Japanese Candlestick Anatomy

L

et’s break down the different parts of a Japanese candlestick.

Just like humans, candlesticks have different body sizes. And when it comes to forex trading, there’s nothing naughtier than checking out the bodies of candlesticks!

Japanese Candlestick Anatomy

The candlestick is made of body and shadow.

The body of the candlestick shows the open and close prices while the shadows on the top and bottom of the body show the high and low price for that time period.

The color of the body of the candlestick determines if the candlestick is showing a bullish or bearish price movement.

When the candle is red, it means that the opening price is higher than the closing price, and vice versa for green (you can see different trading platforms using other colours).

A very long white body or bar indicates that there was aggressive buying (greed) in that time period and in the end the bulls won.

The longer the body is, the more intense the buying is.

The longer the red body, the more bearish it is. A very long red body or bar indicates that there was aggressive selling (fear) in that time period and in the end, the bears won.

Short bodies imply very little buying or selling activity. In forex lingo, bulls mean buyers and bears mean sellers.

Long vs. Short Japanese Candlesticks

As we said, a long green body in Japanese candlesticks shows strong buying pressure.

As longer the body is the further the close price is ABOVE the open.

This means that prices increased considerably from open to close and buyers were aggressive.

On the other hand, when the body is long and red, it shows strong selling pressure.

As longer the red body, the further the close price is BELOW the open.

This means that prices fell further down from the open and sellers were aggressive.

Mysterious Shadows

Don’t look for your shadow! Look at the candlestick! 

The upper and lower shadows show information about the trading session.

Upper shadows mean that the session has a high volume.

Lower shadows show the opposite – low volume during the session.

Candlesticks with long shadows show that trading action occurred well past the open and close.

Japanese candlesticks with short shadows indicate that most of the trading action was confined near the open and close.

Japanese candlesticks with long shadows

The upper and lower shadows are commonly unequal. 

A strong high and weak close creates a long upper shadow.

When the upper shadow of a candlestick is longer, it signifies strong action on the part of buyers during the trading session. However, the fact that the closing price of the period is substantially lower than the period high reveals that sellers successfully forced the price back down.

When the lower shadow is longer, it reveals the opposite: sellers controlled the trading session at some point, driving the price significantly down. Buyers then stepped in before the close to pushing prices back up. It means the session closed strong; thus, the lower shadow is longer.

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