Background
Steve Nison introduced Japanese candlestick charting to the Western world in 1991 with his landmark book 'Japanese Candlestick Charting Techniques.' Before Nison, Western traders used bar charts exclusively. His work translating centuries-old Japanese rice trading techniques created the visual language that virtually every modern trader uses. Every candlestick chart you've ever seen exists because of Steve Nison.
Core Methodology
Nison's contribution is teaching traders to read the psychology embedded in candlestick patterns. Each candle shows the battle between buyers and sellers within a timeframe. Specific patterns (hammer, engulfing, doji, evening/morning star) signal potential reversals or continuations based on the shifting balance of power.
Key Trading Rules
- Hammers and hanging men: long lower wick with small body signals rejection of lower prices (reversal at support = bullish)
- Engulfing patterns: a candle that completely engulfs the prior candle signals a momentum shift
- Doji: open equals close — indecision that signals potential reversal at key levels
- Morning/evening star: three-candle reversal patterns at support/resistance
- Always use candlestick patterns in context — they need confirmation from support/resistance levels
- Candlesticks show what happened; they don't guarantee what happens next — always use stops
Key Concepts
Books & Resources
Japanese Candlestick Charting Techniques by Steve Nison. Beyond Candlesticks by Steve Nison. Candlecharts.com.