Japanese candle charts are the most visual and effective way to represent price fluctuations, accurately reflecting the Japanese spirit of “distilling” information. Even as prices fluctuate continuously, candle charts help you see market psychological movements through just a few simple images.
☘️ Why should we use Japanese candle charts?
Newcomers often choose line charts for simplicity, but sooner or later will switch to Japanese candles for the following reasons:
• Quickly see crowd psychology.
• Clearly identify important psychological thresholds.
• Quickly predict price movements through candle patterns.
• Works well with other systems, especially Ichimoku.
• Convey a lot of information in a single candle.
☘️ Start with Japanese candle charts.
Where to see?
On TradingView or any platform with the “Candles” option.
How does it look?
Start from a larger time frame (Weekly/Daily), then move down to smaller frames (12h - 1h).
Combined with what?
• Can be with the MA line: Candle shadow or touching the moving average.
• Can combine with Bollinger Bands: Candle shadow touches the edge and then bounces back.
• Combined with RSI: Used to determine the optimal entry point.
• But the most perfect combination is probably Ichimoku: The strongest combination, with many advanced topics.
☘️ The structure and nature of a Japanese candle.
Understanding candles is not just looking at shapes but understanding the underlying psychology.
Do not understand Japanese candle charts as pure geometry. You must understand what kind of "psychological story" it is depicting about the crowd.
A Japanese candle itself contains a price path for a specific time frame. But itself, it is just a "moment" of the market.
There is a probability when you try to describe the exact mood of the crowd within a candle. Because we are using "form" to infer "content".
A candle represents a trading session with:
• Open: Opening price.
• High: Highest price.
• Low: Lowest price.
• Close: Closing price.
• Candle body: The range of buying – selling dispute.
• Candle shadows: Reflect excessive psychology – fear or greed.
☘️ Practical applications in trading.
Start by observing single candles such as: Pinbar, Doji, Hammer, Spinning Top…
Then enhance by analyzing candle clusters/models such as: Inside Bar, Engulfing, Three White Soldiers…
☘️ When observing single candles, note:
1. Look at the previous trend to determine context.
2. Observe volume – should choose an exchange with large volume.
3. Wait for the candle to complete before analyzing.
☘️ Apply observation and trading plan with Pin Bar candles.
Description: Short body, long shadow leaning towards one side.
• Long upper shadow → Increased chance of reversal down.
• Long lower shadow → Increased chance of reversal.
Observe 3 factors with Pinbar:
• After a strong decline → Can recover.
• Volume remains the same but the price does not drop deeply → Strong buying force.
• Close lower than Open → Clear reversal momentum.
After observing, to make a profit safely, we need to make a plan.
Plan trading with Pinbar.
Advice: Find entry points by applying Fibonacci.
Based on the candle pattern, determine "buy up" or "sell down."
How to ensure the entry point is always close to the lowest price when buying up or the highest price when selling down. The purpose of this is to prepare for the case when we are wrong, so the stop-loss point is the most optimal.
If the price movement does not reach the buy point (or short sell), wait for another opportunity. Or use "stop buy" or "stop sell" when you have experience.
Plan 1: Buy near the bottom.
• Zoom out the candle to see the internal fluctuations.
• Draw Fibonacci retracement to find entry points near the stop-loss level.
Plan 2: “Stop buy/sell” – Buy if broken, sell if punctured.
• Identify the highest/lowest price of the candle.
• Place a buy order if broken, or sell if punctured.
• Cut loss when the price returns to the range of the candle.
After successfully entering the order, "Zoom out" Pinbar to see the price path.
In this case, the reversal Pinbar gives us a high probability of winning. You see, observing candles helps you identify trading trends and find relatively good entry points with Fibonacci.
And we always have a stop-loss point because once it's a probability, there are always risks of unexpected fluctuations.
🍀 Conclusion
Understanding the nature of Japanese candle charts helps you actively apply them to all models. Practice step by step, from single candles to complex models, from observation to planned orders.
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