STA Blog

This week’s guest on Jeremy Naylor’s Charting the Markets show is Patricia Elbaz, independent technical analyst and university lecturer. The programme is an excellent introduction to the basics of candlestick charts: how they are constructed, the importance of the bodies relative to their wicks, what happens when the open and close are at the same level.

Munehisa Homma was a rice merchant from Sakata, Japan who traded in the Dojima Rice market in Osaka during the Tokugawa Shogunate. He’s considered the father of candlestick charting. Around 1710, a futures market emerged for rice, which had previously been exclusively spot traded. Not until the early 1990s and Steve Nison’s ‘Japanese Candlestick Charting Techniques’ book did Westerners learn about the method.

Her charts are lovely and clear, her red and green candles reminding me of the ones the STA team carried while taking part in the JP Morgan fun-run at Battersea Park earlier this month. She then moves on to real live examples where she points out candles just discussed – interestingly honing in on cable’s daily chart.

From single candles, she moves on to two-candle patterns, stressing the fact that the point is to compare their shapes. Explaining how she uses these in conjunction with Western technical analysis, such as moving averages, momentum and RSI, the latter are used as confirmation for the basic candles. She also gives a brief outline of how to choose stop loss levels with her methods.

I urge novices to watch this video. Click here to view.