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THE MARKET WHISPERER 11 3

Let’s say that this Japanese candle also represents one day of trading.

Notice that it is in a dark color. Looking at the bar chart, you can immediately

understand that this chart shows a day of dropping prices. To the left of the

candle you see the simple line chart describing the stock’s behavior over
the entire day. The stock opens the day trading at $21, peaks with the day’s
high of $21.2, drops to the day’s low of $19.5, and closes the day of trade
at $20.

To the right of the bar chart you see a dark candle, meaning dropping
prices. Because the candle is dark, you immediately understand that the
opening price is the top of the candle’s body, the closing price is the bottom

of the body, and the two tails, topping and bottoming, show the day’s high

and low.

SMART Remember that for a light-colored candle, the opening price
MONEY will be at the bottom, and for a dark-colored candle the
opening price is at the top.

You might want to claim that the Japanese candle provides the exact

same information as the bar chart: the opening price, closing price, highest

and lowest prices. This is true, nonetheless there are two differences:
• Because of the different colors, in a split second we can identify whether

the stock rose or fell. Compare again with the AAPL chart and see which
makes identifying stock price movement easier.
• The second and more essential difference is that Japanese candles
developed over time with additional techniques that add a further

dimension to the method.

A third reason exists for using Japanese candles: Because most
professionals have shifted to using this method, it is very worthwhile that
you look at the market exactly the way they do, so that you can operate in
exactly the same way they do. If you operate before them, they will not be
buying together with you, and your risks increase. If you buy after them,
you will be buying at too high a price.

Without a doubt, Japanese candles light the way for traders who know
how to use them effectively. Here is another example: