What is the importance of Japanese candlesticks in trading?

Here are some ways you can use Japanese candlesticks in your trading strategy:

Identifying trend reversals:

Japanese candlestick patterns, such as doji, hammer, or engulfing patterns, can indicate potential trend reversals. A series of bullish candles followed by a bearish reversal pattern may indicate a shift in market sentiment and a potential trend reversal.

Identifying support and resistance levels:

The highs and lows of candlestick wicks can act as support and resistance levels. By identifying areas where the price is trying to bounce or breakout, traders can make more accurate predictions about future price movements.

Determine entry and exit points:

Japanese candlesticks allow you to know what the best entry and exit points are. By analyzing patterns and using technical indicators, you can develop a good understanding of when the price direction is likely to change.

Determine market sentiment:

The size and color of candle bodies can reveal the dominance of buyers or sellers in the market. Large bullish candles indicate strong buying pressure, while large bearish candles indicate intense selling activity.

Confirming Chart Patterns:

Candlestick patterns can validate other technical analysis tools, such as other chart patterns like head and shoulders or double tops. If these patterns coincide with specific candlestick formations, they can provide stronger confirmation of potential trading signals.