Japanese candlestick charting techniques

The third is a long green stick, signalling that an uptrend is now well under way. Each of the ‘soldiers’ should have a longer body that the last, as buying momentum builds. Like the bullish engulfing, a piercing line is formed of two candlesticks that signal a positive market reversal. One useful aspect of candlestick patterns is that they usually have an exact opposite.

Japanese candlestick charting techniques

You might spot tweezer tops in market that isn’t currently trending. They’re still considered a bearish signal, but not as strong as during an uptrend. In a harami, the strong selling sentiment indicated by the first candle gives way, allowing buyers into the market. Those buyers are unable to send its price higher, but do arrest the fall. You could, for instance, wait for the resulting trend or continuation to start before jumping in. Alternatively, you could look at a shorter-term chart to take a closer look at current price action.

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Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. A bearish engulfing consists of a green candle followed immediately by a red one – with the second completely dwarfing its predecessor. The second session brought a swift change of tide, initially opening higher but quickly falling as bears take over. As more and more sellers pile into the market, supply rises and demand falls – marking the beginning of a possible new downtrend.

  • Bearish Japanese candlestick patterns are signals that indicate a potential trend reversal or continuation to the downside.
  • A simple method of confirming a bear move is to look for a strong red candle immediately after the pattern, or hold off until the market has broken through a key area of support.
  • A bearish engulfing consists of a green candle followed immediately by a red one – with the second completely dwarfing its predecessor.
  • The optimism of the previous period has been dashed, hence the ‘dark cloud’ of the name.

The second time, the market then fell back to the first period’s open. This piece of symmetry is a clue that momentum is on the wane, with a possible bear run imminent. Tweezer bottoms consist of two candlestick that appear identical, except the first is red and the second is green. The two equal lower wicks indicate that sellers tried to drive the price lower in each session.

Shooting star

Like the hammer, it signals an impending reversal – however, this time, a bull run may be about to retrace into a bear market. Sellers took the asset’s price down in the session, before being beaten back by buyers. But those buyers couldn’t resume the rally, indicating that momentum may be about to shift. The opening price was the market’s highest point during the session, and it ended at its lowest point. During a downtrend, red marubozu are a solid sign of strong downward momentum. In the rising three methods, a long green stick is followed by three smaller red ones.

Japanese candlestick charting techniques

Despite the poor start to the session – as the market opens below the previous close – the second candle in a bullish engulfing demonstrates strong upward momentum. There should be little visible upper or lower wick, as the market finishes at or near the period’s peak and barely drops below the low open. A hammer is a single candlestick pattern that consists of a short body with a long lower wick, and little to no upper wick. It’s seen as a sign of an impending bullish reversal – which means that if you spot one during a downtrend, the market might be about to bounce back up. We’ve covered 22 candlestick patterns here, but there are many many more that aren’t included. Different technical traders use different patterns, and more are added new examples all the time.

Japanese candlestick patterns cheat sheet

When trading any candlestick pattern, it’s always a good idea to look for confirmation before opening your position. Patterns are no guarantee of future behaviour, so waiting for confirmation can help reduce the risk of losing out when a trend or continuation fails. StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider.

  • Essentially, the sellers are stepping back before pushing the market back down once more.
  • Many patterns are bullish, others are bearish, while some are neutral.
  • Whatever the price action within the period, by the end the buyers and sellers will have cancelled each other out.
  • Continuation patterns, meanwhile, occur during uptrends and can act as a sign that momentum isn’t slowing just yet.
  • Bullish Japanese candlestick patterns are signals that indicate a potential trend reversal or continuation to the upside.

An upside-down version of a bullish reversal pattern will usually indicate a bearish reversal, and vice versa. That could be in the form of a bullish green candlestick, or the market breaking through a resistance level. Candlestick patterns are used in day trading in pretty much exactly the same way as anywhere else – spot a pattern form on a market, confirm the resulting move and open your trade. Day traders will tend to use shorter-term charts to spot opportunities, but otherwise the principle is the same.


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