Introduction

This section covers concepts and terminology related to candlesticks which are important to understand when using CandleScanner. In addition to the commonly known candlesticks, CandleScanner goes beyond the ‘basics’ and employs an advanced methodology which can be adapted by more experienced users.

Less experienced users can simply look at the patterns recognized, and generated, by CandleScanner and just check their efficiency and other statistics. However, if you want a more in-depth understanding beyond basic candle patterns, it is important to learn and understand CandleScanners capabilities.

This User Guide is not the place to go into a full discussion and interpretation of candle patterns in textbook fashion, especially into all of the potential bullish and bearish candlesticks patterns which exist. There are literally dozens of bullish and bearish candlestick reversal patterns. On our website, we are constantly extending the Patterns Dictionary, which explains the candlestick patterns. For new users, we recommend further background reading in order to familiarise themselves with the subject, and so, gain a more insightful and fuller experience in using CandleScanner.

Perhaps at this point we would add a word of caution. In the context of candlestick analysis, the identification of candle patterns may be important, but that in-it-self is not a sufficient condition for profitable trading. Many texts on candlesticks will most often graphically show that the pattern had correctly signaled the subsequent price action and leave it at that. This can give the erroneous impression that to find the pattern on the chart is all the trader needs to do in order to make a profit. However, by merely looking at the resulting price profile ignores important considerations such as position management and risk management. A full assessment of the profitable success or otherwise of candle patterns requires back testing the results, based on candle signals and taking account of money and risk management. This is an aspect will be covered more thoroughly on the CandleScanner website.

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