Wednesday, February 28, 2018

Japanese Candlestick Charting Techniques, Brought to you by Steve Nison

Japanese Candlestick Charting Techniques:
A Contemporary Guide to the Ancient Investment Techniques of the Far East
Written by: Steve Nison
Published in 1991

Japanese Candlestick Charting Techniques: A Contemporary Guide to the Ancient Investment Techniques of the Far East

This book reads like a textbook.

If there was one thing I would have wanted to know before getting this book, it would be that. It reads very much like a textbook as opposed to a typical "book". Is that a bad thing? That's up for the reader to decide on their own. The last book I reviewed, "The Most Important Thing," read more like a book. Reading it in the morning before work or at night before bed was ideal. This book was very different for me.

Now that I write it, that point seems very obvious. A book explaining technical analysis is inherently going to be more in depth and 'technical', for lack of a better word, than a book targeted towards developing an investment philosophy about value investing.

Does that mean I didn't like this book?   Absolutely not.
Does that mean this book wasn't helpful in it's own right? Abso-freaking-lutely not.

Japanese Candlestick Charting Techniques has been one of the most educational and helpful books I have read about investing. Clearly this will only pique the interest of the technical, chart reading investor. Very much the opposite of someone who likens Buffett to a god, or claims Graham wrote the bible of value investing. Nothing against either of those men. Their success and genius is something to admire and strive for, but I think their view on this book, and these types of books, is going to be poor.

The book begins with an introduction to the author as well as the history of Japanese candlesticks. Since I'm young and just recently been getting into investing and looking at charts, candlesticks are the norm for me. I didn't even know bar charts existed, or were different, until reading this book. Since it was published in 1991 there are quite a few things that are out of date. He mentioned candlesticks just starting to become a popular tool but bar charts still being the primary view for most Westerners. Today, I would say it's the opposite. Perhaps not the opposite, but it seems candlesticks are the generic, go-to chart these days. They're all I have ever studied.

Moving on, we get into the meat and potatoes of the book. How each candle is formed, what all the lines mean, the colors; the basics. From there Nison starts to lay the groundwork for reading different patterns and what they mean.

One of the greatest advantages of this book are the great explanations of now only how, but more importantly WHY these patterns mean what they mean. Once explained, it seems very obvious. To me, it was a, staring-you-straight-in-the-face, or brain blast moment. The very first candlesticks explained are the hammer and hanging-man lines. Not only are the examples easy to understand, but the explanation about why these candlesticks can signal a reversal is so simple, yet effective.

Since I'm on the topic of likes, I'll pivot over to a dislike. Fair is fair, right? As much as I love all of the examples, it gets very annoying when there are references to three different images and you there is a constant need to flip back and forth and back and forth. A small inconvenience for otherwise very helpful examples. There was a time or two when the examples were packed so tight I had to flip two pages to actually see the chart, but again that might be me being lazy.

Part One goes on to explain and speak about a plethora of reversal and continuation patterns, dojis, stars, and more. Part Two is my favorite. For beginners, or people who are learning the different types of candlestick indicators, combing through part one is imperative for understanding and building into part two.

Nison lays forth the benefits of combining the Japanese candlestick culture with the Western cultural into one. Using them in conjunction with trend lines, with Fibonacci, with moving averages, with oscillators and more and more. Remember how just a few paragraphs ago I raved about the basic, yet prophetic explanations on why things work? This part is even better. It's something you'll have to read for yourself.

As Part Two progresses, it gets all the more advanced. Starting with trendlines and finishing with options and hedging. Everything seems to build off the groundwork lain from the start. And that makes a ton of sense since that's a lot of what investing is. Building on multiple things, using one thing to help explain another and the new thing to explain yet another. The numbers are changing constantly which creates millions of new candles each day which means there is something new to discover always. That may be an idea you are already aware of - I know I was - but it has definitely brought that idea to the forefront and has helped me stay grounded.

What I truly like about this book is the amount of people it has the ability to help. Without a doubt it is for the technical investor. Someone who wants to read charts and believes there are predictors to market moves.

From cover to midpoint, it can turn a beginner into a candlestick pro. Being able to recognize hundreds of different patterns in a matter of minutes, maybe seconds.

From the midpoint to the end, the book can turn a weak investor into a strong investor. I am tempted to say trader instead of investor because most investors are thinking very long term. A trader is going to utilize the candles to help make a decision for the shorter term.

From cover to cover (if you can make it through the entirety of it) the book will unlock opportunities
galore and questions will start to flow.

Personally, it has opened my mind to the world of charts and an incalculable amount of questions. Nison has spurred my development of becoming a trader and has provided me the basic tools to get started.

That's ultimately what I feel this book provided me. The tools to begin my journey and created the questions to guide me on my first steps.

Though I speak very highly of the contents of the book, there are some flaws. Besides the one pointed out above, this thing is boring. It has taken me a looooong time to get through it. Japanese Candlestick Charting Techniques has been extremely helpful, but it is aaaalllll meat and potatoes and it can really drag on you. It can get boring and breaks became a constant.

Overall, if you want to add to your collection of investment books, I would 100% recommend this book. It has helped me immensely and hope it would do the same for you. If not, because of the expense or maybe because you aren't that interested (yet), see if your local library has it or can get it for you. Or rent it from Amazon. Whatever it is you decided to do, I hope you consider cracking this one open.

"Japanese Candlestick Charting Techniques"
Authored By: Steve Nison

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