An Introduction To Japanese Candlesticks

Japanese Candlesticks have been around for a long time. Legend has it that a certain Japanese rice trader became very rich and successful using these type of chart. It soon became very popular around the world when computers are used for trading.

Some advantages of Japanese Candlesticks are:

  • More visual
  • Tells you lots of details at a glance
  • Enables you to spot trading opportunities easily

Construction

Once you learn how to interpret the candlestick, it opens up a wealth of information for you. Below is how a candlestick looks like. The green bar represents a green day where the stock opens lower and close higher. The red bar represents a red day where the stock open higher for the day but closes lower for the day. The two wicks at the top and bottom represents the highs and lows of the day.

japanese candlestick

Who Won The Day

The candlestick can show us who won the day or the period. This is very important at turning points in the market such as support and resistance areas. The green bar tells us that bulls are in control and have won the day. On the other hand the red bar tells us that the bears have won the day and are in control.

Continuation Or Reversal Patterns

Perhaps the biggest benefit that you can gain from Japanese Candlesticks are the many continuation and reversal patterns that it offers. Some of them are really powerful and can tell us in advance important moves that a stock is about to make. You will learn about these patterns in later articles.

japanese candlestick chart

A bottoming tail reversal pattern formed in IBM in late October. It was a very powerful reversal signal especially when it happened at the 200 MA with heavy volume. Look how the stock reversed and moved higher.

  • If you like this article, consider starting the Stock Market Course. It is free and jam packed with great information for newbies.
  • Want to have updates on the financial markets? Join my Telegram Channel. Dstockmarket.com Channel.
  • Help support this page and press the Facebook Like button below. Thanks!

Recent Articles

  1. Technical Analysis Lessons From OKA Corp Stock Chart

    Aug 17, 18 05:07 AM

    In this lesson we will take a look at the technical developments of OKA Corp's stock price and why it moved the way it did. We will also have a look at what might happen to OKA's stock price.

    Read More

  2. Technical Analysis Lessons From BMY Stock Chart

    Aug 16, 18 07:28 AM

    In this lesson, we will learn how and why BMY manage to bottom out and start a new uptrend.

    Read More

  3. Technical Analysis Lessons From Pentamaster's Stock Chart

    Aug 14, 18 08:19 AM

    In this lesson we will learn and examine why Pentamaster was able to recover all of its losses to start a new uptrend and achieve new highs.

    Read More

  4. Technical Analysis Of KLCI August 13 2018

    Aug 13, 18 05:56 AM

    The KLCI is currently at resistance territory after a nice big rally. I would consider a sideways trading a possible scenario at the moment.

    Read More

  5. Technical Analysis Lessons From AAPL's 15 Min Stock Chart

    Aug 13, 18 05:22 AM

    In this lesson, we will learn how AAPL's 15 Min stock chart formation help to send the stock higher for 2-3 days to give traders a nice swing trading opportunity.

    Read More

New! Comments

Have your say about what you just read! Leave me a comment in the box below.