Reading Candlestick Charts


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  • It tells you the buyers are willing to buy at higher prices and the sellers are unable to push price lower .
  • Each candlestick on the graph represents the same timeframe, which could include any length of time, from seconds to decades.
  • Choosing a larger timeframe offers you a bigger perspective.
  • Though, I’m still noobs on this but i would like to apply this method on my trading.
  • So now we have our gut feeling as to where the trend direction.

If there is no upper shadow, then the highest price is the same as the opening or closing price, depending on whether the market is trending up or down. Note that the market price is going up if the candlestick is green or blue. The color of the candlestick is usually green or blue if the market is trending upwards. candlesticks that have both long upper and lower shadows indicate that there is a lot of indecision in the market. Recognize that short bodies mean there was little buying or selling pressure. Candlesticks with short bodies represent little price movement. Candlesticks with long bodies represent strong buying or selling pressure and a lot of price movement.

The wicks are drawn as two vertical lines above and below the body. The wicks mark the high and the low that price has achieved for the period. The candlestick range is defined by the extreme high of the top wick above the body and the extreme low of the bottom wick.

How to Read and Interpret Japanese Candlestick Charts (Introduction)

Within each candle you see in hindsight the market was gyrating back and forth, but the bar/candlestick only records the open, high, low, and close for the time period. Much more took place within the bar than the high, low, open, and close. If a trader only looks at historical data, breakouts may appear clean and easy to trade, yet in real-time, the market may move back and forth over the breakout point several times . When the bar closes, it looks like a clean breakout occurred, but in real-time maybe it wasn’t. They visually show the high, low, open, and close prices for a given time frame.

As traders often only focus on one candle within a short timeframe, it’s important to understand their key signals. Green umbrellas signal sellers may be ready to reverse the up cycle. Candlestick charts are especially helpful in identifying market trend changes.

A long-legged doji, meanwhile, has both a long upper and lower wick – so the session saw a significant high and low, but ended up where it started. What does the Marubozu Candlestick Pattern on the chart warn about? What is the meaning of the Marubozu in Forex and other markets? After five hours of trading in the range, the bullish momentum breaks through the upper border of the falling wedge.

bullish or bearish

The prices then increase until the price becomes so high that the sellers once again find it attractive to get involved. At the same time, the price is eventually too high for the buyers to keep buying. Candlesticks can also show the current price as they’re forming, whether the price moved up or down over the time phrase and the price range of the asset covered in that time. Your results may differ materially from those expressed or utilized by Warrior Trading due to a number of factors. We do not track the typical results of our past or current customers. As a provider of educational courses, we do not have access to the personal trading accounts or brokerage statements of our customers.

Bearish Harami Candlestick

Last but not least, we have the triple candlestick patterns comprised of multiple candles. As commonly echoed, past performance is not an indicator of future results. With this in mind, it is best to learn more trading techniques and combine these techniques with the interpretation of candlesticks so you can make the most of your experience on In fact, a lot of well-known technical indicators in trading crypto are based on how combinations of candlesticks appear on a chart.

On a 1-hour chart, for instance, each candlestick represents one hour of activity. What does the appearance of the shooting star pattern signal on the price chart? The movement should start above the lower border of the previous candle and impulsively break through the closing price of the first bullish candle. The third candlestick should give the final signal of the bullish trend reversal down, it must be bearish and have a long body. An evening star is a pattern composed of three candlesticks that signals a reversal at an uptrend’s high.

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Since we started our educational series of articles about the crypto market, we’ve constantly advocated DYOR . It’s a crucial step in crypto trading, as it is before you delve into anything crypto-related. Here are two common examples of bearish three-day trend reversal patterns.

Last Price or Current Price on a Candlestick Chart

Candlestick charts are now used internationally by swing traders, day traders, investors and premier financial institutions. In technical analysis, candlestick patterns are often considered a lagging indicator because you need to wait until the close of a candle before entering a trade. This has many drawbacks, with the most important being that lagging indicators only record the results, so it leaves room for the trader to decide or speculate on the next price movements. When investors study candlesticks in order to develop context across a particular asset or during certain market conditions, this is a part of a trading strategy called technical analysis. Here, investors are looking to use past price movements to find future trends and opportunities.

However, most patterns fall under the category of multiple-candlestick patterns. To detect price trends, you’ll need to be familiar with the patterns shown by two or more consecutive candlesticks to detect potential price trends. We have compiled all the types of candlestick patterns in one infographic. This infographic will be very useful for those who are using candlestick techniques to monitor market movement and also for those who are learning about them. Homma is said to have developed candlestick charts during his lifetime by studying years of historical data and comparing them with weather conditions. This study also helped him understand the role of emotions on the value and pricing behind the trade of rice.

Back in the 1700s, a Japanese rice merchant called Monehisa Homa invented the candlestick charts. He discovered that the price of the product was dictated by supply and demand, and also, the emotions of the Japanese rice traders had a significant factor in the price changes. The Japanese candlesticks used basic elements to represent the price in the trading period. Over the centuries, Homma’s initial candlestick charts were refined, most notably by Charles Dow, one of the founding fathers of technical analysis, to the model used nowadays. When the hammer appears after a series of bearish candlesticks, it can potentially signify a bullish price trend ahead.

Hence, a bullish pin bar must have a lower low with respect to the previous candle. If you are looking at a bullish reversal pattern, then the prior trend should be bearish. The long thin lines above and below the body is called the shadow of the candlestick. It’s like a combination of a line chart and a bar chart, where each bar represents all four important pieces of information for an interval. The reason for this is that the candlesticks are based on prices. Since the prices keep varying, the size and shape of the candlesticks also vary due to the nature of their anatomy.


All types of are risky and investors may suffer losses. Past performance of investment products does not guarantee future results. The responsiveness of the trading system may vary due to market conditions, system performance, and other factors. Account access and trade execution may be affected by factors such as market volatility. This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy.


This is due to the fact that candlesticks formed in shorter time frames can be just a shadow of a candlestick in a longer time frame. Sustained price movement in a particular direction is called a market trend. When prices move higher in a sustained manner, the prevailing market trend is up.

Bullish two-day trend continuation patterns

To do this, each market participant must be able to analyse price movements and understand trader psychology. A candlestick chart is a convenient and practical tool that displays price changes, thanks to which traders and investors can easily define the trend direction. Today, candlestick charts are used to track trading prices in all financial markets.

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