Japanese Candlesticks: The Complete Guide from A to Z

Every candlestick has two components: the body and the wicks. The body is the rectangular section that shows you the open and close price. The wicks — also called shadows — extend above and below the body and show the highest and lowest prices reached during that candle's time period.

A bullish candle closes above where it opened — price moved up. A bearish candle closes below where it opened — price was pushed down. The colour tells you the direction, but the shape tells you the story.

The wicks reveal the battle between buyers and sellers within a single candle. A long upper wick means price pushed up during the candle but was aggressively sold back down before the close — sellers were in control. A long lower wick means price was pushed down but buyers stepped in and drove it back up — buyers were in control.

This is the core insight that makes memorising patterns unnecessary. If you understand buying and selling pressure, you can read any candle on any chart without needing to recall a specific pattern name. The wick length tells you where the real battle happened and who won.

When you see a long lower wick at a support level, buyers are rejecting lower prices strongly — that is a bullish signal regardless of what colour the candle body is. When you see a long upper wick at a resistance level, sellers are rejecting higher prices strongly — that is a bearish signal regardless of candle colour.

The length of the candlestick body tells you the strength of conviction behind the move. A long body means there was strong momentum and volume behind that candle — buyers or sellers dominated for the entire session. A short body means the session was contested — neither side gained much ground.

Watching how body size changes across a series of candles reveals momentum shifts. If you see a sequence of large red candles followed by progressively smaller red candles approaching a support level, the sellers are losing steam. That shrinking momentum is your warning that buyers are about to take over.

A candle with no wick at all — just a solid body from open to close — signals the most extreme conviction. Buyers or sellers controlled price from the very start to the very end of the session with no pushback at all.

Understanding what individual candles mean is only half the skill. The other half is knowing where to look and how to combine candlestick signals with the rest of your chart analysis. This is what separates traders who read candles correctly from traders who lose money acting on noise.

Do not pay attention to every single candle on every time frame. The only candles that matter are the ones forming at key support and resistance levels or at trend lines. Candles in the middle of a move — with no nearby level — carry no actionable information. Entering a trade in the middle of nowhere gives you a poor risk-to-reward ratio because your stop and target are roughly equal distances away.

When price is approaching a key level, that is when you zoom in and pay close attention. Is a reversal pattern forming? Is the selling pressure weakening? Is a large engulfing candle about to close? The answer to those questions at a key level is what drives your entry decision.

Candlestick patterns on the 5-minute or 15-minute chart are unreliable. There is too much noise at those time frames and patterns fail far more often. Always get your confirmation on the 1-hour or 4-hour chart first. Once the higher time frame gives you a signal, then scale down to the 15-minute to find a precise entry with a tighter stop-loss.

This approach gives you the best of both worlds: a higher-probability signal from the larger time frame and a better risk-to-reward ratio from the smaller time frame entry.

Never trade a candlestick pattern in isolation. Combine it with as many confirming factors as possible: a key support or resistance level, a moving average crossover, a broken trend line, or a Fibonacci retracement zone. The more confluences align, the higher the probability of the trade working and the more confidence you have to hold it through normal fluctuations.

A strong setup looks like this: price is at a major resistance level (confluence 1), a trend line has been broken (confluence 2), the moving average has crossed bearish (confluence 3), and an evening star or doji has formed (confluence 4). Four factors pointing in the same direction is a high-conviction trade.

You do not need to memorise a hundred candlestick patterns. The following five are the only ones you need. Master these and you will have everything required to read price action at any key level on any instrument.

The engulfing pattern is one of the most reliable reversal signals in price action. A bullish engulfing forms at the end of a downtrend — a large green candle completely covers the body of the previous red candle, showing that buyers have overwhelmed sellers in a single session. A bearish engulfing forms at the end of an uptrend — a large red candle completely covers the body of the previous green candle, showing that sellers have taken full control.

The key is size. The engulfing candle must be clearly larger than the candle it covers. A marginal overlap is not an engulfing pattern. You want a candle that dominates the previous one — that is what signals genuine momentum reversal.

The three line strike is a continuation pattern — it tells you the existing trend is about to resume after a brief counter-move. In a downtrend, you will see three small green candles (the pullback) followed by one large bearish engulfing candle that swallows all three. In an uptrend, you will see three small red candles followed by one large bullish engulfing candle.

The logic is straightforward: the market pulled back against the trend briefly, attracted enough counter-trend traders to fuel a small move, and then the dominant side came back in with force and reclaimed everything in a single candle. That reclamation is the three line strike.

Multiple candle rejections occur when several consecutive candles reach a key level but are repeatedly pushed back — each one forming a long wick in the direction of the level. The wicks get longer and longer as the level holds, and the candle bodies fail to close beyond it.

This pattern tells you that the level is extremely strong. Price has tried to break through multiple times and failed every single time. The accumulation of failed attempts increases the probability that when price finally turns away, it will move decisively in the opposite direction.

The morning star and evening star are three-candle reversal patterns and among the most reliable signals in price action when they form at key levels.

The morning star signals the end of a downtrend and the start of a reversal upward. It consists of a large red candle, followed by a small-bodied candle or doji (indecision), followed by a large green candle that closes at least halfway up the body of the first red candle. The small middle candle is the pivot — the moment where sellers lost control and buyers began stepping in.

The evening star is the mirror image. A large green candle, a small-bodied candle or doji at the top, then a large red candle that closes at least halfway down the body of the first green candle. It signals the end of an uptrend.

The Marubozu is the simplest and most extreme candlestick. It is a long candle body with no upper or lower wick at all. Price opened at one extreme and closed at the other — buyers or sellers were in complete control for the entire session with no meaningful opposition.

A green Marubozu means the candle opened at its low and closed at its high. Buyers dominated from open to close without any selling pressure capable of pulling price back. A red Marubozu opened at its high and closed at its low. Sellers were in total control throughout.

When a Marubozu appears after a period of consolidation or at a key level, it is a powerful signal that the move has real momentum behind it and is likely to continue. The absence of wicks is the absence of doubt.