Japanese candles are used to display price movements in financial markets (such as currencies, stocks, and cryptocurrencies). Each candle represents a specific time period (minute, hour, day, etc.).
- Candle components:
- Body: the filled part of the candle, representing the difference between the opening and closing price.
- If the body is green/white: the price closed higher than the opening (uptrend).
- If the body is red/black: the price closed lower than the opening (downtrend).
- Shadows (Wicks or Shadows): the lines that appear above and below the body.
- Upper shadow: the highest price reached.
- Lower shadow: the lowest price reached.
- What the image indicates:
- A downward trend is shown on the left with red candles (price is decreasing).
- We then observe the emergence of a bullish reversal pattern (Highlighted Candlestick Pattern), often a Bullish Engulfing pattern or something similar.
- After the pattern, the trend begins to reverse upwards as indicated by the blue arrow.
- Candle pattern inside the magnified circle:
- This pattern mostly represents:
- A bullish candle engulfs the previous bearish candle, which is a strong signal for a trend reversal upwards.
- These candles are used by traders as an entry point after confirming the reversal.
- Practical benefit:
- Candles help you identify:
- Entry and buying areas.
- Potential reversal areas.
- Strength of the current trend.
It is always important to use candles with other indicators to confirm signals.
✍️ Tips:
1. Do not rely on just one candle — ensure there is confirmation from the next candle.
2. Watch the trading volume and the overall position of the pattern on the chart.
3. Practice reading candles using a demo account before real trading.
