Understanding Candlestick Charts: Technical Primer
BALTIMORE ( Stockpickr) -- As any real-world practitioner of technical analysis will tell you, charts are paramount to finding profitable trades. But like most tools of the trade, there's much more to reading a stock chart than just looking at a line from one price point to the next.
Technical traders look at a bevy of different chart types that give them a significant advantage over the standard line charts most retail investors are familiar with. Today, we're going to take a look at the basics of reading the most popular: the candlestick chart.
In technical analysis, charts are crucial because they provide a graphical depiction of price action, the single most important indicator of a stock's behavior. While the legalese on your 401(k)'s mutual fund prospectuses may warn you that "Past performance does not guarantee future results," successful quantitative and technical traders have shown that, in some cases, past performance is actually highly correlated with future results.
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