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✨Japanese Candlestick Chart
The candlestick chart features candles, each representing one time period. It displays four prices simultaneously: opening, closing, maximum, and minimum. The rectangle between opening and closing prices forms the candle's body. Vertical lines above and below the candle represent the maximum and minimum prices, known as the candle's shadow. Learn more here.
🤔How do you read candlestick signals?
Candlestick formations, or patterns, offer cues for traders to open or close positions. Divided into reversal and continuation patterns, traders wait for specific formations to appear, then act accordingly.
Types of Candlestick Patterns
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Single Candlestick Patterns
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Double Candlestick Patterns
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Three Candlestick Patterns
📝Candlesticks Activation
- View at the left-downward side of your platform screen.
- Click on "Chart types button"
- Then Select the "Japanese Candlesticks" and will appear on your screen.
❓Trade using single candlestick patterns
Certain Japanese candlestick patterns comprise a single candlestick, signaling trend reversals or continuations based on shape and color. For clearer signals, analyze single candlestick patterns on longer time frames, such as one hour or more. To confirm signals, consider analyzing additional patterns.
Hammer
The Hammer pattern is a trend reversal indicator. Visually, this candlestick looks like a hammer with a small body of any color and a long lower shadow. There is practically no upper shadow. At the same time, the lower shadow is usually twice as long as the body.
In such a situation, open an Up trade if the price fell before this, and open a Down trade if the price rose before this.
Shooting Star
The Shooting Star pattern is a trend reversal indicator. Visually, this candlestick looks like an inverted hammer, with a small body of any color and a long upper shadow. There is practically no lower shadow. At the same time, the upper shadow is usually more than twice as long as the real body.
In such a situation, open an Up trade if the price fell before this, and open a Down trade if the price rose before this.
Doji
Doji is an indicator of closing due to indecision in the market. It usually appears when the supply and demand in the market are at an equilibrium. Doji looks like a cross: the opening price is virtually equal to the closing price, and both shadows are long.
In this scenario, the decision about the trade should be made in the context of the previous price behavior.
📊 Trade using 2 candlestick patterns
Candlestick patterns, often seen as one green and one red candle on a chart, signal potential up or down trades based on their proximity. These patterns offer leading signals, especially effective when the market demonstrates upward or downward trends.
Bullish Engulfing
Bullish Engulfing is a combination where the boundaries of the body of a green candle are larger than the boundaries of the body of a red one. The green candle follows the red one and completely engulfs it. This means that the asset's price has risen more than it has fallen before.
As a rule, this pattern gives a signal about the end of the downtrend and the beginning of the uptrend.
Bearish Engulfing
Bearish Engulfing is a combination where the boundaries of the red candle body are larger than the boundaries of the green candle body. The red candle follows the green one and completely covers it. This means that the asset's price fell more than it had grown before.
As a rule, this pattern gives a signal about the end of an uptrend and the beginning of a downtrend.
Piercing Pattern
A Piercing Pattern is a combination where the body of a green candle starts below the body of a red candle. The green candle follows the red one, while the closing price of the green candle is in the area of the upper part of the red candle body.
As a rule, this pattern gives a signal about the beginning of an uptrend. A Piercing Pattern works similarly to Bullish Engulfing, but it is not as strong. To confirm the signal, analyze other patterns as well.
Dark Cloud Cover
Dark Cloud Cover is a combination where the body of the red candle starts below the body of the green candle. The red candle follows the green one, while the closing price of the red candle is in the area of the lower part of the green candle body.
As a rule, this pattern gives a signal about the beginning of a downtrend. Dark Cloud Cover works similarly to Bearish Engulfing, but it is not as strong. To confirm the signal, analyze other patterns as well.
Bullish Harami
Bullish harami is a combination where a long red candle is followed by a shorter green candle. In this case, the body of the green candle does not exceed the boundaries of the red body.
As a rule, this pattern gives a signal about the beginning of an uptrend. To determine the trend more accurately, analyze the pattern together with a support line.
Bearish Harami
Bearish harami is a combination where a long green candle is followed by a shorter red candle. In this case, the body of the red candle does not exceed the body boundaries of the green candle.
As a rule, this pattern gives a signal about the beginning of a downtrend. To determine the trend more accurately, analyze the pattern together with the resistance line.
❔Trade using 3 candlesticks patterns
As high-precision patterns, the combination of three candlesticks with an average accuracy of signals can indicate a continuation or a trend reversal. They allow you to analyze the market more effectively than patterns from one or two candlesticks.
However, one should be careful to use this group's patterns in trading. It is recommended to combine them with other technical analysis tools to confirm the signals.
Three Stars in the South
The three Stars in the South pattern are formed on a downtrend. It consists of three candles. Each subsequent candle is shorter than the previous one. In addition, the minimum price increases from candle to candle.
The Three Stars in the South pattern indicates that the downtrend is getting weaker and a bullish reversal is possible. If this pattern is formed on the chart, the price is likely to rise after the fall.
Bullish Doji Star
The Bullish Doji Star pattern begins with a long red candle. It is followed by the doji candle. It is located below the previous candle, and there is a small gap down between them. The third candle is also green. Its body is more than the body of the first red candle and almost covers it.
The Bullish Doji Star pattern indicates a bullish trend reversal. If this pattern is formed on the chart, the price is likely to rise after the fall. Please note that you can enter the market by a Bullish Doji Star only if the pattern is formed on a downtrend.
Bearish Deliberation
The Bearish Deliberation pattern is the reverse of the three Stars in the South pattern. Bearish Deliberation is formed on an uptrend. It consists of three doji candles. The first and the second candle is approximately the same size and the third much shorter than them. Opening and closing prices rise from candle to candle.
The Bearish Deliberation pattern indicates that the uptrend is weakening and the price may turn down. If this pattern is formed on the chart, it is likely that the price will fall after growth.
Downside Gap Three Methods
Downside Gap Three Methods is formed on a downtrend. It starts with two long red candles with a gap down between them. The third candle is green and its body covers the gap between the first two candles.
If the downside Gap Three Methods pattern is formed on the chart, as a rule, the downtrend continues.
📌Does using Candlesticks guarantee trading results?
Candlestick analysis provides insights into market dynamics for signal accuracy. You can explore patterns like 'Hammer' or 'Bullish Engulfing,' but remember, gains rely on a balanced approach—combining patterns with risk management and staying informed. Learn more here.
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