Japanese candles are an essential tool in technical analysis for visualizing price movements in financial markets. Each candle represents a period (minute, hour, day, etc.) and consists of two main elements: the body and the wicks (or shadows).
1. The body:
- Green (or white): Closing price > opening price (rise).
- Red (or black): Closing price < opening price (decline).
The longer the body, the stronger the movement.
2. The wicks:
They indicate the extreme prices (high and low) of the period.
- A long upper wick signals a rejection of the highs.
- A long lower wick indicates a rejection of the lows.
Key signals:
- Doji (very small body): Indecision, possible reversal.
- Hammer (long lower wick, small body): Bullish signal after a decline.
- Engulfing candle: A candle that "swallows" the previous one, indicating a reversal.
By combining these patterns with other indicators (support/resistance, volumes), traders anticipate trends. Practice on charts to master their interpretation!
