Japanese Candlestick
A charting method showing open, high, low, and close prices that reveals market sentiment and potential reversals.
Japanese candlesticks plot open, high, low and close in a single visual bar. The body shows the open-close range and the wicks the high-low range, and patterns can signal what comes next.
Japanese candlesticks are a charting technique that displays four price points (open, high, low, close) in a visual format. The "body" shows the open-close range, while "wicks" show the high-low range. Patterns formed by candlesticks can signal potential price movements.
How It Works
- Green/white body: Close > Open (bullish)
- Red/black body: Close < Open (bearish)
- Upper wick: High price reached
- Lower wick: Low price reached
Types of Japanese Candlestick
Doji
Open and close nearly equal - indecision
Hammer
Small body, long lower wick - potential reversal
Engulfing
Large candle engulfs previous - strong signal
Trading Tips
Patterns are more reliable on higher timeframes
Confirm with other indicators
Consider the trend context
Japanese Candlestick Example
Say EUR/USD prints a small body near the day high with a long lower wick after a selloff. That hammer shows sellers pushed hard and buyers absorbed everything: a one-candle story of rejection that often precedes a bounce.
How Traders Use Japanese Candlestick
Read candles in context, never alone. A hammer at support after a decline means something. The same shape mid-range means noise. Learn five patterns deeply instead of fifty shallowly.
Related Terms
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