16 Japanese candlestick patterns that every investor should know

Japanese candles are amazing for predicting price movements in financial markets. I'll tell you about 16 common patterns and how to take advantage of them for your trades.

What are Japanese candlesticks?

The candles visually represent the dance of prices in the market. They are a vital part of technical analysis. By just looking at a few bars, you already have valuable information.

In a daily chart, each candle represents a full day of trading. They have three parts:

1. The body. Opening to closing sample.

2. The wick. It indicates highs and lows.

3. The color. Green ( or white) if it rises. Red ( or black) if it falls.

Over time they form patterns. Investors use them to detect supports and resistances. Some show the tug-of-war between buyers and sellers. Others seem to indicate where the market is headed.

Six ascending candlestick patterns

These usually appear after drops. It seems they invite to buy.

Hammer

It is like a small body with a long tail below. It appears after drops. Although sellers pushed hard, buyers ended up winning. A green hammer is a better signal than a red one, I think.

Inverted Hammer

It looks like a hammer but has the tail up. It suggests that buyers pushed, there were sales, but the price held. A good buying signal, generally.

Bullish Envelope

Two candles: a small red one that is "hugged" by a large green one afterwards. The second day opens lower, but what a rise! Investors usually profit from this.

Penetrating

Once again two candles: a long red one followed by a long green one. Sometimes there is a gap between them. Buyers push the price at least up to the halfway point of the previous candle. Quite reliable.

Morning Star

Three candles that bring hope: a small one between two large (red and green). The "star" usually does not touch the others. A sign that sellers are getting tired. The market seems to want to rise.

Three white soldiers

Three consecutive days with large green candles and small wicks. Each one taller than the previous. A great bullish signal after declines. Buyers are advancing decisively.

Six bearish candle patterns

These appear after rises. They mark resistances. Pessimism is growing and people are starting to sell.

Hanged Man

It's like a hammer but in a bullish trend. Not so positive. There were strong sales during the day. Buyers recovered some, but it seems the rise is weakening.

Shooting star

Like an inverted hammer but in an uptrend. It has a small body and a long wick above. The market rises at first and then falls. Like a star that shines and then goes out.

Bearish envelope

It appears at the end of rallies. A small green candle "embraced" by a large red one. Marks the end of the bullish party. The lower the second candle, the more likely a big drop is.

Sunset Star

Three candles: a small one between two large ones (green and red). It is the bearish version of the morning star. It indicates a trend change, especially when the third candle erases the gains of the first.

Three black crows

Three large red candles with short wicks or none at all. Each day opens near the previous close but ends lower. Sellers completely dominate for three days. Bad situation.

Dark Cloud Cover

Like a cloud that covers the sun. Two candles: one red that opens above the previous green body and closes below its middle. The bearish trend wins the battle. Short wicks indicate determination in the decline.

Four continuation candlestick patterns

These do not indicate direction changes. They show periods of rest or indecision.

Doji

When the price opens and closes almost the same. It looks like a cross. Very short body with variable wicks. Buyers and sellers in balance. It is neutral alone, but it can be part of other patterns.

Tops

Short body with similar wicks above and below. No one knows what to do. The bulls sold at highs and the bears bought at lows. These are usually periods of consolidation. The current pressure may be losing strength.

Triple bearish formation

A long red body, followed by three small green ones and another red. The green candles fail to break out of the range of the red ones. The bulls do not have the strength to change the trend.

Triple bullish formation

The opposite: three small red candles between two large green ones. Despite the selling attempts, buyers maintain control.

Perfect your Japanese candle reading

The best way to learn is by practicing. Important to remember: although they are useful for quickly predicting trends, it is better to combine them with other technical analyses.

Japanese candles continue to be valuable tools in 2025. They provide you with insights into market psychology and potential future movements in various financial instruments.