Summary of Japanese Candles

Summary of Japanese Candles

Japanese candles are formed using opening, closing, maximum and minimum prices.

• If the closing price is higher than the opening price, we will have a bullish candle, usually white or green.


• If the closing price is below the opening price, we will have a bearish candle, usually black or red.


• The colored part is known as the body of the candle.


• The thin lines that protrude above and below the Japanese candle are known as the shadows.


• The upper shade above is the maximum price.


• The bottom of the shade below is the minimum price.

The bodies and shadows of the Japanese candles provide important information.

The elongated bodies indicate a strong activity of sale or purchase. The longer the body, the greater the intensity of sale or purchase.

Short bodies indicate little activity. In Forex slang, buyers are known as bulls and sellers like bears.

Candles with a small body but long shadows both above and below are known as spinning tops. This is one of the patterns of Japanese candles indicating indecision between buyers and sellers.

A candle is known as 'Marubozu' if it has no shadows.

A Japanese 'Doji' type sail has almost no body and the opening price is almost the same as the closing price.

The hammer is one of the trend change patterns that forms during a downward trend.

The hanging man is a bearish trend change pattern that can indicate a cap or a strong point of resistance.

The inverted hammer occurs when the price has been falling and suggests a possible correction.

The shooting star is a trend change pattern that looks identical to an inverted hammer but occurs when the price has been rising.

 

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.