Basic Patterns of Japanese Candles

Basic Patterns of Japanese Candles

Next we will see how certain types of candles or successions of them can not give a very useful information on the possible behavior of the price. This is what is known as the "Japanese candle patterns" and these are some of the main ones:

Spinning Tops

Japanese candles with a long shadow above, a long shadow below and a small body are called spinning tops. The color of the body of the candle is not very important in this case.

This pattern indicates that there is indecision between buyers and sellers.

 

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The body of the candle indicates little movement between the opening price and the closing price, and the long shadows indicate a struggle between buyers and sellers, but in the end no one took advantage.

Although the session opened and closed without much change, prices moved significantly up and down. Neither buyers nor sellers were able to take a significant advantage.

Without a spin it is formed during a bullish trend, it usually means that there are not enough buyers left, and a possible change in trend.

Without a spin it is formed during a bearish trend, it usually means that there are not enough sellers left, and that a change in trend is feasible.

Marubozu

This curious name pattern means that the Japanese candle has no shadows.
Depending on whether the candle body is full (candle candle) or empty (candle candle), the maximum and minimum are the same as its opening or closing.

The figure below shows that there are two types of candles type Marubozu.

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A white Marubozu has a long white body without shadows. The opening price is equal to the minimum price and the closing price the same at the maximum price. This is a very bullish candle, since it indicates that the buyers were in control throughout the session. Generally this becomes the first part of a continuation towards the rise or a pattern of bullish reversal.

A black Marubozu has a long black body with no shadows. The opening price is equal to the maximum and the closing price is equal to the minimum. It is a very bearish pattern, indicating that the sellers had control. It is usually indicative of a downward continuation or a 'bearish' reversal.

Doji

Japanese doji candles have the same opening and closing price, or at least their bodies are extremely short. Doji candles should have a very small body that appears as a thin line.

A doji candle suggests indecision between buyers and sellers. Prices move above and below the opening price during the session, but finally closes very close to the opening price.

Neither buyers nor sellers were able to take control.
There are four types of doji candles. The length of the up and down shadows can vary and the candle result can be seen as a cross, inverted cross or a plus (+) or less (-) singo.

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When a veladoji is formed on your graph, pay special attention to the previous candles.
If a doji is formed after a series of long, positive body candles (such as white marubozus), the doji is indicating that buyers are weakening.

In order for the price to continue to rise, more buyers are needed but these are sold out. Sellers are beginning to win the battle in search of the price.

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Remember that this is only indicative of a possible change in the trend. Always need confirmation with the following candle or candles. Wait for a bearish candle to close below the opening price of the white candle.

If a doji is formed after a series of long and negative body candles (such as black marubozus), the doji is indicating that sellers are weakening.

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As always, confirmation with the following sails is required to determine a reversal in the trend. Wait for a white candle whose closing price is above the opening price of the black candle.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.