History of Japanese candles. All combinations of Japanese candles in detail Japanese candles who created in what year

Candlestick analysis involves identifying certain patterns that help predict future market fluctuations. Conventionally, all such models can be divided into reversal and trend continuing. They are very popular among traders due to the fact that they have fairly high signal accuracy. Next we will look at all the main Japanese candlestick combinations.

The body of the candlestick is a white (green) or black (red) rectangle, limited by the opening and closing prices. The vertical lines above and below are called top and bottom “shadows”.

If a rectangle white, which means the stock closed above its opening price.
If black– then the closing price is lower than the opening price.

Taking just one look at the white or black body of the candle, you instantly understand whether stock trading was closed on a positive or negative wave. Those of us who spend hours looking at charts eventually realize that Japanese candlesticks are not only easy on the eyes, but also provide clear signals that are often not so noticeable on bar charts.

Important combinations of Japanese candlesticks that, if interpreted correctly, will lead to profitable trades.

The Doji is an example of a single candlestick combination. This type of candle, where a stock opens and closes at the same price, is called a " doji».

By the way, the plural of “doji” is also “doji”.

In the case of a doji, the candle has no body. Since buyers are unable to put enough pressure on sellers to force the stock to close above the opening price, and sellers are unable to force the stock to move below the opening price, this candle reflects the state of indecision that is prevalent in the minds of market participants.

Please remember the doji. This is a very important candle because it very often predicts changes in the current trend or even a reversal.

Traditionally " doji» open and close at the same price. But even if it is an “almost doji”, where the opening and closing prices differ by a few tenths of a point, the candle still carries an important signal.
", which appears during a sideways movement (consolidation) in combination with another doji and candles with a short body, does not indicate serious changes. To give a strong reversal signal, such a candle must appear at the top or bottom of a chart price pattern.
" is considered a stronger signal at the top of an uptrend in stock prices or index values than at the bottom of a downtrend. This is especially true when it is preceded by a long white candle, as in the evening star-doji combination. Remember: a long white candle indicates strong bullish sentiment. Then the “doji” appears, which indicates market participants’ indecisiveness and unwillingness to pay a higher price. What is the result? Perhaps a rollback and profit taking will soon follow.
”, many times confirming the top or bottom of the trend, turn into areas of support and resistance.

When a stock or other asset pulls back to support during an uptrend and then forms a doji, it indicates it is ready to reverse and continue its rise. The same is true in a downtrend: if a stock bounces to a resistance level and then forms a doji, it may indicate that it will continue to fall. Notice the important word “may.” Always wait for the next candle to confirm the direction of price movement.

At the candle " long-legged doji" has long upper and lower shadows, and its appearance will certainly attract your attention. When the opening and closing prices are in the middle of a "doji", it is called a "doji". rickshaw».

If you think about what had to happen for these candles to form, you will understand why their appearance is so significant. Imagine that a stock opened at a certain price, say $50. Buying pressure pushed them high, then selling pressure pushed them much lower. And yet, the session closed at the opening price, i.e., $50. Conclusion? Total uncertainty. Neither bulls nor bears have enough power to push prices higher or lower than the opening price. Do you understand that this may make the bulls want to take profits in the next trading session just in case? Remember, the market does not like uncertainty.

When you see a " doji-gravestone", and you have a long position open on these shares, immediately take part of the profit. Well, or at least tighten the stop loss.

In his book Japanese Candlesticks: Graphical Analysis of Financial Markets, Steve Nison writes: “We have already discussed that many Japanese terms associated with technical analysis are based on military analogies, and in this context the “gravestone doji” also brings to mind graves. bulls or bears who died defending their territory.”

« Tombstone Doji» opens and closes at the minimum price of the day. If prices rise to a new high, drawing a long upper shadow, this should put bulls in a particularly pessimistic mood. The translation is this: no matter that the bulls took out the entire supply, the bears still pushed prices back to the minimum and the auction closed at that price. Remember that the mark at which it ended is itself a very important signal.

Hammer and Hanged Man

The Hammer and Hanged Man candles are reversal combinations. It appears at important support levels and indicates that the downward movement is coming to an end. The hammer is also known to many traders as Pin bar.

The body of the candle in this case can be white or black, but must be short. The lower shadow is twice as long as the body. The upper shadow, as a rule, is either very short or absent altogether: such a candle is said to have a “cut top.”

When you see the combination " hammer" during a downtrend, this may mean that the trend will slow down and change direction, going sideways or changing to an uptrend. But remember: the “hammer” needs confirmation. Whether it represents a true reversal signal will become clear from the following combination of candles.

The hammer can be either a bullish or bearish candle - Hanged. If a hanging man appears during an uptrend, the implication is immediately clear. However, you will have to wait for the next candle to form before interpreting this signal. When/if the next candle confirms the hanging man is right, take all or part of the profit as the price will probably go down.

Why is the hammer a reversal pattern? Professional traders who are well familiar with candlestick analysis and market psychology explain this by saying that sellers made an attempt to significantly lower the price (this is evidenced by a long downward shadow). However, buyers were able to turn the tide. Therefore, a small body is formed at the end of the hammer.

Both regular and inverted combinations of Japanese candlesticks can appear on the chart. This form also forms at the support level and indicates an upward reversal of the market. The inverted hammer is characterized by a large shadow on top and a small body below.

Absorption

Combination of Japanese candles Absorption consists of two candles, which must be of different colors. The body of the second candle should completely " Absorb"The body is the first. The opening price of the second candle should be lower than the closing price of the first, and the closing price of the second should be higher than the closing price of the first. This combination is called " bullish engulfing" Its opposite is “ bearish engulfing».

When looking for such a signal on the chart, it is important to remember one rule - it is the bodies of the candles that should be absorbed. That is, the body of the left candle should be within the body of the right one.

One of the significant advantages of this model is that it appears on the chart quite often. Indeed, if you look at the quotes of most financial instruments, you can often find this combination at support and resistance levels.

It is better to look for such a pattern at such levels. To do this, you can use numerous indicators like. Or you can simply draw a chart correctly and manually determine all the important levels.

What is the reason for the appearance of such a pattern? Let's say the price of a stock rises. One day the price suddenly opens with a gap and then begins to decline. Market sentiment changes and the candle closes below the previous bullish opening. In this case, we are talking about bearish engulfing.

When an engulfing pattern appears, you must wait for confirmation. The confirmation is the closing of the second candle. Once it has happened and the pattern has finally formed, you can open a trade in the direction in which the pattern points. Naturally, it would not be superfluous to use any indicators.

Stars

The following combinations consist of three candles, including the Stars. " Star" represents a strong and valuable reversal signal.

To be considered a Star, a candlestick must appear at the top (bottom) of an uptrend (downtrend), have a short body, and open with a gap (up in the case of an uptrend, down in the case of a downtrend) compared to the previous candle.

Candles adjacent to the “star”: in the case of an uptrend, the body of the first candle should be long and white, and the body of the third should be long and black, matching in size with the body of the first. In a downtrend, the body of the first candle is long and black, then a “star” appears. And finally, a third long white candle appears, the size of the first, black one.

The Japanese call the first combination the “Evening Star” and the second the “Morning Star”. When the Star turns into a Doji, it signifies an even more serious warning of an impending reversal.

Morning Star is a reversal pattern. This pattern is somewhat more complex than the hammer or shooting star, as it is formed by three candles. The morning star appears at support levels and indicates that the market is turning upward.

What are the main parameters of such a model? First of all, the morning star is preceded by a bearish candle. Then a so-called gap in quotes appears and a small candle with a small body and a small shadow. After it, a bullish candle usually appears with a gap.

It is important to note that if the small candle is a Doji, it will be called a Morning Star Doji. However, this does not affect the essence of the model, since in both cases we are talking about a market reversal.

What is the explanation for this pattern? Everything is quite simple. The first candle indicates that the bears are trying to gain dominance in the market. The second candle with a gap seems to indicate that the bears have chances. However, this candle really breaks the price.

The “star” itself is small and it is clear that there is a struggle in the market. Then the bears release the price and buyers begin to dominate. Moreover, as can be seen from the pattern, there is a completely opposite dynamics and rate of price growth. And this already suggests that the bears suffered a crushing defeat.

Unfortunately, the Morning Star pattern is not a very frequent visitor to the chart. Much more often, a price reversal occurs with the appearance of a hammer or an inverted hammer. But if the morning star is formed, then the market will actually turn around.

The Evening Star pattern is a mirror image of the Morning Star. He predicts a market reversal downwards. This model includes three candles. The first is bullish, the second is doji and the third is bearish.

A prerequisite for the formation of this pattern are the so-called between candles. There is a mandatory price gap between the bullish and doji. The same goes for the doji and bearish candle.

How is this pattern formed? Everything is quite simple. First, a bullish candle appears, which indicates buyer interest. In principle, this is also indicated by the price gap between the first and second candles. Investors are increasingly inclined to buy. But during the formation of the second candle, a struggle occurs, and a very small doji candle appears.

Then the sellers completely take the initiative into their own hands, another price gap appears and a downward trend begins, and quite a strong one at that. It is important to remember that the third candle should close below the center of the first. Otherwise the signal will be weak.

Another important point regarding this pattern. It only works when price gaps appear. If they are not there, we are not talking about the evening star. Although in this case, a reversal often occurs. But it has nothing to do with this pattern.

Like many other Japanese candlestick patterns, the evening star forms at a resistance level. Moreover, often the second candle turns out to be above the resistance due to the price gap, and then the price again turns out to be lower due to the second price gap.

The shooting star pattern is a reversal pattern. It appears at a resistance level and indicates that the uptrend is coming to an end. A shooting star can be either a bullish or bearish candle. It doesn't matter at all. The signal it gives is a reversal from top to bottom.

On the chart, a shooting star looks like this - it has a small body and a very long upward shadow.

It is quite easy to identify such a pattern on a chart. It is necessary to preliminarily designate the levels, and if a model with a very long upper shadow and a small body appears near the resistance, then we are dealing with a shooting star. By the way, it is important to note that the lower shadow of a shooting star is either absent or very short.

How can such a phenomenon be explained? The fact is that buyers are trying to break through the resistance and raise the price even higher. If they succeed, the shooting star will not form. But if buyers fail, a pattern appears with a very long shadow and a short body. Sellers are gradually taking the initiative into their own hands.

Do not confuse the shooting star pattern with the inverted hammer pattern. The latter forms at support and indicates an upward reversal of the market.

A curtain of dark clouds and a gap in the clouds

Another important combination indicating a possible trend reversal is “ curtain of dark clouds" A fairly strong candlestick analysis model, which indicates the end of an uptrend and the beginning of a downtrend. It is formed at the resistance level. It also consists of two candles and heralds change when it appears at the top of an uptrend or at the end of a stagnation (sideways movement).

The first candle has a long white body. The second body opens above the close of the first and closes near the lower boundary of the price range of this and the previous candle.

The deeper the closing price of the second candle falls relative to the price range of the first, the stronger the bearish signal of this combination.

The "dark cloud cover" warning is in its name: a storm is approaching, hide under the roof.

The opposite of " curtains of dark clouds" is a bullish "clearance in the clouds" combination. It resembles a "bullish engulfing" in which the second candle (the body) opens below the closing price of the previous black candle and then rises to at least half of its body. The more strongly the second body “pierces” the first, the higher the chances that this is a strong signal of a trend reversal. When such a combination occurs at the bottom of a downtrend, expect a change in the direction of its movement.

Working with the Dark Veil pattern is quite simple. You need to wait until the formation of the Japanese candlestick combination is completed and after that you can sell. It is very important that the pattern appears at a resistance level or at a key resistance level, which will significantly increase the strength of the signal.

Also, you can use various technical analysis indicators in order to get confirmation of the signal.

Harami and Harami Cross

The Harami combination is another interesting opportunity for a financial market trader to find a market reversal and open a trade on the opposite trend at its very beginning. This pattern is based on two candles, one of which is larger than the other in size.

"Harami" means " pregnant" This combination consists of a long body enclosing a subsequent short one. A long candle is " mother", short - " child».

In this combination, the long body should appear first and the short body second. (When the opposite occurs, it means a bullish engulfing combination.) The colors of the candles do not have to be opposite, but they usually are.

The appearance of a harami means that the current trend has come to an end and there will be a reversal in the market in the opposite direction. Moreover, it is important to understand that color combinations in this case are of low importance. What is more important is what the previous trend was in order to understand what to expect from the market in the future. A bearish harami appears at a resistance level, while a bullish harami appears at a support level.

The distinctive feature of Harami is that this model assumes a price gap. If you look closely at the figure, you can see that the body of the right candle is inside the body of the left candle. The opening of the right candle occurs either below or above the close

left depending on the situation. It is very important to pay attention to the size of the right candle. The smaller it is, the greater the chances that a truly harami pattern has formed. Moreover, if a doji appears in place of the right candle, the signal becomes even stronger.

" is formed when the second candle ("child") represents a "doji". This means that the strong confidence of market participants has disappeared - a bullish mood in the case of a long white body of the first candle, or a bearish mood when the first candle is long and black. As already stated, " doji" means indecision and uncertainty. In other words, a harami cross could be a potential reversal signal. Pay attention to this candle when you notice it during an uptrend or downtrend.

When we are dealing with a regular harami, the right candle has a body, albeit not a large one. In the case of the Harami Cross combination, the right candle has no body. A Doji candle is forming. This candlestick combination often terrifies the markets as the second candlestick shows a lack of volatility, indicating uncertainty in the market. The signal will accordingly be stronger.

The sandwich combination of Japanese candlesticks is quite rare and difficult to find on the chart; it consists of three candles. However, when it appears, we can say that there will soon be a trend. The model fully corresponds to its name and represents “ sandwich"on the chart.

Contrary to popular belief, a sandwich can be either a bearish or a bullish candlestick pattern. That is, it can appear after a downward trend and foreshadow growth, or it can form after an uptrend and foreshadow a future decline.

If we are talking about a bullish sandwich, the two outer candles will definitely be bearish, and the middle one will be bullish. Moreover, the middle candle should be smaller than the outer ones. As for the bearish sandwich, the opposite is true - the two outer candles should be bullish, and the middle one should be bearish.

This Japanese candlestick pattern is in many ways similar to models such as the morning and evening star. Very often they are even confused with each other. The name speaks for itself - it is a lonely candle (doji), which is formed with a price gap in relation to the previous candle and the next one.

The composition includes three candles. The signal is the average. However, until the pattern is fully formed, it is not recommended to trade it. The middle candle must be a doji.

The first candle can be either bearish (if the previous trend was bearish) or bullish (if the market was in an uptrend). Then comes the doji and after that again a bearish or bullish candle (necessarily opposite to the first). That is, if the first was bearish, then the third will definitely be bullish and vice versa, if the first was bullish, then the third will be bearish.

After completing the formation of the combination, you can open a deal depending on which model appears. Although some experts recommend waiting a few more candles, you should not do this, as you may miss a good opportunity to enter the market. On the other hand, in order to be more confident in the decision being made, it is recommended to use additional indicators. It is important to remember that this pattern only indicates a reversal when it forms at levels.

The combination of Japanese candlesticks does not appear on the chart very often. But it is quite reliable, as practice shows. Belt grabs can be of two types: bullish and bearish. A bullish belt grab is formed with the appearance of a candle, the opening of which occurs at the minimum for a certain period with a price gap in relation to the previous candle. After this pattern appears, an upward movement usually begins. An important feature of the bullish belt grab is that the candle has no lower shadow, that is, sellers do not even try to change the situation in their favor.

As for the Bearish Belt Grip, it is formed by a bearish candle that opens at the high of a certain period of time with a price gap from the previous candle. A bearish belt grab signals the start of a downtrend. In order to understand whether this is really a bearish belt grab, you need to make sure that the signal candle does not have an upper shadow. Buyers don’t even try to challenge the sellers’ initiative.

Three black crows are a pattern that indicates a possible market reversal after an uptrend. An important feature of this pattern is that the closing prices decrease sequentially, and the opening prices are within the limits of the previous candle.

Two flying crows are a rather interesting pattern, which is very similar visually to engulfing, with the only difference being that both candles must be bearish. The pattern is a signal for a future downward trend. Its meaning is that despite the upward price gap, buyers cannot hold the price and push it higher. As a result, the decline begins.

As for holding on the mat, this pattern is one that continues the trend. In principle, purely visually, it can resemble a graphical pattern of a flag or a pennant, so a trader is unlikely to have doubts about which position to choose when such a pattern appears on the chart.

Results

No candlestick combination, indicator, oscillator or analyst forecast will tell you where your stock - or the market as a whole - will move in the next hours, days, weeks or months. What can What these forecasting tools do is tell us about the possibility and degree of likelihood of price movements in one direction or another, based on historical data.

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In the field of trading, there is one topic that definitely needs to be mentioned - Japanese candlesticks, they are used by investors to analyze the market. This tool is a kind of technical indicator that displays price behavior in a graphical interpretation and indicates the dynamics of changes in the market trend over a certain period of time. The Japanese candlestick method can be compared in its importance to technical analysis, but often, investors combine these techniques for a clearer understanding of the situation that is happening in the market. In the field of binary options, there are things that every investor, even a beginner, must take into account.

Trading using Japanese candlesticks is a fundamental concept that can be a good basis for creating your own trading system through which you will trade. From the very beginning, trading with Japanese candlesticks may seem quite complicated and confusing, but with time and experience, you will learn to easily recognize important patterns and trade with them.

Japanese candles. Story

It is believed that the Japanese candlestick chart first appeared in the 17th century in Japan. It was created by Munehisa Homma, an ordinary rice trader, Homma used this tool to more clearly interpret the lows and highs of the market over a selected time period. In addition, he believed that candles should reflect information related to the opening and closing prices of the selected trading asset.

Japanese candlesticks are very popular among traders trading in various markets because they reflect all the important market information in a simple format that is understandable even for novice investors. Beginning in the 17th century, many additional tools were developed that visually reflected price movements and made it possible to predict trends that might develop in the future.

However, no tool has been able to surpass Japanese candlesticks in its popularity and technical potential, because they reflect all the information that investors need to predict future price movements. It is worth noting that many investors are sure that Japanese candlesticks and graphical analysis are identical things and in themselves they are an integral part of technical analysis. In fact, this theory is erroneous, such an analysis is an independent and self-sufficient methodology, there are historical data that confirm this. For example, candlesticks are known to have been used in the 17th century, and Charles Dow is known to have introduced the concept of technical analysis three centuries later, so candlestick chart analysis even predates technical analysis. In any case, the combined use of these techniques will affect your trading from the best side, since you will be able to more objectively assess the current situation, which is why these concepts are often considered as one whole. In the United States of America and Europe, this type of chart appeared only in the 80s of the last century, thanks to the book by Steve Nison, which described various formations and methods of applying them in practice. Over time, interest in the Japanese candlestick chart has increased significantly, and this trend continues as more and more investors use this tool in their trading.

Basics

Trading using Japanese candlesticks is a very broad topic that cannot be fully mastered in a few days; it will take some time to develop the necessary practical skills that will allow you to trade using this technique. Before looking at the patterns that are important to us, we need to understand the basics and understand how Japanese candlesticks are built.

If you open a live chart for binary options, you will see something like the one shown above. You may notice that all candles have a similar structure, but their shapes and sizes can vary significantly. Any candle is based on four points that are interconnected with each other - these are prices formed over a certain period of time. The figure shows an hourly chart; accordingly, one candle reflected the dynamics occurring in the market within one hour. If you select, for example, a weekly chart, the price movement for one selected week will be reflected. Points at which Japanese candlesticks are drawn:

Opening. Indicates at what price the new candle opened.
Closings. Reflects information about the price at which the closing occurred for the selected period of time.
Minimum. This is the minimum value that the price has reached for some time.
Maximum. It is the maximum point that the price has reached over a certain time.

On the left is a bullish candle, its closing price is always higher than the opening point. On the right is a bearish candlestick with a closing price below the opening price. There are also so-called neutral candles, their opening and closing coincide. Bullish candles in the standard form have a transparent body, and bearish candles have a shaded body. The body is the distance the price has traveled over some time. However, in any modern trading terminal, an investor can independently set the colors in which your desktop will be painted.

Even without taking into account different patterns, candlesticks can give you a lot of useful information. For example, by their size you can judge market activity; the minimums and maximums reflect the activity of buyers and sellers, and its body shows the final result. The entire analysis of Japanese candlesticks is based on the interpretation of the interaction of buyers and sellers; their activity creates a number of important formations in the market, by considering which an investor can predict possible situations that will occur in the future.

Analysis

This is a fairly popular technique that is used with great success by many investors. Analysis of Japanese candlesticks involves identifying various combinations on the chart that tend to form again from time to time. Any setup can consist of one or a group of Japanese candles, and each of them has its own interpretation and is formed at certain moments. Candlestick patterns have a huge variety; in Steve Nison's book you can find over a hundred different formations that are used in trading. As practice shows, investors who use this technique choose several patterns for trading, which they use in practice. There are simpler formations that can be found very often in market conditions, and there are complex ones that are much less common.

Pay attention to the figure above, it shows the most popular setup that is used in the described analysis - the “shooting star”. This model works well in any market, from Forex to binary options. Japanese candlestick analysis in Forex is the most popular technique for market analysis, which helps many investors earn stable profits; in the field of binary options, this analysis is also very often used! You must understand that each Japanese candlestick formed on the price chart reflects the result of the struggle between buyers and sellers.

Accordingly, each formation that appears on the chart means something and reflects the true mood of market participants. It is important to take into account not only the nature of the Japanese candlestick itself and the pattern formed by it; in addition, you need to analyze its size, lows and highs, and consider its location. In addition, each formation needs to look for additional confirmation to be confident in a potential trade. The formation that has formed on the chart can confirm the current price movement, or signal the investor about a possible reversal. In any case, you need to analyze the market context and take into account a wide period of time, because one formed Japanese candlestick, which does not have confirmation, will not give you an objective picture. If you take into account some points and devote time to practice, an investor will be able to earn a stable profit in the market using this method.

It is worth touching on one more topic that is related to the analysis of formations - this is Price Action. In fact, this technique is a somewhat simplified analysis, the tool of which is Japanese candlesticks. Only the names of the models differ, but there are no global changes. Price action appeared relatively recently, but in a short period of time, this methodology has won a huge number of fans trading on the stock exchange.

Features of application

Any tool used on the market has its own characteristics that need to be taken into account. Japanese candlesticks are no exception to this rule; there are certain points without taking into account which it will not be possible to trade profitably using patterns. Let's look at the main features that you need to focus on:

Models provide reliable signals only over long time intervals. It is better to look at candles and the patterns formed by them on the daily time frame - this is the optimal period of time that allows you to evaluate the market well and conduct active trading. The smaller the time frame you use, the more false signals will appear.
Formations on weekly and monthly intervals have a high percentage of reliability. Considering the fact that the candle takes a long time to form on the monthly timeframe, it reflects market activity on a more global level. But here you need to take into account the fact that the price range is very wide and a candle can be formed by several full-fledged trends. Plus, you will have to wait a very long time for trading signals at such intervals. It is better to use long periods of time for a general assessment of the market, but there is no need to focus your attention on them.
Market context is an important parameter to consider in any case. You need to understand that it is not the pattern itself that is extremely important, but the place where it appeared. For example, a reversal formation based on an important level is more reliable. Each market situation is unique and requires separate consideration and a number of details must be taken into account for greater confidence.
Some traders believe that reversal formations indicate to investors a trend reversal, but this opinion is somewhat erroneous. There are two concepts - trend and trend. A trend is a global price movement that can continue for a long time, and the trend can change several times in one trading session. Japanese candlesticks to a greater extent indicate a possible change in trend; there is no need to count on the fact that when a reversal pattern appears, the global trend must change.
Pay attention to gaps. At its core, a gap is a gap between quotes, which can very often be observed at the market open on Monday. Such areas indicate a significant imbalance between supply and demand, and in the future they may act as important areas where changes in price dynamics may occur.
You must approach the choice of formations with great responsibility. Japanese candlesticks and the setups formed by them have a huge variety, but this does not mean that you will need to use every existing formation. You should choose only those models that are most understandable to you and are comfortable to use in practice. You must develop your own system; if you try to analyze every formation, you will very quickly get confused, which will lead to large losses.
Good signals are given only by those formations that are clearly visible. You must understand that two identical setups can have different importance. Priority should be given to those models that immediately catch the eye and are visually fully formed.

Search for strong formations

Not all Japanese candlesticks and the formations formed by them are of practical importance for an investor. For trading, we must choose strong patterns; we will talk about how to find them later. To begin with, take into account the general trend; the appearance of a reversal pattern after a long period has a higher chance of positive development. Again, you should not expect that the appearance of such a signal will mark a change in trend, but in this case you can catch a corrective movement, which over long intervals can amount to a large number of points. Remember, we are only interested in those formations that are supported by a strong level; if you have identified a pattern without support, then it is better to refrain from trading using such a formation.

Technical analysis and the shapes of Japanese candlesticks are two important concepts; if you combine these techniques, you will get a powerful tool for extracting constant profit from the market. Additionally, you can use technical analysis indicators; if their signals confirm the combination of a level and an important formation, then you can safely purchase an option. This way, you will ensure yourself a high potential profit and little risk in the transaction. Remember, only high-quality and in-depth analysis will make it possible to make a profit on a stable basis! In order to learn how to use this technique, you need to spend some time mastering the information.

Of particular value is the video material about Japanese candlesticks; videos of this nature can be found on the Internet without much effort. The main advantage is that you will be shown the features of this lysis using real examples. Take your training seriously, because it is the foundation on which you will build your own vision of the market over time.

Advantages and disadvantages

All existing trading methods have certain pros and cons. The described methodology is no exception, let’s first look at the advantages:

This analysis can be applied to all existing markets. A similar method is practiced by many investors on stock, futures, commodity and other exchanges. This versatility is due to the fact that the setup reflects the psychology and actions of exchange participants. As a rule, investors act in relatively the same way in certain situations.
Using this analysis, we take into account the most important thing - price! We do not consider market dynamics from the point of view of mathematical formulas, but analyze the distribution of supply and demand - this is the main aspect influencing the pricing process.
High performance. Compared to indicator systems, strategies built on the basis of this method have a higher level of effectiveness. This is due to the fact that the indicators significantly lag behind the price; accordingly, investors using such systems enter the market only when the trend has already changed, and most of the price movement is not captured. Traders who use the described technique very often enter at market peaks and troughs, catching trend reversals, thus they always purchase an option at a better price! Naturally, in order to learn how to catch price reversals, you need to spend some time learning, but, as a rule, the time spent more than pays off in the form of large profits.

In fact, this methodology has many more advantages, but to fully describe them you will need a whole series of articles! Let's touch on the disadvantages; perhaps, we can highlight only one disadvantage of this technique - its complexity. Taking into account price movements is always more difficult than trading based on signals coming from indicators. However, if an investor is not able to interpret price movements, then he will not last long in market conditions!

Conclusions

The importance of Japanese candlesticks cannot be overestimated! For more than three hundred years, they have acted as reliable assistants, enabling many traders to perform high-quality market analysis. This topic is very broad and there is a lot to learn! Fortunately, there will be no problems with a lack of information; videos about Japanese candles, various articles, and training courses can be found on the Internet in a few minutes. Initially, this analysis may seem very simple to you, but such an opinion, as practice shows, is erroneous.

It's time to talk about such an important part of graphical market analysis as Japanese candlesticks. We will look at their types and types, and also dive a little into the analysis of Japanese candlesticks.

What are Japanese candles

Where did this type of chart come from, and why are they called Japanese candlesticks?

Everything is very simple, we will find the answer in the pages of history. Japanese candlesticks originated in Japan (amazing, right?) thanks to the Japanese Rice Exchange, which operated since the 17th century. The Japanese, long before the advent of the classical version of technical analysis Charles Dow, used candlestick charts to analyze the rice market. In its classical form, the analysis of Japanese candlesticks, which we see now, were formed by the 1850s. The famous Steve Nison made a very big contribution to the analysis of Japanese candlesticks. It was he who introduced Japanese candlesticks to the Western world of trading, actively popularizing the analysis of Japanese candlesticks for trading on stock exchanges. The books that Steve Neeson wrote: “Japanese Candlesticks” and “Beyond Japanese Candlesticks” can be downloaded on our website here.

Now let's look at the appearance of the Japanese candlestick.

A Japanese candlestick consists of a “body” and “shadows” (less commonly “tail”, “wick”), and displays the opening and closing prices, as well as the high and low prices for a specific period (timeframe).

Classic bearish Japanese candlestick

In the picture we see a classic bearish Japanese candlestick

1. High price (usually denoted by the Latin letter “H”, from the English Height / High - height\high). Located at the highest point of the candle's shadow. Displays the maximum price movement for a specific period.

2. Opening price (Latin “O”, from the English Open - open). A mark that fixes the price at the beginning of the opening period of the candle. It is the beginning of the “candle body”.

3. Closing price (Latin “C”, from the English Close - closing). A mark that fixes the price at the end of the candle's closing period. It is the end of the “candle body”.

4. Minimum price (Latin “L”, from the English Low - bottom). Located at the lowest point of the candle's shadow. Displays the minimum price movement for a specific period.

For a bullish candle, the “H” and “L” marks remain unchanged, while the “O” and “C” are swapped, respectively (O at the bottom, C at the top).

During market movement (that is, during the formation of a candle), a Japanese candlestick can change its status from bearish to bullish several times, especially during strong market fluctuations.

If the closing price (“C”) is higher than the opening price (“O”), then this candle is called bullish, that is, growing. On the graphs it is displayed either hollow, white, or traditionally cold colors (green, blue, and so on).

If the closing price (“C”) is lower than the opening price (“O”), then the candle is called bearish, and therefore falling. On the graphs it is always displayed in black, or, traditionally, in “hot” colors (red, orange, yellow).

Most traders prefer charts with Japanese candlesticks, as they are easy to understand and easy to read. Looking at Japanese candlesticks, you can see a more complete and clear picture of the movement of the price chart.

As we can see from the examples, Japanese candles come in different sizes. What is this connected with? Let's figure it out.

The longer the candle, the stronger the price increase in a given period. If the body of the candle is long, this means that there is strong selling or buying pressure. If the body of the candle is short, then this indicates strong price consolidation and small growth.

Thus, bullish Japanese candles (displayed in green in ours) signal greater pressure from buyers of the asset. The longer such a candle is, the more the price rises. But although such candles suggest growth, you should always monitor their position on the chart. If, for example, a long bullish candle appears after a long price decline, this could signal a potential trend reversal (especially if the candle appeared at a support level). Too much buying pressure can initiate an intense bullish trend.

Bearish Japanese readings (ours are orange) signal greater selling pressure. The principle of their action is the opposite of bullish candles. After a long period of growth, a long bearish candle may mean that the trend may soon reverse and indicate a resistance level. After a prolonged price decline, a long bearish candle may indicate an even greater failure, and even panic in the market.

It’s not uncommon to see this type of Japanese candlestick on a chart, such as “ Marubozu brothers" These are both bearish and bullish candles that do not have “shadows”, but only a body. These are very powerful candles, which signal that this segment was dominated exclusively by sellers or buyers, respectively.

Japanese candles "Marubozu Brothers"

Candle shadows

“What would your good do if evil did not exist, and what would the earth look like if shadows disappeared from it?” - Woland said in Bulgakov’s immortal novel.

On almost all candles, you can notice lines above and below the body of the Japanese candle. These shadows can provide very valuable information to someone watching the market. The shadows of a candle are the range in which the price moved between the opening and closing of the candle. In other words, the shadows of the Japanese candlestick reflect the struggle between buyers and sellers, and the closing price reflects what they agreed on in a specific period of time.

If you observe a candle that has a long upper shadow and a short lower one, it means that buyers were trying to dominate during this period by offering a higher price for the asset. But the sellers seized the initiative and “brought down” the price to the one you see at closing.

If you see a short upper shadow and a long upper shadow, then this illustrates the opposite situation. Sellers initially dominated here, but they gave in under pressure from buyers. It is precisely such market situations that draw long shadows.

If the chart shows you a candle with long shadows and a small body, then know: such candles are called “Spinning Top”. They symbolize indecision in the market. Large shadows indicate that both buyers and sellers fought for a long time over the price, but did not come to anything. Such a Spinning Top after a long rise, or a long bullish candle, means that buyers are weakening and will soon give up. A spinning top after a long fall may mean weakening sellers and an imminent trend reversal.

Now let's move on to a whole section of very significant Japanese candlesticks - doji.

Doji are extremely important and indicative neutral candles that can give a very important signal, either by themselves or when present in various combinations. They occur when the opening and closing prices are approximately the same, so you see either a Catholic cross, an inverted cross, or a plus on the chart.

An ideal doji involves opening and closing prices at the same level, but this is not always the case. Often the price closes just a few pips above or below the opening price, and this is also considered a doji. Like Spinning Top, doji signal indecision in the market and maintenance of the status quo. According to Steven Neeson, who pays great attention to these candles, dojis located in a cluster of other candles with small bodies are not considered important. At the same time, if you see a doji among long candles, then this is a reason to think about an impending change.

Now let's talk about the main varieties of doji.

There are 3 main varieties of doji: long-legged doji, dragonfly and tombstone (yes, that doesn't sound very positive). Now about each separately.

Long-legged doji has shadows of approximately equal length. Such dojis most reflect indecision in the market. The long legs show that during the bidding there was a heated struggle, but no one emerged victorious, and everything remained in its place.

Doji the dragonfly appears in the following market situation: during the opening of the candle, sellers dominated, but in the end, buyers made up for the position and returned the price to its original value. A dragonfly doji candlestick looks like the letter “T”, with a long shadow at the bottom of the body and no shadow at the top (or very short).

The role of the dragonfly doji in a trend reversal depends on the price movement before it, as well as the future movement. A long shadow below signals that buyers are beginning to dominate, but that there are still enough sellers in the market. If a dragonfly doji occurs at the bottom of a long bearish trend, and ideally at a support level, then this can give a signal for a trend reversal. If a dragonfly occurs at the top of a bullish trend, then there is also room to expect a reversal in the price chart. But it is worth remembering that for both options you must wait for confirmation.

Tombstone Doji- the last of the standard types of Doji candles. The candlestick resembles an inverted "T", that is, a long upper shadow, and the body is below, given that the opening and closing prices are the same (or almost the same). Such a candle tells us that buyers have significantly dominated, pushing prices higher. But by the end of the session, sellers were still able to drive the price down to the opening price of the transaction. As with the Dragonfly Doji, the Tombstone Doji works on the same principle and is most often a reversal signal.

We're done with doji. Now let's talk about some more significant types of Japanese candlesticks.

Japanese hammer and hangman type candles

Japanese candlesticks: hangman and hammer.

Hammer is a rising Japanese candle (bullish), if it emerges after a long bearish trend, we should expect a price reversal upward. The hammer has a small body and a long lower shadow. It doesn't matter what color the candle is, what matters is the formation itself.

Gallows is a falling Japanese candlestick, which, after a strong bullish trend, can signal a downward fall in price. Like the hammer, it has a small body and a long lower shadow.

Candlestick patterns (combinations)

There are also a large number of combinations (patterns) of candles, which can also be significant in technical analysis.

So, for example, there is such a combination of candles as “ Star" Consider the “Evening Star” and the “Morning Star” and many others. Let's look at the main ones.

"Evening star"

"Morning star"

Candles that open with gap(separation) from the previous candle are called “Stars”. Usually, the previous candle has a large body, and the one that “hangs in the air”, as a rule, has a small body. The role of “Star” can also include tops, hammers and doges of any type, which enhances the meaning of the formation.

Evening star is a falling pattern that can indicate a resistance level. The combination may signal a trend reversal, especially if the subsequent candle is long bearish.

Morning star is a growing figure, and the complete opposite of the “evening” one.

Doji Star, presented in the figure below, implies a combination of candles in which, after a rapidly growing candle, a doji candle opens with a gap. As we already know, a star entails a reversal, and a doji candle illustrates indecision in the market. Most often, doji stars lead to a trend reversal, but after a certain period of indecision. Before making a trading decision, you should wait for confirmations, as suggested in the morning and evening stars examples.

Doji Star

The following combination of Japanese candlesticks is called “ dark cloud" If after a rising candle a sharp falling candle appears, whose closing level is below the middle of the growing candle, then such a figure may signal a trend reversal.

Dark Cloud Candlestick Pattern

The opposite combination of candles is “ Breakdown" If after a downtrend, especially after a long bearish candle, a long bullish candle appears that opened below the closing price and closed above the middle of the previous candle, then this is a breakout. This candlestick pattern usually signals a price reversal towards a bullish trend.

Breakout candlestick pattern

If, after a long rising trend, a small rising candle is completely covered by a bearish candle, then this combination may symbolize a reversal. Such candles are called - Falling embracing candles.

Falling enveloping candle

The last Japanese candlestick figure for today is “ Harami", which translates from Japanese as "pregnant".

Figure "Harami"

A Japanese candlestick that appears within the body of the previous one is called “Harami”. This combination indicates a decline in the trend potential. The shadows of the second candle do not necessarily have to be within the larger candle, but it is preferable when they do not come out.

For novice traders, in the initial stages, it is very difficult to notice and apply candlestick figures and candlestick patterns in a timely manner. It takes significant time spent viewing and analyzing charts for the trader’s eyes to get used to and see the full picture of what is happening. To make this process faster, we recommend installing a special CandleStick indicator or Japan indicator on your terminal, which will highlight significant candles and combinations of candles on your chart. This indicator will be useful not only for beginners, but will also make life easier for more experienced traders. On our website you can find many useful indicators, scripts and even trading robots, which are available for download absolutely free.

In conclusion, we note that Japanese candlesticks are an excellent illustration of the price chart on the market, and are rightfully popular with traders of all levels. In addition to simply demonstrating a trend, Japanese candlesticks can themselves be signals that a trader can successfully use to make his trading decisions.

The model is an abandoned baby. This Japanese pattern appears rarely, in a top or bottom reversal. It is considered a very strong reversal pattern consisting of a doji star separated by spaces from the previous and subsequent candle. At the bottom of a downward trend, following the black candle, there is a small white candle with a closing price, usually above the bottom of the black candle. After breaking through the minimum level of a predominantly white candle, the price decline will usually continue.

Evening star. An important figure that determines reversals at the top. Formed from three candlesticks. The first is a tall white candle. The second is with a short black (possibly white) body, creating a gap upwards. The third, black candle covers approximately half of the first, white candle.

Japanese formation, 2 crows flying up. It consists of three candles. The first is an elongated white candle, followed by a small black one at short intervals. The third candle, the black body, closes slightly below the closing price of the 2nd candle. This formation signals a trend reversal at the top.

Doji. The Japanese Doji is characterized by the same opening and closing prices. Separate several Japanese Doji candles (see picture). They give very strong signals.

A curtain of clouds. This Japanese pattern foreshadows a bearish reversal. With an upward trend, a large white candle is followed by a black candle, its opening price is higher than that of the previous candle, and its closing price is in the area of the middle of the body of the first candle.

Belt grab. This Japanese pattern appears on charts in two forms: bearish and bullish. A bullish formation that includes a large white candle, its opening price is near the minimum. It usually gives when it is formed in a low price zone.

A bearish formation consists of a large black candlestick, whose opening price itself is in the area of the maximum and signals a bearish market movement if it is formed in the high price area.

Stars. A short body that forms a gap relative to the previous large body. It confirms the weakening of the previous trend. The star that forms immediately behind the elongated black candle, during , is called by the Japanese “raindrop.”

Doji stars. Doji forming a gap from a large white and black candle. This is an important Japanese reversal pattern when confirmed by another signal in the passage of the second session.

Counterattack. Following a black candle during a downward trend or a white candle during an uptrend, the market usually opens with a large interval downwards (in the second case up), and then by the time it closes it returns to the border of the price that closed the previous session. This Japanese formation speaks of equal forces in the confrontation between the bulls and bears themselves.

Japanese crossharami, whose reversal zone begins with a doji. It signals a reversal at the bottom or at the peak of the rise, especially if it is followed by a large white (in the second case black) candle.

Hammer. Japanese pattern giving a significant reversal signal. A short black candle (or white) located at the bottom of the entire price range, with a large lower shadow. Its upper shadow is usually short, and sometimes it is not there at all. The appearance of this candle in a downtrend indicates an increase in prices.

Windows. The windows indicate a continuation of the current trend. When a window appears on the chart during an uptrend, a pullback to the same gap is likely to occur. This could even become a support level for the price. At the time when the window opens in the process of falling prices, there is usually a rise to the window. In this case, window . The Japanese usually say: - the market is returning to the window.

The Japanese model is the “three rivers” foundation. As a rule, it includes three candles. The first has a large body and is black. The second, a small black candle, defining . The third, at the base with a short body.

The attack repulsed. Similar to the Japanese “3 white soldiers” formation, the last 2 white candles here give a signal of a weakening of the uptrend. This combination indicates a weakening of the power of buyers or an increase in the influence of sellers.

Japanese shooting star model an upper candle with a large wick on top and a small wick below (sometimes without it at all), a small body near the lows, which appears after the trend has risen. Signals a bearish position in an uptrend.

Inverted hammer. A candle formed following a downward trend, with a high upper shadow and a rather small body, which is located below the price. The shadow below is usually short (sometimes there is none). The shape of an inverted hammer is similar to a bearish shooting star, but when it appears in a downtrend, it is analyzed as a bullish bottom turn breakout. Such a signal must be confirmed during the next session, with a white candle with opening (or closing) prices higher than the previous one.

Tweezers. This Japanese formation gives an average signal of a trend change. It is of great importance if two candles included in its composition also form a candlestick indicator again. For example, if in both sessions the harami cross formation contains an equal maximum, this may be an important signal at the peak, since 2 of the same candles form the upper part of the “tweezers” and the bearish formation – “harami cross”.

Japanese hanged man (or hanged man). Significant reversal signal at the top. The Hanged Man and the Hammer are practically the same candle. It is characterized by a short body (white or black), usually located at the highest part of the price range of the current session, and a fairly long shadow below. The upper shadow is usually short (sometimes completely absent).

When such a candle is formed during an uptrend, it is considered a bearish hanging man and indicates that the market has begun to weaken, but requires bearish evidence in the second session, for example, a black candle with a price slightly below the open or close. As a rule, the lower wick of this candle should be at least 2...3 times the height of the body.

Clearance in the clouds. Japanese reversal formation at the bottom. During a downtrend, a large black candle is formed at the beginning of the second session. It all ends with the appearance of a large white candle, with the closing price just above the center of the previous candle.

Separation. This type of Japanese pattern appears during a downward or upward trend, while the market forms around the opening price level of the previous candle, and then closes below or above it. Once this pattern has formed, the previous trend usually resumes.

Breaking the tasuki. Such a gap can happen both downward and upward. A downward gap is formed when, during a trend tending to the bottom, a downward gap is made by a black candlestick. Following it is a white candle, similar in size, with the opening price at the limit of the black candle, but with the closing price, a level higher. Which is bearish.

“Tasuki gap” - up, considered a bullish pattern in the continuation of the trend. In this case, after the white candlestick that breaks upward, a black candlestick similar in size grows, with the opening price at the limit of the white body and the closing price itself slightly below it. The Japanese “tasuki gap” formation appears on charts quite rarely.

Push. Japanese formation, in which a white candlestick with a closing price is within the previous black body, but lower than its middle. The Japanese "push" pattern is larger than the "bottom" pattern, but gives a stronger signal than the "cloud break". In a downtrend, the “push” will be bearish. But in a rising market, this Japanese model will be bullish.

3 white soldiers. A formation of 3 white candles, with gradually increasing closing prices. These candles indicate market strengthening when they are formed after a moment of stabilization and in the area of low prices.

Formation - three Buddhas. The Japanese model of three Buddhas is similar to the famous “head and shoulders” graphic formation. According to the Japanese definition, this is one of the types: “three mountains”, in which the peak located in the center should be higher than the side ones. The “three Buddhas” formation is essentially “head and shoulders”.

Three mountains. Japanese reversal formation at the top, where the price forms 3 peaks similar to each other. It happens that this type of formation is considered as 3 gradually.

Three rivers. 3 depressions are formed. When prices exceed the intermediate highs with a white candlestick or gap, this signals that the market has reached bottoms. At the bottom, during a downward trend, behind the black candlesticks, there is a small white candlestick, its closing price is near the lows of the black candlestick.

This type of Japanese formation is considered a trend continuation formation. After the line of lows of the white candlestick breaks through, the price decline will continue.

Holding on the tatami. A strictly bullish formation, foreshadowing the continuation of the trend. Following the white gap candle is a short black candle. Next, it is followed by 2 short black candles, and after them - a powerful white candle, or a candle whose opening price forms a gap upward relative to the outermost black candle.

Morning star. An important Japanese reversal formation at the bottom, which includes three candles. The first candle has a long black body. The second has a short one (white or black), forming a space downwards. The third, white candle covers most of the 1st, black candle.

Formation - Morning Star "Doji". The Japanese model, which has many similarities with the morning star, only the candle in the center (star part), is represented here as a doji. Due to the presence of the doji, this formation is more bullish than the standard morning star.

Harami. A Japanese formation consisting of 2 candles, where the short body lies within the long body of the candle following it. Harami portends that the previous trend has ended, and there has been pacification in the struggle between bulls and bears. The color of the 2nd candle can be either white or black. In most cases, it is the opposite color of the first candle.

Remembering all types of ideal Japanese candles is difficult, but possible. When speculating on the market for a long time, you can easily recognize a particular situation that has arisen on a chart of Japanese candlesticks. But today, when you are just starting your journey as a trader, review the above illustrations again, and if you find something already familiar on the charts in a real trend, look at this situation again and you will find out what “the candles want to tell you.”

VIDEO: Candlestick patterns

Forex Japanese candlesticks are a special type of price display in the Forex market. It is most often used to conduct technical analysis. Its main distinctive feature is that the candle reacts more quickly even to small changes in quotes, which makes it possible to quickly analyze price trends on the chart used.

History of appearance

Japanese candlesticks were created by a Japanese trader in the late 17th century to display the minimum and maximum value of a price level during a given time period. During that period, traders tried to predict the price of rice, developed various schemes and eventually came to the conclusion that candles were the most reliable way to determine future prices.

Today, Japanese candlesticks in Forex are quite popular due to the simplicity of data display and ease of reading.

Forex video Japanese candlesticks:

Candle shape

Analysis of Japanese candlesticks on Forex is best done on daily time frames. Japanese candles can be of two types: bullish and bearish. A bullish candle has a white body, while a bearish candle has a black body. Both have a body and shadows, which are indicated by vertical lines. The upper border of the line indicates the maximum price level, and the lower border - the minimum. The top of the body of a bearish candlestick shows the opening price level, and the bottom shows the closing price level. The top of the body of a bullish candle, on the contrary, displays the closing price level, and the bottom – the opening.

Hammer

This tool deserves special attention. A hammer is a candlestick with a small body that is placed at the top of the session's price range and has a large lower shadow.

A small body is evidence that the price level has remained virtually unchanged since the opening and closing, while long shadows are a sign that the bulls and bears are tied. Note that the volatility of the pair was high, but the closing price was almost back to the opening value. In the case when a top appears during a bearish trend, this is evidence that the bears are tired and, most likely, a bullish trend will appear. If the top appears during the period of dominance of the bullish trend, then this is evidence of exhaustion of the bulls.

Doji

For figures of this type, the opening and closing price levels have the same values, and there may also be a slight difference. A Doji is a candle with a very small body, so you won't even be able to recognize its shade. This icon is evidence that neither bulls nor bears can gain the upper hand. Doji are divided among themselves according to the size of shadows into the following types:

A long-legged doji at the top represents a trend reversal signal. In situations where such a candle is located between a local maximum and minimum, it is called a “rickshaw”.
The dragonfly signals a trend reversal.
Grave - the opening and closing price levels are equal to the minimum price value. Such a sign at the top is evidence of a trend reversal, at the bottom of the trend is a turn signal in case of a bullish trend in the next session.
Four Price Doji – formed as a result of lack of price movement.
A star or cross is a candle with shadows of minimum length. Most often, the star is part of complex patterns, such as in the "abandoned baby" and "doji star".

If dojis appear on the chart, you must pay attention to the candles that appeared earlier. If the Doji was formed after a whole series of candles with large white bodies, then this is evidence that buyers have weakened. For the price to continue to rise, new buyers are required. During this period, sellers are going to fight back buyers, which will lead to a decrease in the price level in the future.

If a doji forms after several candles with black bodies, this indicates that the bears have weakened. To maintain a downward trend, it is necessary for new sellers to appear, which are not currently available.

Marubozu

Marubozu is a candle without shadows. It can be of two types: white and black.

A marubozu with a black body is evidence that the market is dominated by sellers, which pushes the price down further. A white body is a sign that bulls dominate the market, which contributes to a further increase in value.

These were Forex Japanese candles for a novice trader, now I bring to your attention a table with combinations of candles that are harbingers of a trend reversal from downward to upward.

Mistakes when analyzing Japanese candlesticks

When analyzing Japanese candlesticks, the following mistakes are often made:

Many speculators perceive the appearance of a candle as a trading signal. Although in “Japanese Forex Candlesticks” the book talks about how candles do not represent trading signals, but only indicate possible changes on the chart. Moreover, it is impossible to determine entry points from candles.
Candles, which are called “reversal” candles, are more correctly called “change patterns”: they only warn about possible changes, but do not indicate the exact direction.
The most reliable signals occur on the D1 timeframe. At shorter intervals, signal reliability decreases.
In some literature you can find evidence that reversal patterns in a bearish trend are more reliable than in a bullish one. This statement is reliable only for the stock and commodity markets; this does not apply to Forex.

Signal amplification

The signal strength level increases in the following cases:

The longer and stronger the trend, the more accurate the signal.
A candle only matters when there is a strong signal.

Statistics on the effectiveness of Japanese candlesticks

In order to perform the analysis, D1 graphs were collected over a very long period. Candlestick combinations were recognized by a computer program. The success of a trading signal was determined in this way: whether the signal was justified after 1-7 trading sessions. As a result, statisticians came to the conclusion that candlestick signals are reliable in 30% of cases. It is for this reason that you should not rely on them alone; they are best used in conjunction with other tools.

I hope you now know how to trade Japanese candlesticks on Forex, I wish you all good luck and see you again!