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What is a Japanese candlestick pattern? How to predict price trends with candles

What is Japanese Candle?

Hi guys! After 7 basic lessons, I'm sure you already have a rough grasp of it, right? Continuing the class series of Blogtienao (BTA), this is lesson 8. In this article, it will help you have a more sympathetic view of the model. Japanese candle.

When it's time to go to class, let's go to class!

See more: Lesson 7: Factors that affect the rise and fall of the price of Bitcoin (BTC)

What is Japanese Candle?

A Japanese candlestick is something that shows the price rising or falling within a specified time frame. It helps you to identify market moves forward or backward. Each candle has its own meaning. In Forex or Crypto Candlesticks are also a way to do technical analysis. To predict those moves you can look at the candlestick patterns created.

See more: What is Forex? A detailed guide for newbies

A candle consists of: candle body and shadow. Types of prices forming Japanese candlesticks: opening price, closing price, high and low price. Normally, Japanese candles have two colors green and red. A green candle represents an increase in price (the closing price is higher than the opening price). A red candle represents a decrease in price (the closing price is lower than the closing price).

Structure of Japanese candles

How to read Japanese candles

To read a candle we must consider the shadow and the body of the candle. Candlestick shadow, also known as low beard, long body. It shows that the buyers (bulls) are pushing the price up. Conversely, if the beard is long, the body of the candle is short. It shows that the bulls are under selling pressure from the sellers (bears). Shows failure of the bulls to push the price high.

Short whiskers show that buyers (sellers) control the price situation. Longbeard shows that the buy (sell) side is indecisive compared to the other side.

How to read Japanese candles

What is a Japanese candlestick chart?

Japanese candlestick chart is a chart of many candles combined to form. Depending on the time frame, each candle will represent the price movement in that period of time. If you look at the D1 chart, each candle will represent the closing, opening, high, and low prices for a day. Simply put, each candle represents one trading session in a day.

In addition, you can choose other time frames such as W1 (week), H4 (4 hours), H1 (1 hour)… The larger the timeframe, the farther the price trend is. For example, if you look at the weekly chart (W1), it will provide a longer-term view of the market than the H1 chart.

Depending on your trading style, you can view many different timeframes. When you are a long-term investor, you can look at time frames such as: D1, W1. Or a short-term trader can choose a shorter time frame such as: H1, H4, ...

BTC Japanese candlestick chart

Reversal pattern

The reversal pattern can be an uptrend. It indicates the price from a downtrend to an uptrend. Provides traders with Buy signals. Or it could be a downtrend. No shows the price starting to fall and provides a Sell signal.

Bullish Patterns

Here are some bullish reversal patterns for your reference.

Bullish Engulfing candlestick pattern

A bullish engulfing candlestick pattern is when the price is in a downtrend and there is a green candle that is higher than the previous red candle. This green candle has an opening and closing price higher than the high and low of the previous red candle. Visualize this pattern simply as this green candle engulfing the previous red candle.

Bullish engulfing candlestick pattern

The pattern is more effective when the green candle engulfs 2-3 red candles ahead.

Bullish engulfing candlestick pattern

Hammer candlestick pattern

The hammer candlestick pattern is when there appears a candle with a long beard below and a small body like a hammer. This candle can be red or blue. To be sure, you can wait for one more candle to confirm. The confirmation candle is green and the closing price is higher than the opening price of the hammer candle.

Note: The hammer candle above the real body may have no shadow or small shadow.

Hammer candlestick pattern

Doji Morning Star candlestick pattern (Doji Morning Star)

This Doji Morning Star pattern consists of one red candle, one Doji candle and one green candle. Doji candles are candles with a small body. That is, the closing price is close to the opening price and there are two long candlesticks. This candle shows an indecision of the market.

Doji Candles

If following the star is a green candlestick and the closing price is more than half the body of the red candle. The Doji Sao Mai model will be completed.

Morning Star Doji candlestick pattern

The reliability of the pattern is higher when the green candle closes more than half of the red candle.

Japanese candlestick pattern Doji Morning Star Long Green Candle

Bearish Patterns

If there is an bullish pattern, there must also be a bearish pattern! Please refer to these Japanese candlestick patterns below!

Bearish engulfing candlestick pattern (Bearish Engulfing)

The bearish engulfing candlestick pattern is the opposite of the bullish engulfing candlestick pattern. A sell signal is formed when a red candle engulfs a green candle. At this time, it shows that the bears are dominating the bulls.

Bearish engulfing candlestick pattern

Dark Cloud Cover (Dark Cloud Cover)

In an uptrend. When appears a strong bullish candle (long green candle). This is followed by the appearance of a red candle that closes half (50%) higher than the body of the previous green candle. At this point, people can choose to sell or wait for the next red candle to confirm the reliability of the pattern.

Dark Cloud Covered Candlestick Pattern

Shooting Star candlestick pattern

Contrast with Hammer pattern. The Meteor pattern represents a downtrend and is often at the top of an uptrend. The pattern forms when there is an inverted hammer (long beard). The pattern indicates that the bulls are trying to push the price to a higher high. But the bears took control of the situation and the price started a downtrend.

Some notes for you guys

View only closed candles. Do not watch moving candles. When the price is moving, the pattern is not complete yet.

There are also some factors about market conditions. You must consider whether you are in a bull market or a bear market. Evaluate more factors: support area, resistance area, moving average, trend line, price channel…

You can refer to the video below to get more information about candles!

Japanese candlestick pattern

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Conclusion

Hope through this article of Blogtienao (BTA), you can grasp the knowledge about Japanese candlesticks and candlestick patterns.

If you have any questions, please comment below. Our team will try to answer as quickly as possible.

Thank you to everyone who viewed the article. Happy investing everyone!

Note: the article is based on basic knowledge, only applicable for newbies to help them have the most understandable view, other pros, if you have additional suggestions, please contact Blogtienao (BTA). If you are new, if you don't understand something, please join the discussion groups below (fb group is preferred)

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