Original Question: I often see you mention island gaps, inside and outside days… Do candle formations have a important role in chart reading to you?

First of all candlesticks and HLC or OHLC bars contain the same information. So what we are talking about are price and volume formations as measured on a daily basis.

To make this story short, the interpretation of such price and volume formations are actually the A to Z of chart reading right where the action takes place or where the rubber meets the road as Gil used to say. Learning to read this signature should be your top priority over the years. I am currently working on a large series called Chart School and it comes in six chapters. Inside, outside days, reversals, price volume anomalies, volatility contractions and change in character are all part of this. What I don’t like about candlesticks is that people are way to strict with how they should appear on the chart. And putting labels on daily formations such as shooting star or hanging man is just another added layer of unnecessary complexity. Even when you use candlesticks you should ignore the candlestick labels and learn to just READ the price and volume signature. It is hardly ever the same but it oftentimes ryhmes. You’ll get a hang of it once you put in the practice hours needed.

Explaining all this is obviously way too much to be covered in a simple Q&A post.

Was this article helpful?

What a waste of my time!Article was helpful & informativeGreat article, could boost my trading right away! (1 votes, average: 3.00 out of 3)
Loading...

Feel free to ask us!

If you have a question regarding the article above please refer to our Q&A section first. If that doesn't help, feel free to sign up to our mailing list to receive our contact details. If your question is reasonable it will be answered in our Q&A knowledge base.

Disclaimer: This article is my opinion which stems from my own experience gathered trading real money in the stock market. It represents my style and it fits my personality and risk allowance. More power to you if you are a net profitable trader despite violating everything that’s written above!

Category

No Category

Tags

No Tag
Scroll arrow icon
0 Shares