When analyzing candlestick charts, short days can be interpreted by the same analytical process as the long candles. (See candlestick charting – long days). There are a large percentage of the trading days that do not fall into either of these two categories. The short day pattern is short in length but is not necessarily named for its relation to the duration of a trade. The short day candlestick pattern consists of only one candlestick and it opens and closes inside of the preceding candlestick’s range. It is entirely contained by the previous candlestick and it is neither bullish nor bearish.
When using candlestick charts it is important to know that the short day pattern can occur in a variety of situations. For example short day patterns can occur during a trend, at the end of a trend and at the beginning of a trend as well. When alone, it only signifies a small range and that the time period was neither bullish nor bearish. Due to this, the short day pattern is not really used as a trade entry or exit pattern but instead is encompassed in other candlestick patterns. This provides those candlestick patterns with more relevance. It can also convey the upcoming price movement when using candlestick charts.
Recognizing and understanding the psychology behind candlestick charts will provide completely new insights for investors to understand optimal times to buy and sell. Japanese rice traders realized that prices do not move based on fundamentals but instead that they move based on the investor perception of those fundamentals.
The psychology built into a major candlestick signal is simple common sense investment philosophy. When you learn how to utilize the candlestick charts correctly you now have the knowledge to improve your trading techniques for those trading entities you want to trade. You do not have to depend on canned programs that sometimes work and sometimes don’t work and you do not have to buy or sell stock recommendations blindly based on a research analyst’s recommendations. The candlestick signals provide guidance as to what investors are actually doing at a certain point in time. Learn the 12 major candlestick patterns as well as the secondary patterns and your investments perceptions will greatly improve.
Continue to learn about candlestick patterns and read about the Dark Cloud Cover, the hammer signal, the bearish engulfing, and others.
