Forex Japanese candlestick patterns are a popular tool in technical analysis. It helps describe price action and trader sentiment during a particular trading session. To help you better understand Japanese candlesticks, Forex Trading will provide detailed information about this model. These include the meaning, how to read Japanese candlestick charts, and the most common types of Japanese candlestick patterns.
What are Forex Japanese candlestick patterns?
What are the Forex Japanese candlestick patterns? Advantages in the Forex trading market
What is the concept of Japanese candles?
Forex Japanese candlestick patterns are a charting tool that helps traders monitor price fluctuations of assets in the market. This type of chart is commonly used in the Forex field to analyze and predict price trends.
This pattern is also known by the English name Japanese Candlestick Pattern. In our country, investors often call it by names such as candlestick pattern, or Japanese candlestick chart,…
In the Forex market, using this type of chart helps investors easily track price information, including opening price, closing price, highest price, and lowest price during the trading session.
Common types of Japanese candles
In reality, traders will encounter many different types of Forex Japanese candlestick patterns. However, based on the characteristics of these models, they are divided into many types. Typical examples include Japanese candlestick reversal patterns pattern, continuation Japanese candlestick patterns, and neutral Japanese candlestick patterns.
Japanese candlestick reversal pattern
Reversal candlestick patterns often provide traders with signals about a change in the previous trend. If the pattern appears after a downtrend, it signals a possible price reversal to the upside. On the contrary, if the pattern appears after an uptrend. This shows that it signals that the price may reverse downward.
Based on candlestick reversal patterns, traders can determine when the price changes trend. From there, find the most effective entry and exit points.
The Japanese candlestick pattern continues
The continuation Japanese candlestick pattern shows that the price trend is continuing in the right direction with no signs of reversal. When noticing this pattern, investors can safely maintain their orders until a new reversal signal appears.
See more: Read candlestick charts: Basic & advanced material
Things to know about Forex Japanese candlestick patterns
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Characteristics of Japanese candlestick patterns in the Forex trading market
Japanese candlesticks include two main components: the candle body and the candle shadow. The standard Forex Japanese candlestick patterns usually have the following parts:
- Candle body: Reflects the range of price fluctuations between the opening price and closing price in a specific period of time
- Opening price: Is the starting price in a trading session
- Closing price: Is the final price, ending the trading session
- Upper candle shadow: This is the highest point of the price during the trading session
- Lower candle shadow: This is the lowest point of the price during the trading session
In addition, Japanese candles are also represented by two colors, blue and red, each color has its meaning:
- Green candle (bullish candle): The opening price is lower than the closing price, indicating an increase in price
- Red candle (bearish candle): The opening price is higher than the closing price, indicating a decrease in price
Meaning of Japanese candlestick chart
Forex Japanese candlestick patterns reflect the price behavior of buyers and sellers in the market. It helps traders identify which side is dominant and from there make a decision to enter a Buy or Sell order. Specifically:
The long green candle body shows that the buyers are dominant, and vice versa. The long red candle body shows that sellers are dominating the market. The length of the candle body represents buying and selling pressure.
The upper and lower candle shadows represent price fluctuations during the trading session.
- If a candle in Forex has a long upper shadow and a short lower shadow. It shows that the buyers pushed the price up too high, but then the sellers prevailed and pushed the price back close to the opening price.
- If a candle in Forex has a long lower shadow and a short upper shadow. This signifies that the sellers controlled the market and pushed the price down, but then the buyers took over and pushed the price back up, close to the opening price.
In the case of a short candle body without candle shadows, this shows that both sides do not dominate the market. If both the upper and lower shadows are long, it is a sign of competition between both sides of the market.
How to read Japanese candlestick charts
Candlestick patterns in Forex often reflect the psychology of the market at present. When these patterns appear, they provide signals that a strong reversal may be imminent.
For example: In the chart, we have a Hammer candlestick (small body, long lower shadow, short upper shadow) appearing. With the closing price higher than the opening price, this is a bullish candle. Investors should close the short position and open the buy position when the Hammer candlestick ends.
Multi-candle patterns can include 2 candles such as engulfing candles, double-top candles, and double bottom candles. Or a cluster of 3 candles like morning star, evening star, 3 white soldiers, 3 black crows. Based on these patterns, you can effectively choose when to enter or exit the market.
For investors who prefer short-term trading, they are often interested in single candlestick patterns. However, for investors following long-term strategies, special price models become more important.
When analyzing, investors need to look at the entire chart. This is to quickly recognize patterns such as triangles, rectangles, or bats. They can then rely on signals from these models to determine reasonable entry and exit points.
Japanese candlestick charts are popular in Forex
Some outstanding Forex Japanese candlestick patterns that traders should pay attention to.
Morning Star model
Morning Star has a special structure that is different from most other candlestick patterns. It makes it easy to identify and remember.
The Morning Star pattern usually includes three candles with the following characteristics:
- The first candle is always a bearish (red) candle, with a relatively large body. The length of the body should be as long as possible.
- The second candle can be green or red. This candle has a small body and is often in the form of a Doji or Spinning top candle.
- The required third candle is a strong bullish candle (blue), with a large body. The length of the body should be at least ½ to ¾ of the first candle.
- If there is a larger gap (GAP) between the second candle and the remaining two candles, the more effective the pattern will be.
Doji candlestick pattern
Doji differs from other candlestick patterns in that it does not have a real body. The opening and closing prices are almost the same, but the high and low can be different.
The body of the Doji candle is a horizontal line on the market of the Doji candlestick pattern. This represents a balance between buying and selling pressure, causing the opening and closing prices to be roughly equal.
The candle wick can be short or long, and depending on the length of the candle wick, Doji is divided into different forms.
The color of the Doji is not important, it can be blue or red.
See more: Exness – Trade With The World’s Leading Broker Exness
Marubozu model
According to many analyses, it is possible to rely on identification to analyze the Marubozu candlestick pattern. Traders can find favorable trading opportunities according to market trends.
But to do it successfully, traders must first accurately identify Marubozu candlestick patterns on the price chart through the following basic characteristics:
The candle body is very long, showing large price fluctuations throughout the trading session. Marubozu candles are usually longer than at least 5 previous candles.
Colors of Marubozu candles:
- The green candlestick (bullish Marubozu) shows that buyers are overwhelming the market. With the highest price coinciding with the closing price and the lowest price coinciding with the opening price.
- A red candle (bearish Marubozu) shows that sellers are controlling the market. With the opening price coinciding with the highest price and the closing price coinciding with the lowest price.
summary
Thus Forex Trading has introduced an overview of candlestick charts and Forex Japanese candlestick patterns. Hopefully, through this article, you will better understand candles and step by step approach the market effectively. Apply this knowledge into practice to maximize your profits.
FAQs:
How to combine Japanese candlestick patterns with other technical indicators?
Below are some brief tips
- Identify trends
- Signal filtering
- Confirm entry/exit points
Managing risks when using Japanese candles?
Japanese candlesticks are just a tool, use it together with other technical indicators. Such as trend lines, and trading volume,… to confirm signals and minimize risks while using Forex Japanese candlestick patterns.
Are Japanese candlesticks effective in all Forex markets?
Although Japanese candlesticks are a popular and useful technical analysis tool for many traders. But their effectiveness depends on many factors, including:
- Market type
- Time frame
- Indicators and strategies
- Trader’s skills
