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Japanese Candlesticks

With this article on Japanese Candlestick, you’ll learn to navigate your tradings with proven methods.

Are you wondering where the Japanese Candlestick name comes from? Candlestick charts are known for being used in the trade of rice by Japanese traders several centuries ago. The man who introduced this secret technique called ‘’Japanese Candlestick’’ to the Western world is Steve Nison. With his Japanese Candlestick Charting Techniques book, Nison has been helping traders find their way for a long time.

According to Steve Nison, the candlestick chart was first seen in the 1850’s. The creation and development of the candlestick chart originates from a legendary brass broker called Homma in the province of Sakata. His original ideas have probably been edited and developed over the years, eventually becoming the candlestick chart we use today.

Candlestick charts stand out as more informative than regular bars. They are especially useful in ever-fluctuating markets like forex. Thanks to Nison’s Japanese Candlestick Charting Techniques, we are not moving blindly. With this comprehensive guide on Japanese Candlestick Charting, you’ll be able to read candlestick charts for both day trading and long-term signals. What types of investments can be monitored using candlestick charts? Well, you can use it to navigate forex, stocks, and even crypto trading.

Let’s dive in, and learn how you can monitor your investments with Candlestick charts. But let’s not forget that the candlestick charts are not enough to navigate your way through forex, therefore you can check my forex risk calculator and lot size calculator for more insight and safety.

What is Candlestick in Forex?

Japanese candlesticks are patterns to detect price movements for a time-based analysis. You can use Japanese candlesticks for any timeframe you want, one day, an hour, or even 30 minutes.

The candlestick charts are most often used in technical analysis of equity and currency price patterns. Candlesticks usually consist of the body (black/white or green/red) with an upper and a lower shadow (wick).

We call opening and closing prices to the values at the start and the end of a trading day. Candlestick’s body is the margin between the opening and closing price. The price that trips above and below the real body are shadows (wicks). Japanese candlesticks are patterns that are used to describe the price movement throughout a given timeframe. You can use Japanese candlesticks for any period. One day, one hour, 30 minutes, etc.

The candlestick charts are most often used in technical analysis of equity and currency price patterns. Candlesticks usually consist of the body (black/white or green/red) and an upper and a lower shadow (wick). To understand Candlestick charts, it’s essential to understand how Candlestick charts are structured. The space between the open and the close is called the real body, and the price trips above and below the real body are shadows (wicks).

japanese candlestick

Candlestick patterns play a crucial role in reading market sentiment and predicting price movements in the forex market. In this section of our Japanese Candlestick Charts article, we’ll delve into the significance of long and short bodies in candlesticks and how they reflect buying or selling pressure.

Candlestick Bodies

A key principle in candlestick analysis is that long bodies signify robust buying or selling activity. The length of the real body directly correlates with the intensity of buying or selling pressure, indicating the dominance of either buyers or sellers in the market.

long short candlestick

Long White Candlestick: A long white candlestick is a visual representation of strong buying pressure. This candlestick type has a closing price above the opening price, suggesting a bullish trend. The extended length of the white body implies a significant takeover by buyers, and it often forecasts a continued upward movement in future prices.

Long Black Body Candlestick: Conversely, a long black body candlestick signals intense selling pressure. With a closing price below the opening price, this candlestick reflects a bearish trend. The extended length of the black body indicates a forceful push by sellers, pointing towards a potential downtrend.

Candlestick patterns provide insights into the dynamics of price movements and the balance of power between buyers and sellers.

  • Open-to-Close Dynamics: Paying attention to the open-to-close relationship within candlesticks reveals meaningful insights into price movements. The more significant the open-to-close gap, the more pronounced the buying or selling action during the trading period.
  • Buyers’ Pressure: A substantial white candlestick not only signifies a strong buying sentiment but also implies that buyers took control, exerting their influence over the market.
  • Sellers’ Aggression: On the flip side, a long black body candlestick indicates aggressive selling. The closing below the opening price reflects a considerable drop, showcasing the dominance of sellers in the market.

In forex terminology, understanding the symbolism of bulls and bears is crucial. Bulls represent buyers, signaling an optimistic market sentiment, while bears symbolize sellers, indicating a more pessimistic outlook.

Short Bodied Candlesticks

Contrary to long bodies, short-bodied candlesticks suggest minimal buying or selling activity during the trading period. These candles may indicate market indecision or a temporary balance between buyers and sellers.

Understanding Japanese Candlestick Patterns will equip you to make informed decisions by interpreting the psychological dynamics of the market. Long bodies reveal the strength of buying or selling pressure and provide valuable information on the potential future price movements while short bodies are signifiers of indecisiveness.

Shadows

Shadows play a crucial role in providing insights into the price movements during a trading session detecting price peaks and lows can be highly beneficial for detecting winning patterns. These upper and lower extensions from the real body of the candlestick hold valuable information that traders can leverage for a comprehensive understanding of market dynamics.

long shadows

The upper and lower shadows of Japanese candlesticks act as a visual narrative of the high and low points within a trading session. These shadows are instrumental in revealing the dynamics between buyers and sellers.

Trading Activity at Open and Close: Candlesticks with long upper shadows are the signifiers of significant trading that occurred both at the opening and closing prices. This implies that buyers were actively participating throughout the session, demonstrating robust trading interest.

Long Upper Shadow and Short Lower Shadow: When a Japanese candlestick boasts a long upper shadow and a short lower shadow, it signals the dominance of buyers. In this scenario, buyers are aggressive, bidding at high prices. However, their influence wanes as sellers manage to pull prices down from their peak, resulting in a weakened closing with a long upper shadow.

Long Lower Shadow and Short Upper Shadow: Conversely, the presence of a long lower shadow and a short upper shadow on a candlestick indicates the dominance of sellers. Sellers exert pressure, pushing prices lower. Yet, the emergence of buyers towards the end of the session counteracts the downward momentum that leads to a robust closing with a long lower shadow.

The length of shadows in Japanese candlesticks is indicative of the intensity of trading activities around the open and close.

Long Shadows: A candlestick with long shadows signifies robust trading throughout the session, revealing the active participation of both buyers and sellers. This suggests a volatile and dynamic market.

Short Shadows: On the other side, candlesticks with short shadows suggest that the majority of trading transactions were confined around the open and close. This could indicate a more subdued and stable market environment.

Positioning shadows helps us recognize the dominance of buyers or sellers and provides valuable insights into potential price movements. A comprehensive understanding of these patterns contributes to a more informed and strategic approach to forex trading.

Fundamental Japanese Candlestick Patterns

In this section of the post, I will talk about the basic Japanese candlestick patterns. We will go step by step to learn all. Don’t worry they are not as complicated as they look. Let’s start with the first one.

Spinning Tops

If Japanese candlesticks have a long upper shadow, long lower shadow and small real bodies they are called spinning tops. What about the color of the real body? It is not very important.

This pattern shows the instability between the sellers and buyers. The meaning of the small body (whether hollow or filled) is little movement from open to close. In addition, the shadows show that both sellers and buyers were struggling, but no one could win.

Despite the little changes in the opening and closing of the session, there have been significant increases and decreases in the price movements.

Neither the sellers or the buyers can gain superiority, and the result is a deadlock.

  • When there is a spinning top during an uptrend, this generally indicates that there are no more buyers and there may be a reversal of the direction.
  • When there is a spinning top during a downtrend, this generally indicates that there are no more sellers and there may be a reversal of the direction.

Marubozu

The Japanese candlesticks that don’t have shadows are called Marubozu. The result of that the candlesticks consist of just real bodies.

Depending on whether the candlesticks’ body is hollow or filled, the high and low are the same as its open or close.

You can see the picture below of the Marubozus brothers.

A white Marubozu consists of a long white real body with no shadows. The open price is equal to the low price and the close price is equal to the high price.

This candlestick is very bullish and it shows that buyers have the control the entire session. It generally means a bullish continuity or a bullish reversal pattern.

A black Marubozu consists of a long black real body with no shadows. The open price is equal to the high and the close price is equal to the low price.

However, this candlestick is very bearish and it shows that sellers have the control the entire session. It generally means a bearish continuity or a bearish reversal.

Doji

Doji is a special candlestick version. Doji candlesticks have the same open and close price together that the real body is quite short.

A doji looks like a ‘’+’’ sign. The prices move below and above the open price during the trading action, but close at or very near the open price. It is a deadlock between sellers and buyers – nobody won.

Doji candlesticks have four special types.

Upper and lower shadows can have different length and as a result of this forex, candlestick looks like a cross, inverted cross or plus sign.

The word Doji refers to both the plural and singular.

When a Doji occurs on your chart, pay particular attention to the previously candlesticks.

It may be a signal of the buyers are becoming weaker when a Doji occurs after a long hollow candlestick (like white Marubozus).

long white candle doji

It may be a signal of the sellers are becoming weaker when a Doji occurs after a long filled candlestick (like black Marubozus).

long black candle doji

In the following parts, I will mention specific Japanese candlestick patterns and what they are telling us.

Reversal Patterns

Reversal patterns are technical clues that suggest a potential shift in market psychology and trend.

They include Western indicators like double tops, bottoms, reversal days, head and shoulders, and island tops and bottoms.

Trend reversals usually occur gradually as the underlying psychology shifts, rather than abruptly.

Reversal patterns imply a likely change in the prior trend but not necessarily a complete reversal.

Recognition of reversal patterns is valuable for successful trading by aligning with the changing market environment.

Top Reversal Signal: After a top reversal signal appears, the prior uptrend could convert into a period of sideways price action

An uptrend can resume after a top reversal signal or can abruptly reverse into a downtrend.

When a top reversal pattern appears in a bull market, it signals a cautionary note but may not warrant a short sale since the major trend is still up. Instead, it might indicate a liquidation of long positions. In a prevailing downtrend, the same top reversal formation could be used for short sales.

Hammer and Hanging Man Lines

  • Candlestick patterns with long lower shadows and small real bodies.
  • These patterns can be either bullish or bearish, depending on their placement in a trend.
  • In a downtrend, the appearance of a hammer signals a potential end to the downtrend.
  • A hanging man, appearing after a rally, suggests that the prior move may be ending.

Hammer

Hammer occurs during a downtrend and signals a potential reversal. The candle has a small body at the top with a long lower wick and little or no upper wick. It indicates that the price was driven down during the period but then pulled back near the open.

Hanging Man

The Hanging Man pattern appears in an uptrend, indicating a potential reversal. Resembling a Hammer, it has a small top body and a long lower wick. The key distinction lies in the preceding price action context.

Interpretation:

  • The hammer is associated with trying to gauge the depth of the market, and it can indicate the end of a downtrend.
  • The hanging man gets its name from its appearance, resembling a hanging man with dangling legs.
  • Both patterns can be either bullish or bearish depending on the context of the trend.

Criteria for Recognizing:

  • Three criteria for recognizing hammer and hanging man patterns: real body at the upper end of the trading range, a long lower shadow (twice the height of the real body), and no or a very short upper shadow.
  • The color of the real body is not crucial, but a white real body in a hammer and a black real body in a hanging man may have slightly different implications.

Bearish confirmation is crucial for the hanging man, as it often appears in a market full of bullish energy. The greater the down gap between the hanging man’s real body and the opening the next day, the more likely it will be a top reversal.

Engulfing Patterns

Engulfing patterns are major reversal signals in candlestick charting, involving two opposite-color real bodies.

A bullish engulfing pattern occurs in a downtrend when a white bullish real body engulfs the prior period’s black real body, indicating buying pressure and overwhelming selling pressure. A bearish engulfing pattern happens in an uptrend, where a black real body engulfs the prior white real body, signaling a potential top reversal as bears take control.

Criteria for Engulfing Patterns:

  • The market should be in a clearly definable uptrend or downtrend.
  • Engulfing patterns consist of two candlesticks, with the second real body engulfing the first. The second real body should be the opposite color of the first, except in cases where the first real body is very small or a doji.

Bearish Engulfing Pattern: This pattern occurs during an uptrend. It is characterized by a small green (or white) candle followed by a larger red (or black) candle that completely engulfs the body of the previous day’s candle. It signals a potential bearish reversal.

Japanese candlestick charts, engulfing patterns


Bullish Engulfing Pattern: This pattern occurs during a downtrend. It is characterized by a small red (or black) candle followed by a larger green (or white) candle that completely engulfs the body of the previous day’s candle. It signals a potential bullish reversal.

Dark Cloud Cover

The dark-cloud cover is a two-candlestick pattern that signals a potential top reversal. It typically occurs after an uptrend or at the top of a congestion band. The first day features a strong white real body, followed by the second day’s price opening above the prior session’s high.

Characteristics of A Dark Cloud Cover:

  • The second day opens above the high of the previous day.
  • The market closes near the low of the day, penetrating well into the body of the previous day’s candle.
  • The greater the penetration of the second day’s black (or red) real body into the first day’s white (or green) body, the stronger the signal. Some analysts look for more than 50% penetration for confirmation.
  • If the black (or red) candlestick doesn’t close below the halfway point of the white (or green) candlestick, additional bearish confirmation might be needed.
Dark cloud cover, Japanese candlestick patterns

The Piercing Pattern

The Piercing Pattern is another important candlestick pattern in technical analysis, often signaling a potential bullish reversal, especially after a downtrend.

Context and Appearance of The Piercing Pattern:

  • The Piercing Pattern typically appears at the end of a downtrend.
  • It’s a two-candlestick pattern.
  • The first candle is a long bearish (red or black) candle, indicating that the closing price is significantly lower than the opening price.
  • The second candle is a long bullish (green or white) candle.
  • It opens lower than the closing price of the first candle (potentially making a new low), but it closes more than halfway into the real body of the first candle.

Implications of The Piercing Pattern:

  • The pattern suggests that the bears controlled the price for most of the first candle’s session, but the bulls made a strong comeback during the second session, closing significantly higher.
  • The deeper the second candle closes into the body of the first candle, the more significant the potential for a reversal.
  • The pattern is confirmed if the price moves higher following the appearance of the pattern.
Piercing pattern

Stars

Stars, in the context of candlestick charting, are small real bodies that create distinct patterns signaling potential trend reversals. These patterns include the morning star, evening star, doji star, and shooting star. A star occurs when a small real body gaps away from the larger real body preceding it, and it is still considered a star as long as its real body does not overlap the prior one.

Evening Star

The Evening Star is a classic top reversal candlestick pattern, often indicating a shift from a bullish to a bearish market sentiment. It’s particularly effective when identified after a significant uptrend.

Characteristics of Evening Star Japanese Candlestick Pattern:

  • The Evening Star is a three-candlestick pattern.
  • It typically appears at the end of an uptrend.
  • The first candle is a large bullish (green or white) candle, indicating strong buying pressure.
  • The second candle is smaller and can be bullish or bearish, but it’s often a sign of indecision in the market.
  • It gaps above the first candle, showing a continuation of the uptrend but with less conviction.
  • The third candle is a large bearish (red or black) candle.
  • It should open below the second candle and close well into the body of the first candle, ideally covering at least half of the first candle’s body.

What Evening Star Japanese Candlestick Pattern means:

  • This pattern suggests a shift in market sentiment from bullish to bearish.
  • It is considered more reliable when the third candle significantly penetrates the first candle’s body.
  • The pattern is confirmed if there’s a continuation of the downward price movement following the pattern.
Evening star, japanese candlestick patterns

Morning Doji Star

A bullish reversal pattern that typically appears at the end of a downtrend.

Appearance of a Morning Doji Star:

  • First Candle: A long bearish (red or black) candle in a continuing downtrend.
  • Second Candle: A Doji candle that gaps below the close of the first candle. A Doji is a candle with a very small body, indicating a near-equal opening and closing price, symbolizing market indecision.
  • Third Candle: A long bullish (green or white) candle that opens above the Doji and closes near the middle of the first candle’s body, signaling a shift towards bullish sentiment.
morning doji star, Japanese candlestick patterns

Evening Doji Star

A bearish reversal pattern that typically appears at the end of an uptrend.

Appearance of a Evening Doji Star:

  • First Candle: A long bullish (green or white) candle in a continuing uptrend.
  • Second Candle: A Doji candle that gaps above the close of the first candle.
  • Third Candle: A long bearish (red or black) candle that opens below the Doji and closes near the middle of the first candle’s body, signaling a shift towards bearish sentiment.
Evening doji star, japanese candlestick charts

Shooting Star

The Shooting Star is a bearish reversal candlestick pattern that typically appears after an uptrend, signaling a potential reversal in price direction.

  • Appearance and Formation of a Shooting Star Pattern:
    • The Shooting Star consists of a single candlestick.
    • It typically occurs at the end of an uptrend.
  • Shooting Stars’ Candlestick Characteristics:
    • The candle has a small real body at the lower end of the trading range.
    • There is a long upper shadow, at least twice as long as the real body.
    • The lower shadow is small or nonexistent.
  • Implications of a Shooting Star:
    • The pattern indicates that, during the trading period, prices were driven higher (hence the long upper shadow), but ultimately closed near the open, suggesting a rejection of the higher prices.
    • This rejection of higher prices potentially signals a bearish reversal.
Shooting star patter, japanese candlestick charts

The Inverted Hammer

The Inverted Hammer is a candlestick pattern that often signals a potential bullish reversal, especially after a downtrend.

  • Appearance and Formation of an Inverted Hammer:
    • The Inverted Hammer consists of a single candlestick.
    • It is typically found at the bottom of a downtrend.
  • Inverted Hammer Characteristics:
    • The candle has a small real body at the lower end of the trading range.
    • There is a long upper shadow, which is at least twice the length of the real body.
    • The lower shadow is small or nonexistent.

What Inverted Hammer Means:

  • The long upper shadow indicates that during the trading period, buyers were able to push the price up significantly, but the selling pressure brought the price back down to close near the open.
  • This pattern suggests a potential reversal from bearish to bullish sentiment as buyers start to gain traction.

Harami Patterns

The harami suggests a brake has been applied to the market, indicating the potential end of the immediate preceding trend, leading to a lull.

While not as significant as some other reversal signals, the harami can still warn of a trend change, especially at market tops. The Harami Pattern provides insight into the market’s health after a strong move. After a bull move, the small real body following a long white real body indicates a weakened upward drive, suggesting a potential reversal.

Bullish Harami

  • Occurs during a downtrend.
  • The first candle is a large bearish (red or black) candle.
  • The second candle is a smaller bullish (green or white) candle that is completely contained within the range of the first candle’s body.
Bullish harami, japanese candlestick pattern

Bearish Harami

  • Occurs during an uptrend.
  • The first candle is a large bullish (green or white) candle.
  • The second candle is a smaller bearish (red or black) candle that is completely contained within the range of the first candle’s body.
Bearish Hammer, Japanese candlestick pattern

Tweezer Top

Tweezers are characterized by two or more candlestick lines with matching highs or lows, resembling the two prongs of a tweezer tool.

In a rising market, a tweezer top occurs when the highs match. In a falling market, a tweezer bottom is formed when the lows are the same. Tweezers can be composed of real bodies, shadows, and/or doji.

Tweezers often occur on nearby or consecutive sessions and are usually not considered vital reversal signals on their own.

Tweezer top, japanese candlestick patterns

Tweezer Bottom

These occurrences indicate potential reversal points in the stock’s trend, with Tweezer Tops suggesting a shift from bullish to bearish sentiment and Tweezer Bottoms indicating a shift from bearish to bullish sentiment.

  • Formation: Consists of two or more candlesticks with matching lows.
  • First Candlestick: Typically a bearish candle.
  • Subsequent Candlesticks: Can be bearish or bullish, but must have the same low as the first candle.
  • Implication: Indicates that the selling pressure is fading and a potential reversal to an uptrend may occur.
Tweezer Bottom, Japanese candlestick charting

Bullish Belt Hold

A belt hold is a single candlestick line that can be either bullish or bearish.

The bullish belt hold is a strong white candlestick that opens on the low of the day (or with a very small lower shadow) and moves higher for the rest of the day. It is also known as a white opening-shaven bottom.

  • Formation: The pattern is formed by a single long bullish (green or white) candle.
  • Characteristics:
    • The candle opens at its low and closes near its high, with little or no lower shadow.
    • There is no gap down from the previous candle’s close.
  • Implication: Indicates strong buying interest after the open, which could signal a reversal from bearish to bullish sentiment.
Bullish belt hold, Japanese candlestick

Bearish Belt Hold

A bearish reversal pattern typically occurs during an uptrend.

  • Formation: The pattern is formed by a single long bearish (red or black) candle.
  • Characteristics:
    • The candle opens at its high and closes near its low, with little or no upper shadow.
    • There is no gap up from the previous candle’s close.
  • Implication: Indicates strong selling interest after the open, which could signal a reversal from bullish to bearish sentiment.
bearish belt hold, japanese candlestick charts

Upside Gap Two Crows

The “Upside Gap Two Crows” is a bearish reversal candlestick pattern that typically occurs in an uptrend. It’s a three-day pattern with specific characteristics.

  • First Day: A long bullish (green or white) candle, continuing the existing uptrend.
  • Second Day: A gap up from the first day, followed by a bearish (red or black) candle that does not close below the previous day’s open. This candle should ideally open within or above the body of the first day’s candle.
  • Third Day: Another bearish candle that opens within the body of the second day’s candle and closes within the body of the first day’s candle, but still above the first day’s open.
Japanese candlestick patterns, upside gap two crows

Three Black Crows

The “Three Black Crows” is a bearish reversal candlestick pattern typically identified at the end of an uptrend. This pattern is composed of three consecutive long-bodied, bearish (red or black) candles. The pattern occurs after a notable uptrend in the market.

  • Each of the three candles in the pattern is a long, bearish candle.
  • Each candle opens within the body of the previous candle, but below the previous day’s close.
  • Each candle closes at or near its low.

The pattern suggests a strong reversal from the bullish trend, indicating growing bearish sentiment and selling pressure.

three black crows, Japanese candlestick patterns

The Counterattack Lines

Counterattack lines are candlestick patterns characterized by opposite-colored candlesticks with the same close. They signify a temporary halt or reversal in the prevailing trend.

Counterattack lines, while not as strong as some reversal patterns, provide insights into potential shifts in market sentiment.

Bullish Counterattack Lines

Bullish Counterattack Lines occur during a downtrend and suggest a potential bullish reversal.

  • First Candle: A long bearish (red or black) candle.
  • Second Candle: A long bullish (green or white) candle.
  • Key Feature: The second candle opens lower (usually with a gap) but closes at or near the same level as the close of the first candle, indicating that buyers have matched the sellers’ pressure.
bullish counterattack lines, japanese candlestick patterns

Bearish Counterattack Lines

Occurs during an uptrend and suggests a potential bearish reversal.

  • First Candle: A long bullish (green or white) candle.
  • Second Candle: A long bearish (red or black) candle.
  • Key Feature: The second candle opens higher (usually with a gap) but closes at or near the same level as the close of the first candle, indicating that sellers have matched the buyers’ pressure.

Both patterns indicate a moment where the opposing force (buyers in a downtrend, sellers in an uptrend) has come in strong enough to potentially reverse the current trend.

Bearish counterattack lines, japanese candlesticks

Three Mountains

The “Three Mountains” pattern is a bearish reversal pattern and is somewhat analogous to the Western “Triple Top” pattern.

  • Formation: Consists of three consecutive peaks (mountains) that are roughly at the same price level.
  • Characteristics: The peaks are formed by bullish candles, with each peak followed by a decline.
  • Implication: Indicates exhaustion of the bullish trend and potential for a bearish reversal.
three mountains, japanese candlestick patterns

Three Rivers

The “Three Rivers” pattern is a bullish reversal pattern and can be seen as the inverse of the “Three Mountains” or a kind of “Triple Bottom” pattern.

  • Formation: Consists of three consecutive troughs (rivers) that are roughly at the same price level.
  • Characteristics: The troughs are formed by bearish candles, with each trough followed by a rise.
  • Implication: Indicates exhaustion of the bearish trend and potential for a bullish reversal.

These patterns typically require a longer period to form compared to other candlestick patterns and are more significant if they occur after a prolonged trend.

three rivers, japanese candlestick patterns

Three Buddha Top

The “Three Buddha Top,” also known as the “Three Buddha Head” or more commonly in Western technical analysis as the “Head and Shoulders” pattern, is a well-known bearish reversal pattern. It is characterized by three peaks, with the middle peak (the head) being the highest and the two outside peaks (the shoulders) being lower and roughly equal in height.

  • Left Shoulder: The formation starts with the left shoulder, which is formed by a rise to a new high and a subsequent decline.
  • Head: After the left shoulder, there’s a significant rally, forming the head, which rises higher than the left shoulder’s peak, followed by a decline back near the level of the left shoulder’s low.
  • Right Shoulder: The pattern is completed by a rise that creates the right shoulder, which is lower than the head but is roughly in line with the left shoulder. The subsequent decline from the right shoulder’s peak signals the completion of the pattern.
  • Neckline: A key component of this pattern is the “neckline,” which is typically drawn by connecting the lowest points of the two troughs between the three peaks. The pattern is confirmed when the price falls below this neckline.
  • Implication: The Head and Shoulders pattern indicates a reversal from a bullish to a bearish trend. It is considered one of the most reliable trend reversal patterns.
three budha top, japanese candlestick patterns

The “Three River Bottom” is a candlestick pattern that is indicative of a bullish reversal, particularly after a downtrend. It’s less commonly referenced in Western technical analysis but offers valuable insights.

The Dumpling Tops

The “Dumpling Tops” is a bearish reversal candlestick pattern found in technical analysis, often signaling the end of an uptrend. It’s somewhat analogous to the Western “Rounded Top” or “Head and Shoulders” pattern but has its unique characteristics. Here’s a breakdown of the Dumpling Tops pattern:

  • Formation:
    • The pattern resembles a rounded top and is formed over an extended period.
    • It starts with a flat or slightly rounded high, indicating a stall in the upward momentum.
  • Characteristics of the Dumpling Tops:
    • The pattern consists of a series of candlesticks that gradually slope downwards, forming a convex shape at the top.
    • The candlesticks typically have small bodies, showing indecision among traders.
  • Implication:
    • The Dumpling Tops pattern suggests a gradual shift in sentiment from bullish to bearish. It reflects a slow erosion of buying pressure, leading to a potential downward trend.
  • Confirmation:
    • The pattern is confirmed by a significant bearish candle or a gap down that indicates a shift to a bearish trend.
dumpling top, Japanese candlestick patterns

Fry Pan Bottoms

The “Fry Pan Bottom” is a bullish reversal candlestick pattern recognized in technical analysis. This pattern is similar in concept to the “Rounded Bottom” or “Saucer Bottom” pattern in Western charting methods. The Fry Pan Bottom indicates a gradual and sustained change in market sentiment from bearish to bullish. Here’s how it typically forms:

  • Formation:
    • The pattern resembles a frying pan and is formed over an extended period.
    • It starts with a slow and rounded decline in price, indicating a bearish trend.
  • Characteristics:
    • The pattern consists of a series of candlesticks that gradually form a concave, upward-sloping curve at the bottom.
    • The candlesticks may vary in size, showing a mix of indecision and gradual shifting of power from sellers to buyers.
  • Completion and Implication:
    • The pattern completes with a decisive bullish candle or a gap up, signifying that the buyers have taken control.
    • It suggests that the period of consolidation or downtrend is ending and a new uptrend is beginning.
  • Confirmation:
    • The pattern is confirmed by continued bullish momentum following the completion of the formation.
frypan bottom, Japanese candlestick patterns

The “Tower Tops” is a bearish reversal candlestick pattern found in technical analysis. It is indicative of a potential reversal of an existing uptrend, similar in concept to the “Double Top” pattern in Western charting methods. The Tower Tops pattern is characterized by a sharp increase in price followed by an equally sharp decrease, resembling a tower.

Upward-Gap Tasuki

This is a bullish continuation pattern that occurs during an uptrend.

  • Formation:
    • The pattern starts with a bullish (green or white) candle.
    • The next day, the market opens with an upward gap and forms another bullish candle, but this candle does not completely cover the gap.
    • The third day is a bearish (red or black) candle that opens within the body of the second day and closes within the gap created between the first and second days.
  • Implication:
    • The pattern suggests that although there is a slight bearish sentiment on the third day, the overall bullish trend is likely to continue.
upward gap tasuki, downward gap tasuki, japanese candlestick patterns

Downward Gap Tasuki

This is a bearish continuation pattern that occurs during a downtrend.

  • Formation:
    • The pattern starts with a bearish (red or black) candle.
    • The next day, the market opens with a downward gap and forms another bearish candle, but this candle does not completely cover the gap.
    • The third day is a bullish (green or white) candle that opens within the body of the second day and closes within the gap created between the first and second days.
  • Implication:
    • The pattern suggests that although there is a slight bullish sentiment on the third day, the overall bearish trend is likely to continue.
downward gap tasuki, japanese candlestick patterns

Rising Three Methods

This is a bullish continuation pattern that typically occurs during an uptrend.

  • Formation:
    • The pattern starts with a long bullish (green or white) candle.
    • It’s followed by a series of two to three smaller bearish (red or black) candles that stay within the range of the first candle. These candles represent a brief period of consolidation.
    • The pattern completes with another long bullish candle that closes above the first candle’s high.
  • Implication:
    • Indicates that the uptrend is likely to continue after the brief consolidation.
rising three method, Japanese candlestick charting

Falling Three Methods

This is a bearish continuation pattern that typically occurs during a downtrend.

  • Formation:
    • The pattern starts with a long bearish (red or black) candle.
    • It’s followed by a series of two to three smaller bullish (green or white) candles that stay within the range of the first candle.
    • The pattern completes with another long bearish candle that closes below the first candle’s low.
  • Implication:
    • Indicates that the downtrend is likely to continue after the brief consolidation.
falling three method, japanese candlestick charting

Three Advancing Soldiers

The “Three Advancing White Soldiers” is a bullish candlestick pattern that signals a strong reversal of the current downtrend. This pattern is considered to be a very reliable indicator of a change in market sentiment from bearish to bullish. Here’s how it typically forms:

  • Formation:
    • The pattern consists of three consecutive long bullish (white or green) candles.
    • Each candle opens within the body of the previous candle but closes at a new high, showing a steady advance.
  • Characteristics:
    • Each of the candles in the pattern should have a small or no wick, indicating that the market is closing near its highs.
    • The candles ideally open within the previous candle’s body, suggesting a continuation of buying pressure.
  • Implication:
    • The Three Advancing White Soldiers pattern indicates a strong shift in momentum from bearish to bullish.
    • It often appears at the end of a downtrend and signals the beginning of an uptrend.
  • Confirmation:
    • The pattern is confirmed if the bullish trend continues in the subsequent sessions.
three advancing white soldiers, japanese candlestick patterns

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