Master the Types of Japanese Candles: The Tool Every Technical Trader Must Know

You’ve been watching charts for weeks and still can’t anticipate market movements. Do you know why? Because you probably haven’t learned to read correctly what the Japanese candlestick patterns are telling you. While most beginner traders obsess over complicated indicators, professionals know that mastering candlesticks is the fundamental starting point for any effective technical analysis.

Why Are Japanese Candlesticks Your Best Trading Ally?

Before diving into specific patterns, you need to understand why this matters. Technical analysis is based on three pillars: historical patterns, mathematical tools, and indicators. But if you don’t master the visual language of candlesticks, the other two pillars will collapse.

Japanese candlesticks originated in Japan’s rice market centuries ago, but their effectiveness in modern financial markets remains unmatched. Why? Each candle provides four data points simultaneously: open, close, high, and low, which we call OHLC. A line chart that only uses closing prices forces you to miss 75% of the available information.

Imagine trying to understand a movie by only watching the final frames of each scene. That’s exactly what you’re doing when you ignore the wicks and bodies of the candles.

Basic Anatomy: How Each Candle Is Built

Each candle has two main components:

The body: The rectangular part representing the range between open and close. A large body indicates strong activity; a small body suggests indecision.

The wicks: The thin lines extending upward and downward, showing the maximum and minimum levels reached during the period. A long wick suggests price rejection at a certain level; a short wick indicates prices remained disciplined.

The color of the candle indicates the direction: on most platforms, green candles mean close higher than open (bullish), while red candles mean the opposite (bearish). But you can customize it according to your preferences.

Candlestick Patterns You Need to Recognize Instantly

Engulfing Candle: The First Warning of a Reversal

This pattern alerts you to trend reversals before many traders notice. It consists of two candles of different colors, where the second candle “engulfs” the first completely, surpassing both its open and close prices.

In practical terms: buyers controlled the market, but the second candle shows that sellers not only regained ground but did so with such strength that they closed below the previous day’s open. Or vice versa in a bullish pattern.

This setup is especially valuable when found on larger timeframes (daily or weekly). On 5-minute charts, it produces more false signals.

Doji: The Symbol of Market Indecision

A doji candle is almost a crucifix on your chart: long wicks on both ends with a body almost nonexistent. This means buyers and sellers fought throughout the period but ended up closing at the same price (or very close) where they opened.

What is it telling you? That no one won that battle. It’s a cry of uncertainty in the market. Some traders see it as an exit opportunity; others ignore it because its next move is unpredictable.

The important thing: a doji is not an entry signal. It’s an alert that requires confirmation from subsequent candles. Only a novice would enter the market seeing a doji without additional context.

Hanging Man: The Candle That Predicts Reversals

Imagine a candle with a small body and an extraordinarily long lower wick ###if we’re in a bullish market( or upward )if we’re in a bearish market(.

Here’s the story: in a bearish hammer during an uptrend, the price rose as usual but was attacked with such aggression that it fell significantly during the same period. However, buyers counterattacked and closed the candle near the high. That shows sellers have power, but buyers can still defend themselves.

The hanging man indicates that the previous trend is losing strength. It’s time to prepare for a change in direction.

) Suspended Man: The Hammer with a Different Context

Here’s a trap for beginners: a hanging man candle has exactly the same shape as a hammer. What changes is what came before.

A hammer appears after an uptrend, indicating sellers will start to take control. A hanging man appears after a downtrend, indicating buyers will begin to regain strength. The shape is identical; the meaning is opposite.

That’s why advanced traders always observe the prior context. An isolated candle is a guess; a candle in context is a prediction with foundation.

Marubozu: The Symbol of Pure Strength

Marubozu means “bald” in Japanese because this candle practically has no wicks. The body occupies almost the entire range of the period.

What does it mean? Absolute control. In a bullish marubozu, buyers dominated from open to close without concessions to sellers. In a bearish marubozu, pure selling. These patterns often appear after the price tests an important support or resistance level.

The larger the body relative to the period, the greater the trend strength. A daily marubozu carries much more weight than one on a 15-minute chart.

How Candlestick Types Improve Your Level Identification

Here’s the revolutionary part: when you switch to candlestick charts, you suddenly see support and resistance levels that line charts simply hide.

Why? A line chart only connects closing prices. But the wicks show if the price tried to break a level, was rejected, and pulled back. That is critical information you would never see on a continuous line.

Let’s take EUR/USD at support 1.036. The wicks of multiple candles touch that level and bounce. On a line chart, that support would never be visible because the closes happened higher. You would end up with a completely wrong analysis.

With candlesticks, you see the real battle at each level. Buyers pushing, sellers defending. That allows you to place your tools ###Fibonacci, moving averages, stop orders( in much more precise locations.

The Magic of Timeframes and Their Long Wicks

Here’s the secret many beginners don’t understand: a long wick on a large timeframe candle is extraordinarily important.

Why? Because that long wick on a 1-hour candle is made up of multiple 15-minute candles and dozens of 5-minute candles. If you see a long wick, it means that during that hour, the price reached a certain level, was strongly rejected, and ended up closing elsewhere.

That is not random. It’s movement that requires coordination of many traders. When it happens on larger timeframes, it has institutional weight.

Conversely, a long wick on 5 minutes could be just a minute of local panic. That’s why professionals pay much more attention to patterns on daily, weekly, even monthly charts than on short frames.

Real Example: How a Trade Is Executed with Candles

Let’s analyze a real scenario with EUR/USD. You identify clear support at 1.036 through the wicks of several candles. You place your Fibonacci retracement tool from a previous high to the low where your support is testing.

The 61.8% Fibonacci level almost exactly coincides with your support. That is a confluence, your confidence signal. You wait for a candle pattern that confirms your analysis )like a bullish engulfing or a bearish hammer showing rejection(.

You place your order at that confluence. That trade would have worked almost perfectly because you based your entry on three independent confirmations:

1. Support identified through candle wicks
2. Fibonacci retracement level
3. A candle pattern confirming reversal

Beginners enter for one reason. Professionals enter when three reasons align.

The Actual Progression of a Technical Trader

You can’t skip steps. Here’s the correct path:

Phase 1: Theoretical Learning )2-3 weeks( Learn what each pattern is. Study Japanese candlestick types until you can identify them with your eyes closed.

Phase 2: Passive Observation )4-8 weeks( Don’t trade. Just open charts, look at historical patterns across different assets )forex, cryptocurrencies, commodities, stocks(. Train your eye to recognize patterns. A demo account is perfect for this without financial pressure.

Phase 3: Fundamental Analysis )Additional( Professional traders don’t rely solely on technicals. They complement with fundamental analysis: news, earnings reports, monetary policy. Candles show the what; fundamentals show the why.

Phase 4: Selective Trading Only after months of analysis, when you recognize patterns instantly, do you start trading. And here’s the key: you will trade very little. One trade per week or per month, not daily. You seek confluences, not volume of trades.

Think of it like a surgeon. Trains for years observing, practicing, studying. When they finally operate, their movements are precise because they already know every possibility.

Why Line Charts Are Sabotaging You

If you’re still using line charts for technical analysis, you’re trading blind. Here’s why:

A line chart only shows you close-to-close. It completely ignores:

• Opening price
• Attempted highs
• Defended lows
• Candle strength
• The internal battle context

It’s like reading only the first and last paragraph of a book and expecting to understand the story.

With candlesticks, you see everything. You see if the price was bullish, bearish, if there was a battle, who won, where rejection occurred. The difference is the difference between trading with information vs. speculating blindly.

Advanced Practice: Reading Candles on Multiple Timeframes

Here’s the technique used by institutional traders:

Observe a daily candle with a long wick. You want to know what really happened. Switch to 4 hours: the wick expands in detail. Switch to 1 hour: you see exactly when the peak occurred and when the reversal started.

That information allows you to:

1. Understand the real strength of the move
2. Identify exactly where to enter and where to place stop loss
3. Differentiate local panic from institutional movement
4. Design multi-timeframe strategies

Japanese candlestick types work identically on 1-minute or 1-month charts. The difference is that on larger frames, they carry more significance and institutional weight.

Conclusion: From Novice to Competent Analyst

Mastering Japanese candlestick types is not about learning pretty patterns. It’s about learning the fundamental language of the market. Each candle is a conversation between buyers and sellers. Long wicks are rejection screams. Large bodies are moments of conviction. Doji are unanswered questions.

Once you understand that language, your analysis will improve dramatically. Not because candles are magical, but because you are finally reading the market instead of just observing it.

Start today: open a demo account, select your favorite asset, and begin observing. Don’t trade yet. Just watch. Identify patterns. Mentally predict what will happen next. Then check if you were right.

In a week, you’ll recognize patterns unconsciously. In a month, you’ll make accurate predictions regularly. In three months, you’ll have a trader’s eye.

The market doesn’t punish knowledge. It punishes ignorance. Japanese candlestick patterns are your weapon against that ignorance.