How to Read Japanese Candles in Trading: A Simple Guide for Beginners

Japanese candlesticks are a fundamental tool in technical analysis. Traders everywhere use them. They help to see price movements in the market.

What are Japanese candles?

This is a graphical way to show how the price has changed. The entire history for the period is in one candlestick. Open, close, high, low — it's all here.

Key Elements of Japanese Candlesticks

In the candle there is:

1. Body:

   • The difference between opening and closing
   • Green or white - the price has risen
   • Red or black - the price has fallen

2. Shadows:

   • The upper shows the maximum
   • Lower — minimum

3. Prices:

   • Opening — start of the period
   • Closing — finish

How to understand Japanese candlesticks

1. Colors say a lot:

• Green/White: buyers have won
• Red/Black: sellers took the upper hand

2. Form is also important:

• Long body, short shadows — strong movement. Obvious.
• Short bodies, long shadows — the market is in turmoil. It seems that no one knows where to go.
• Where is the closing relative to the extremes? This explains a lot.

Important Types of Candles

1. Reversal:

• Hammer: small body, long lower shadow. It seems the market is ready to turn upward.
• Hanged Man: looks like a hammer, but at the top of a trend. Not a very good sign for bulls.

2. Continuation Candles:

• Marubozu: a candle without shadows. Someone is really dominating.

3. Uncertainty:

• Dodge: there is almost no body. The forces are equal. Battle.

How to use candles in trading

1. Trend Direction:

   • A lot of greens — we are going up
   • Red dominates — we are rolling down

2. Reversals:

   • Did you see the reversal pattern? Take a closer look.
   • But context... context is more important than anything.

3. Comprehensive:

   • Candles + support/resistance = strength
   • Add indicators like RSI — even better

Practical Tips

1. Train:

   • Look at different time frames. Every day.
   • Historical data is your textbook.

2. Context is king:

   • One candle means nothing. A series is a different matter.
   • The market situation is important. Very.

3. Be systematic:

   • Your own strategy is better than someone else's. Even if it is not perfect.
   • Test before using real money. Always.

Reading candles is somewhat similar to an art. It seems simple, but experience is needed. Over time, you begin to "feel" the market. A strange sensation. But it works. Almost always.