Japanese candlesticks are a fundamental tool for technical analysis in financial markets. Mastering their reading can make a significant difference in your trading decisions.
Basic Components of Japanese Candles
In most current trading platforms, the candles follow a standard color code:
Green candles: Indicate a bullish trend, where the price has increased during the analyzed period.
Red candles: Indicate a bearish trend, where the price has decreased.
Structure of Japanese Candles
Each Japanese candle is composed of several parts that provide valuable information:
Green candle (bullish):
The upper end of the real body represents the closing price
The lower end of the body represents the opening price
The line that extends above the body is known as upper shadow and shows the highest price reached.
The line below the body is called lower shadow and marks the minimum price of the period.
Red candle (bearish):
The upper end of the body represents the opening price
The lower end indicates the closing price
Shadows work in the same way as in green candles
Basic Patterns of Japanese Candlesticks
Some basic patterns that every trader should know:
Doji: A candle with a very small body where the opening and closing prices are nearly equal. Indicates indecision in the market.
Hammer: A candle with a small body and a long lower shadow. It appears in bearish trends and can indicate a possible change in direction.
Understanding these basic elements will allow you to better interpret market movements and make more informed decisions in your trading operations.
View Original
This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.
Complete Guide: How to Interpret Japanese Candles in Trading
Japanese candlesticks are a fundamental tool for technical analysis in financial markets. Mastering their reading can make a significant difference in your trading decisions.
Basic Components of Japanese Candles
In most current trading platforms, the candles follow a standard color code:
Structure of Japanese Candles
Each Japanese candle is composed of several parts that provide valuable information:
Green candle (bullish):
Red candle (bearish):
Basic Patterns of Japanese Candlesticks
Some basic patterns that every trader should know:
Understanding these basic elements will allow you to better interpret market movements and make more informed decisions in your trading operations.