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How to Read Japanese Candlesticks in Forex

The most important candlestick patterns to anticipate market movements and improve your trade entries and exits.

Anatomy of a Japanese Candlestick

Each candlestick has two main components:

Body: The rectangular section. It represents the difference between the opening and closing price.
Wicks (shadows): The thin lines above and below the body. They represent the highest and lowest prices reached during the period.

▲ Bullish Candle

The close is higher than the open. Typically shown in green or white.

▼ Bearish Candle

The close is lower than the open. Typically shown in red or black.

Reversal Candlestick Patterns

Reversal patterns signal potential changes in price direction. They are especially valid when they appear at key support or resistance levels.

🔨 Hammer — Bullish reversal

Appears in downtrends. Small body at the top with a long lower wick (at least twice the body length). Indicates that buyers rejected lower prices and the market may turn upward.

⭐ Shooting Star — Bearish reversal

Appears in uptrends. Small body at the bottom with a long upper wick. Sellers rejected higher prices, signalling a possible directional shift downward.

✝️ Doji — Indecision / reversal

Opening and closing prices nearly identical, forming a cross. Represents market indecision. Can signal a reversal when it appears after a strong trend, especially the Long-Legged Doji or Dragonfly Doji.

🤗 Engulfing — Bullish or bearish

A two-candle pattern where the second candle completely engulfs the body of the first. Bullish Engulfing (at support) signals a bullish reversal; Bearish Engulfing (at resistance) signals a bearish reversal. One of the most reliable patterns.

Continuation Patterns

💪 Marubozu — Continuation

A candle with no wicks or very small ones. Large body covering almost the entire range. Indicates total buyer (green) or seller (red) dominance during that period. Strong signal of trend continuation.

👦 Three White Soldiers / Three Black Crows — Strong continuation

Three consecutive bullish (Three White Soldiers) or bearish (Three Black Crows) candles of similar size, each closing higher/lower than the previous. Indicates strong momentum and probable trend continuation.

Golden rule: Candlestick patterns are most reliable when they appear at significant support/resistance levels, on higher timeframes (H4, Daily) and when confirmed by volume or other technical indicators.

How to Use Candlestick Patterns in Your Trading

Identify the overall trend on a higher timeframe (daily or weekly)
Look for key support or resistance levels where price might react
Wait for a reversal candlestick pattern to form at that level
Confirm with another indicator (RSI oversold/overbought, MACD divergence)
Enter at the open of the candle following the pattern, with a stop loss below/above the level

Common mistake: Trading candlestick patterns without trend context or key levels. A hammer in the middle of a chart without a support level has no predictive value whatsoever.

🕯️ Master complete technical analysis

In the Intermediate Level at Bolívar Bolsa you will learn Japanese candlesticks, Price Action, support and resistance, and much more.

Educational content only. This does not constitute financial or investment advice. Trading involves risk of loss; past results do not guarantee future results.