence of it, I’ll share right here on the first diagram where basically, you can mark where your open and close are, and that’s going to be the body of your candle stick. Then you’ll see the amount of price movement throughout the day which is defined by these upper and lower wicks or shadows, they’re called a couple different things.

Based on what you see with that and then how you put these things together, you can get a feel for the market mindset. In fact, it was interesting on Friday of last week, there was rather classic formation that showed up, that, again, folks that really dedicated and believers and implementers of the candle stick analysis, they would have recognized that as clearly a reversal that would’ve spilled into Monday, maybe not anticipated such a big day. But they’d use that as a great example in the candle pattern that was formed there exactly play it out as they would have thought. You can come down and, again, I always say look through this particular website as a very good useful tool. Take it in very small bite size pieces. Otherwise, it will be overwhelming.

Let me scroll down to a few just to show you that the basic hinds of set-ups they talk about. Here you can start to see kinds of things that I was just mentioning and it is quite interesting because you can see how the day like this here, the close and open actually pretty close together and the amount of price movement pretty brief versus one of these more elongated candles where the open and close are far apart. You can see, we even traveled outside of that range to hit our high and our low. Then, as you scroll down through here, you’ll see all the names that are used and again you’ll notice a lot of the Japanese influence there. They get into various types of patterns that show good examples of a market where things open or close pretty close together. You can see the amount of price movement throughout the day was pretty significant and what that’s showing is that there is a lot of selling pressure. But by the time the market closed, things came right back up which kind of sets up the tone for further upward movement the following day or the following week, depending on what time period you’re looking at.