Candlesticks were developed and used by Japanese merchants since the 17th Century to help them predict and profit from rice trading. With that, it is easy to say that candlesticks have passed the test of time.

Candlestick patterns have been tested and are a proven tool for any financial market, they continue being used all over the world to this day. If candlesticks were ever found questionable in the past, they would have faded away many years ago.
Learn From the Past
Some traders never learn from history, and they only focus on where the market is going at this minute.
For me, I am a firm believer to truly predict the future you need to know the past, Even more so in trading the market. Understanding the history of Candlestick Patterns will help you understand the future! You can really use candlesticks to make profits trading the market..

Back in the 18th century a Japanese businessman named Munehisa Homma used candlesticks to chart and track rice contracts. Everyone at the time was tracking rice contracts, but what he did was take an emotional approach to the market – analyzing fear, greed, and the herd mentality. He found a way to accurately observe the behavior of the masses and manipulate them to his advantage.
He tracked the opening and closing price along with the high and low of the day and placed them on a chart. This graphic representation was a series of columns that looked like candlesticks, hence the name.

To This day – Candlesticks are the most effective and consistent way to measure emotion in any market and in any time frame. Remember, Emotion is what moves the market!
World's Best Trader Ever
Mr. Homma took an extremely chaotic market and brought some order and insight to why prices did what they did. The patterns that repeated themselves over and over again became his bedrock for future price moves. Homma made huge profits and huge contributions to early candlestick charting. Rumors are that he gained the equivalent of over $10 billion in today's dollars. He could have very well been the most successful trader in all of history…
Perception is Reality.
The actual Price Action or movement in any time frame is more important than the news itself.
You can bet that All known information is reflected in the candle formation. Buyers and sellers move markets based on expectations and emotions (fear and greed) and then the herd follows.
Markets fluctuate, that is just a fact. The actual price may not reflect the underlying value. The actual price shown on a chart measures the emotional reaction. Value is perceived.

Effective Trading:
FACT: The only way to make significant money trading the market is to get exceptionally good at predicting the direction of the market you are trading.
Understanding candlestick patterns is one of the most effective methods to predict direction change. Most of the so-called sophisticated trading indicators used today have candlesticks as a basis for the development of their results.
Candlestick Formation
To make any candlestick you must have the following data set: open (the price at the beginning of the time frame), high, low and close (the price at the end of the time frame). This applies to any time frame you want to measure, from 30 seconds to an hour, day, month, year etc..

The solid or filled portion of the candlestick is called “the body. The long thin lines above and below the body represent the high/low range and are called “tails”.
If the stock closes higher than its opening price for any specified time frame; a solid filled candlestick is drawn with the bottom of the body representing the opening price and the top of the body representing the closing price. If the stock closes lower than its opening price for any specified time frame: a filled candlestick is drawn with the top of the body representing the opening price and the bottom of the body representing the closing price.
On my charts the Green candle is indication of a bullish move or going up and a Red candle is a move down or a bearish move.

Most traders consider candlestick charts more visually appealing and easier to interpret. Each candlestick provides an easy-to-decipher picture of price action. Immediately you can compare the relationship between the open and close as well as the high and low.
The relationship between the open and close is considered vital information and forms the core of the candlesticks. Green candlesticks, where the close is greater than the open, indicate buying pressure. Red candlesticks, where the close is less than the open, indicate selling pressure.
Powerful Candlestick Formations
One of the most identifiable candlestick patterns is the hammer signal. The hammer signal is easily recognized, It looks like a hammer.
The hammer candlestick signal is comprised of one candle. It is easily identified by the presence of a small body with a wick at least two times greater than the body. A True Hammer is found at the bottom of a downtrend.
The hammer candle shows evidence that the bulls started to step in. The color of the small body – a green body has slightly more bullish implications than a red body. The hammer signal prediction is confirmed when a bullish candle immediately follows.
Criteria
- The hammer candle should be at the bottom of a trend to be reliable
- The lower shadow should be at least two times the length of the body.
- There should be no upper wick
- The following candle needs to confirm the hammer signal to be a strong bullish indication.
Signal Enhancements
- The longer the lower wick the higher the potential of a reversal occurring.
- Large volume on the Hammer candle increases the chances that a reversal is coming.
Shooting Star

The shooting star candlestick was named because it looks like a shooting star falling from the sky with the tail trailing behind it.
The Shooting star is comprised of one candle and it is easily identified by the presence of one small body with a wick at least two times greater than this body.
Criteria
- The upper wick should be at least two times the length of the body.
- The color of the body is not important, a red body does have slightly more bearish implications than a green body.
- There should be no lower wick.
- To confirm the shooting star candlestick prediction, a bearish candle should be seen immediately following..
Signal Enhancements
- The longer the upper wick is the higher the potential is for a reversal to occur.
- If on the time period after this signal occurs, the price opens up lower than the previous candle’s close, then the signal has an even stronger confirmation.
- When there is large volume on the shooting star candle, you have a better chance of a reversal.
Go to: www.SafeDayTrading.org for access to all of the most powerful candlestick patterns.
Understanding Candlestick Patterns For Precision Trading

Candlestick patterns can and do predict future market direction. Japanese candlestick patterns consist of approximately 40 reversal and continuation patterns which all have credible probabilities of indicating correct future direction of a price move.
12 Candlestick Patterns You Must Know
There are twelve major candlestick patterns that provide more than enough trade situations to most investors. I advise you to Commit these twelve major patterns to memory. But this does not mean that the remaining secondary patterns should not be considered. In fact, all of those signals are extremely effective for producing profits. Reality however demonstrates that some of them occur very rarely.
The twelve candlestick patterns illustrate the major signals. The definition of “major” means two things. First, they occur in price movements often enough so that they are beneficial to producing a supply of profitable trades. Second, they clearly indicate price reversals with strength enough to warrant placing trades. You will find the twelve major candlestick patterns described fully in the SafeDay Trading program along with the psychology of what each candlestick pattern means and how to trade them. You will find many of these patterns have a 75 – 85% probability of moving in the direction the candle designates.
Combining the understanding of the Candlestick patterns along with the other Key indicators inside SafeDay Trading will make YOU a very precise and profitable trader.
Make yours a profitable day,
Dr David Hackbart
SafeDay Trading