Am I saying that candlesticks are better than bar charts?  We’ll get to that as well as a great resource to help you make money using candlesticks, but first let me tell you why you should familiarize yourself with candlestick charts.

As you read more and more charts your brain starts to make subconscious snap interpretations.  You learn a particular type of chart the way you might learn a language.  Before you buy or sell you’ll sit down and do rigorous analysis, but having familiarity helps you parse information quickly.  Learning to read candlesticks gives you another dimension from which to analyze a chart and there’s no reason not to know how to use them.

The Difference of Candlestick Charts

So given that they represent the same data, why do you need candlesticks?  Well if you look at a typical bar chart, a lot of the data is deduced.  You have the same information on a bar chart that you do on a candlestick chart, but some information is not immediately obvious.  Did the stock close higher or lower than it opened?  I can tell this at a glance with a candlestick chart, while I need to read the little nubs on a bar chart to know this.

As I mentioned, the same information is there, but on a candlestick chart some of it has already been processed for me.  Thus my powers of induction are freed to look a little deeper.  From years of experience, my mind can intuit from a bar chart whether a stock went up or down, but that information was obvious to anyone at first glance on a candlestick chart.

The distinct shading of the open and close regions also yields other benefits for helping your mind read a chart quickly.  The candlestick has a tendency to make your mind more aware of the area between the open and close by representing it so visually.  It highlights that difference, where a bar chart does not.  Thus the candlestick chart helps my mind prioritize things that a bar chart doesn’t.

So, are Candlesticks Better?

Candlestick and Bar charts focus on different things and provide different benefits.  Neither is “better,” but this answer to me is clear:  Being able to read both is better than being comfortable with only one.  Why limit your analysis to only one area of emphasis.  Why not be able to get the benefits of both methods?

Learning More about Candlesticks

So now you want to learn more about candlestick charts?  INO’s Trend TV currently has a free video about candlestick charts for its users.  It’s free to sign up, and you’ll have access to the video before you need to decide if you’re interested in the product they offer. They’re also offering three other free videos at this time.

TrendTV's Free Video on Candlestick Charts

In this complimentary video, “Advanced Applications of Candlestick Charting,” authors, software programmers, and co-founders of the International Pacific Trading Company, Gary Wagner & Brad Matheny will walk you through:

• History of candlestick charting
• How to interpret candlesticks
• How to merge techniques of Eastern & Western technical analysis together
• How to merge candlestick techniques with your current trading plan
• And more…

This 100 minute complimentary video can be found on Trend TV. You don’t have to worry about watching the whole video at once. After you have a password, you can revisit anytime to watch the rest of a video, review a video, or watch other videos on Trend TV.

Go sign up and put another tool in your toolbox.  How can you regret getting more money making weapons for free?  Speaking of which if you haven’t already, be sure to read our technical analysis basics series for more free information.

INO TV – http://tv.ino.com/

INO’s TV service is an invaluable source of information.  The service itself costs about $100 to watch all the educational videos that you want, but you can get 4 for free simply by registering.  Of course if you go ahead and subscribe, that will be money well spent as well, but at a minimum you should register and get your four videos for free.

Yahoo’s Interactive Charts and Historical Data – http://finance.yahoo.com

Not that long ago I was writing my own charting software because I couldn’t stand what was available.  Now I can get a killer interactive chart tool written in Javascript for free on demand.  I don’t have to even download data or anything.  Additionally, if I do want the data, I can just hop to the historical data section and download almost everything I could want.  You can even download it to a spreadsheet.

Investor’s Hub - http://ih.advfn.com/

The one thing I can’t get from Yahoo! as far as I know is a full database of financials.  Investor’s Hub provides a fantastic historical database of earnings, cash flow and balance sheet information for public companies.  For example, if you want to get a detailed picture of a company’s financials without parsing their filings, this site is a live saver.  Here, for example are the annual reports for Caterpillar.  You can see quarterly data is available as well.

Edgar - http://www.sec.gov/edgar.shtml

EDGAR, the Electronic Data-Gathering, Analysis, and Retrieval system is a database with filings by public companies.  In the olden days I used to write scripts to scrape data from here to do historical analysis of companies.  While this information is now easily available on sites like Investor’s Hub, it can still be a good place to go make sure a company you’re getting involved in is what you think it is and that the numbers you’re looking at have some basis in reality.  I’ve saved myself from catastrophes when a company’s financials and chart looked too good to be true simply by reading their quarterly report.  In two cases in particular I learned about litigation they were almost certainly going to lose.

Investing In Bonds - http://www.investinginbonds.com/

Investing in Bonds is a good way to get some broad information on a sector that can be quite cryptic.  The well written articles and indexes can help you make wise decisions in the bond markets.  Bond information does not flow as freely as stock data yet, but this site is lessening the gap.

Yahoo Finance Stock Screener - http://screener.finance.yahoo.com/newscreener.html

It may seem that I’m in love with Yahoo! finance, but they really do have some good tools.  They have two different versions of their stock screener.  Either one is a great place to start building up a list of stocks to analyze.  It can be a great tool when you seem to be unable to get your cash allotment down to the level you would prefer because you can’t find appropriate investment vehicles.

ClearStation - http://clearstation.etrade.com/

I used to track all my purchases on ClearStation.  For a long time it had the best available online charts.  It still remains a valuable community to get some “crowdsourcing” insight into the markets.  You can use it for paper trading and for getting the sentiment of the public at large.  It also tends to have a better level of conversation than most Internet stock discussions, although don’t expect too much, this is the Internet after all.

When so many tools are freely available you’re putting yourself at a handicap if you do not use them.  Be sure to make use of these tools and seek out more to make yourself as informed as possible.  Education is one of the best weapons to prepare yourself in the markets.

Photo Credit: Peter Martin Hall