e hope that at the end of this section you haven’t already given up on Forex trading!
We promise that it gets easier once you know how all charts and prices are related to each other.
Let’s review what we know about Japanese candlesticks:
If the opening price is less than the closing price then the body of the candlestick is green (different software can use white or blue). A very long green body or bar indicates that there was aggressive buying in that time period.
If the opening price is more than the closing price then the body of the candlestick is red (different software can use black as a color of the body). A very long red body or bar indicates that there was aggressive selling (fear) in that time period.
The hollow or filled section of the candlestick is called the “real body” or body.
The thin lines poking above and below the body display the high/low range and are called shadows.
The top of the upper shadow is the “high“.
The bottom of the lower shadow is the “low“
Long bodies indicate strong buying or selling. The longer the body is, the more intense the buying or selling pressure.
Short bodies are the exact opposite. They suggest very little buying or selling activity.
Do you remember the animals? The bulls mean buyers and the bears are the sellers.
Upper shadows signify the session high.
Lower shadows signify the session low.
There are many types of Japanese candlestick patterns, which are categorized by how many bars make up the candlestick pattern – single, dual, and triple candlestick formations.
Below you will see a table with the most common types of Japanese candlestick patterns:
If you combine your knowledge of candlestick analysis with the concept of support and resistance levels, you will get a better success rate for your trades.
Want to learn all about Japanese candles and how to apply them in the graphical analysis? Or how to properly use formations with Japanese candles?
Then you need to hear what the Father of the Japanese Candlesticks, Steve Nison, have to say about their analysis in his book.