Wednesday, October 5, 2011

Corbitt, All About Candlestick Charting

If you haven’t read the last dozen or so books on candlesticks, Wayne A. Corbitt’s All About Candlestick Charting (2012), the most recent volume in McGraw-Hill’s “All About” series, is a good place to start. The author is writing for the neophyte who can benefit from a primer on charts (candlestick and its cousins) as well as technical analysis.

In the first third of the book Corbitt describes the major candlestick reversal and continuation patterns. He then explains how to complement these patterns by using western techniques, both chart reading (trends, support and resistance) and technical momentum indicators. He then adds volume to the mix, including in his analysis the “convenient” yet, as he is the first to admit, problematic candlevolume charts. (I personally can’t understand why anyone would use candlevolume charts instead of, for instance, more granular and informative tick charts.) The final section of the book describes three-line break, renko, and kagi charts.

The book is clearly written and has plenty of illustrative figures and charts. For the most part it is a derivative work, which is fine for a primer. One original contribution is the author’s smoothed volume percentage indicator (VPI), which is akin to the on balance volume indicator. It is used to analyze the cumulative volume of the top stock holdings of ETFs to determine whether an ETF trend is likely to continue or reverse.

All About Candlestick Charting may not belong in the library of a seasoned trader, but it’s a worthy addition to McGraw-Hill’s “easy way to get started” series.

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