I've noticed that many beginners in trading do not pay enough attention to proper chart reading. Meanwhile, the ability to analyze Japanese candlesticks is the foundation of all technical analysis, especially for those working on short timeframes.

Japanese candlesticks have not appeared yesterday. Rice traders in Japan used their method centuries ago, but it only entered the Western world in the late 80s when analyst Steve Nison introduced this system. Since then, Japanese candlestick patterns have become a primary tool for most technical traders.

What is so special about them? Each candlestick shows four key prices for the period: open, close, high, and low. This provides a much more complete picture than a simple line chart. You immediately see the market sentiment and the strength of the movement.

Let's figure out how to read them. Each candlestick consists of three parts: color, body, and wicks. Color is the most obvious: a green candlestick means the price went up, red means it went down. The body of the candlestick shows the range between open and close. On a green candle, the lower boundary of the body is the open, the upper is the close. On a red one, it's the opposite.

Wicks (also called shadows or tails) are the upper and lower protrusions. They show the maximum and minimum prices reached by the asset during the formation of this candle. The length of the wicks is very informative. If the wick is long compared to the body, it indicates market uncertainty, a struggle between buyers and sellers. If the wicks are short and the body is long, it signals decisive movement in one direction.

The longer the wick, the greater the uncertainty. Imagine: the price tried to go up but met resistance and pulled back. This is visible by a long upper wick. Or vice versa — the price fell, but buyers intervened and pushed it up. That's a long lower wick.

A long body without wicks (or with minimal ones) indicates strength. If the body is green and long, it means buyers fully controlled the period and the price steadily rose. A long red body means sellers were in control.

Now, about the patterns themselves. Over time, individual candles form combinations that give signals of trend reversal or continuation. These are Japanese candlestick patterns.

Let's start with simple single patterns. Doji is a candle where the open and close prices are almost the same. Looks like a cross or plus sign. This is a pure signal of uncertainty; the battle between bulls and bears ended in a draw. There are several types: long-legged Doji with long wicks on both sides, Gravestone with a long upper wick, Dragonfly with a long lower wick, and a four-price Doji with no wicks at all.

Marubozu is a candle with no wicks at all. The word comes from Japanese meaning "bald." If it's a green candle, the open was at the minimum, and the close at the maximum — a clear bullish signal. If red, the opposite. The longer this body, the more dominant one side is.

Hammer is one of my favorite patterns. It’s a candle with a long lower wick and a short body at the top. The body should be two to three times shorter than the wick. What does this mean? The price fell but then bounced back and closed higher. Sellers were present, but buyers took control. However, most traders wait for confirmation before entering — usually, the next candle should be strongly bullish.

Inverted hammer is the hammer upside down. Long upper wick, short body. This indicates buying pressure, but then sellers came in and pushed the price down. However, the close was not far below, suggesting that buyers may soon regain control.

Hanging man is like a hammer but appears after an uptrend, not after a decline. The same shape but a completely different meaning. It signals that sellers are strengthening. A red hanging man candle is considered a stronger bearish signal than a green one.

Shooting star is an inverted hammer in the context of an uptrend. Small lower body, long upper wick. The price tried to break higher but pulled back. This can be a reversal signal.

Round top is a candle with a small body centered between equal wicks. Pure uncertainty. Buyers pushed up, sellers pulled down, but nothing happened. Often, this is a period of consolidation before a new move.

Now, double patterns are more serious signals. Engulfing is when one candle completely "engulfs" the range of the previous one. Bullish engulfing: a bearish candle followed by a strong bullish one that covers the entire range of the first. The larger the engulfing, the stronger the signal. Bearish engulfing is the opposite.

Piercing candle is a long red candle followed by a long green one. Usually, there's a gap in price between them. This indicates strong buying pressure and often signals a reversal after a decline.

Of course, context is always important. One candle alone is not a signal to enter. You need to see where it appears: after a prolonged trend, at support or resistance levels, in conjunction with other indicators. Japanese candlestick patterns work best on higher timeframes — daily, weekly, monthly. On minute charts, there's a lot of noise and false signals.

If you want to practice, open a demo account and start tracking these patterns. Over time, you'll learn to recognize them automatically and make decisions faster. The main thing is not to rush and always wait for confirmation before entering a position.