Learn about all reversal and bullish Japanese candlestick patterns and how to analyze them to accurately predict trends.
What are Japanese candlestick patterns?
Japanese candlestick patterns are known as technical analysis tools used in global financial markets to depict current price movements, in addition to predicting future trends. They consist of different patterns and can generally be classified into three main categories: single, double, and triple patterns, with these patterns being the most widely used and recognized globally, especially as they provide the fastest possible visual understanding of price movement, along with the market sentiments behind these candles.
Types of Japanese candlestick patterns
Reversal patterns
Hammer candle / This candle appears at the end of a downtrend and indicates the possibility of a bullish reversal.
Inverted hammer candle / It resembles the hammer candle but indicates a bullish reversal.
Bullish engulfing pattern: It consists of a bullish candle that completely engulfs the bearish candle, indicating a bullish reversal. Morning star pattern: 3 candles indicating a bullish reversal. Bullish harami pattern: A bearish candle followed by a small bullish candle, indicating weakness in the bearish trend with the possibility of a reversal.
Bearish patterns
Hanging man candle: It appears at the end of an uptrend and indicates the possibility of a bearish reversal. Shooting star candle: It appears at the end of an uptrend and indicates the possibility of a bearish reversal. Bearish engulfing pattern: It is a candle that completely engulfs the bullish candle, indicating a bearish reversal. Bearish harami pattern: A bullish candle followed by a small bearish candle, indicating weakness in the bullish trend with the possibility of a reversal. Evening star pattern: Consists of 3 candles indicating a bearish reversal.
Continuation patterns
Three white soldiers pattern: 3 consecutive bullish candles indicating the continuation of the bullish trend. Three black crows pattern: 3 consecutive bearish candles indicating the continuation of the bearish trend. Three descending methods pattern: A long bearish candle followed by 3 small bullish candles, then another bearish candle, indicating a continuation in the bearish direction. Three ascending methods pattern: A long bullish candle followed by 3 small bearish candles, then another bullish candle, indicating the continuation of the bullish trend.
The impact of Japanese candlestick patterns on the market
Identify reversal points
Confirming trend continuity
Identify support and resistance levels
Understanding market sentiment: The patterns reflect a balance of power between sellers and buyers, which supports understanding market sentiment and future expectations regarding it.
Japanese candlestick patterns are considered one of the most prominent technical analysis tools used in financial markets.
How to use Japanese candlestick patterns to predict trends
Japanese candlestick patterns help in predicting market trends through fast visible signals. Here are points that clarify how to use them:
Determine the general market direction whether it is in a downtrend or uptrend using moving averages or the ADX indicator. Use reversal patterns that indicate the possibility of a trend change, which appears during a strong trend that can reverse after the appearance of a candle. Use continuation patterns that indicate the possibility of the current trend continuing, such as the three black crows for down or the three white soldiers for up.
Shapes of Japanese candlestick patterns
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Questions
What are the strongest Japanese candlestick patterns?
The hammer candle is known to be one of the strongest Japanese candlestick patterns.
How many types of Japanese candlesticks are there?
There are many types of Japanese candlesticks that can be categorized into reversal, bearish, and continuation.
How to read Japanese candlesticks?