- If the close is above the open, then a hollow candlestick (usually displayed as white) is drawn.
- If the close is below the open, then a filled candlestick (usually displayed as black) is drawn.
- The hollow or filled section of the candlestick is called the “real body” or body.
- The thin lines poking above and below the body display the high/low range and are called shadows.
- The top of the upper shadow is the “high”.
- The bottom of the lower shadow is the “low”.
Long bodies indicate strong buying or selling. The longer the body is, the more intense the buying or selling pressure.
Short bodies imply very little buying or selling activity. In street forex lingo, bulls mean buyers and bears mean sellers.
Upper shadows signify the session high.
Lower shadows signify the session low.
There are many types of Japanese candlestick patterns, but they can be categorized into how many bars make up the candlestick pattern. There are single, dual, and triple candlestick formations. The most common types of Japanese candlestick patterns are the following:
|Number of Bars||Japanese Candlestick Pattern|
|Single||Spinning Tops, Dojis, Marubozu, Inverted Hammer, Hanging Man, Shooting Star|
|Double||Bullish and Bearish Engulfing, Tweezer Tops and Bottoms|
|Triple||Morning and Evening Stars, Three Black Crows and Three White Soldiers, Three Inside Up and Down|
Just refer to the Japanese Candlesticks Cheat Sheet for a quick reference on what these candlestick patterns mean.
Combine candlestick analysis with support and resistance levels for best results.
And finally, here are some words of wisdom.
Just because candlesticks hint at a reversal or continuation, it doesn’t mean it will happen for sure! You must always consider market conditions and what price action is telling you.
This is the forex market and nothing is set in stone!
And if you’re looking for a more in-depth look at Japanese Candlesticks, you can’t go wrong with Japanese Candlestick Charting: A Contemporary Guide to the Ancient Techniques of the Far East (Amazon Affiliate Link) by the man himself, Steve Nison, if you want to further your study and add another skill to your trading tool box!