How to read japanese candlesticks

The evidence from the technical analysis is useful for timing entries and exits but is rarely unequivocal. It’s up to you to weigh contradictory or inconclusive signals from the total of your technical analysis and fundamental analysis and discern where the balance of evidence points. How to read candlestick patterns and any other indicator depends on the context in which it occurs in the markets. The bearish pattern is called the ‘falling three methods. It is formed of a long red body, followed by three small green bodies, and another red body – the green candles are all contained within the range of the bearish bodies.

Candlestick patterns are widely used and provide reliable signals. As we said at the beginning of the article, candlesticks can come either with or without shadows. However, the whole chart consists of many candlesticks, so you have the entire picture of the asset’s price movement. Japanese candlesticks are a type of chart that provides useful information on market dynamics. 85.9% of retail investor accounts lose money when trading CFDs with this provider.

Third Candlestick Strategy

Due to the highly visual construction of candlesticks, there are many candlestick patterns that traders use for analysis and to establish trade signals. As we mentioned above, candlestick patterns relate to a trend. If you see the price approaching a support or resistance level, it’s worth looking for a reversal pattern.

Bullish Engulfing occurs when a bearish candle (lower close) is followed by a noticeably longer bullish candle (higher close), which “engulfs” the range of the prior bearish candle. The longer the bullish candle, the more it “engulfs” or exceeds the range of the prior bearish candle, the more bullish the pattern. The pattern is more bullish if this pair appears after an extended downtrend, at strong support, or both, because these other signs confirm that the odds are higher that the downtrend is exhausted. A bearish harami cross occurs in an uptrend, where an up candle is followed by a doji—the session where the candlestick has a virtually equal open and close. Bullish patterns indicate that the price is likely to rise, while bearish patterns indicate that the price is likely to fall.

Bearish Harami

It indicates a strong buying pressure, as the price is pushed up to or above the mid-price of the previous day. Bearish Engulfing occurs when a bullish candle (higher close) is followed by a noticeably longer bearish candle (lower close), which “engulfs” the range of the prior bullish candle. The longer the bearish candle, the more it “engulfs” or exceeds the range of the prior bullish candle, the more bearish the pattern. The pattern is more bearish if this pair appears after an extended uptrend, at strong resistance, or both, because the odds are higher that the uptrend has become exhausted.

  • However, none of them should close below the opening price of the bullish candlestick.
  • Much more took place within the bar than the high, low, open, and close.
  • Everything else about the pattern is the same; it just looks a little different.

We’ll tell you about one of them, but before we start, here’s a reminder of the main steps you should follow. The body of the second one should be ‘included’ in the first one. It’s crucial that the candlesticks have different colours. The pattern should be confirmed by the bearish candlestick that appears after the second pattern candlestick. The first bearish one should fully contain the second bullish candlestick.


While a hammer appears after a bear market, a hanging man will do so after an uptrend. They’re taken as a sign that selling sentiment is growing against buyers, and therefore that a reversal may be coming soon. There are many strategies to try while trading because there’s a wide range of candlestick patterns.

How to read japanese candlesticks

No pattern works all the time, as candlestick patterns represent tendencies in price movement, not guarantees. Japanese Candlestick charts are the preferred choice of many traders since the price moves are easy to see and trade signals can be spotted quite quickly due to the colors. Play around with the free charts offered on TradingView to get a feel for candlesticks and how to interpret them. A short red body with a high upper wick, meanwhile, indicates that bulls pushed a market’s price higher, but were beaten back by bears before close.

Bullish Harami Cross

Every Forex Japanese candlestick pattern has its own rules for entering and exiting a trade. Although the candlestick chart is more visual, some traders prefer bars to help them avoid market noise. Test both chart types on the FXOpen TickTrader platform and choose the one that suits your trading approach. Candlestick and bar charts reflect the same information — open, close, high and low prices over a period.


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