Trading with Japanese candles

Trading with Japanese candles? Japanese candles are widely used in the financial markets to observe asset prices. This is not a coincidence,  Japanese candles provide a lot of information in just one moment . In addition, when certain Japanese candles appear together, they form patterns that can be recognized.

What are  Japanese candles?

A  Japanese candle shows the opening, closing, minimum and maximum price of an asset during a session . When looking at Japanese candle charts, we can configure the chart so that the session is 15 minutes, 1 hour, 4 hours, 1 day, 1 week or 1 month. In the following image, we see two Japanese candles, one low and one high. The rectangle that defines the opening and closing prices is called the body. The lines that come out of the body and indicate the minimum and maximum are sometimes called straws.

 The  Japanese candles green body have a price higher closing the opening price, ie the price of  assets rose  . In contrast, Japanese red-body candles   have a closing price lower than the opening price, meaning the asset price has  dropped  .

Once the concept of Japanese candles is understood  , it is easy to know why they are used: they  show all the information of a session in a summarized and visually understandable way:

Japanese candle patterns

The  standards of the Japanese candles are formed when certain candles come together in a certain way . Japanese candle patterns usually have a meaning, as a trend is more likely to form after forming a pattern. Below are  two types of Japanese candlestick patterns , those of bullish continuation (within an uptrend) and those of uptrend reversal. The patterns of Japanese low candlesticks are the same as those of high trends, if we invert them.

Candle patterns that indicate the continuation of a bullish movement

Mat Hold

In Mat Hold the first and last candles have a large body and are tall, while the candles between them are usually three Japanese candles, have a small body

Gaps

The bullish continuation gaps, the main reluctance is that two Japanese bullish candles are separated by a gap. The third candle must not "enter" the body of the standard's first Japanese candle.

Separate climb line

When the first large-bodied Japanese candle casts doubt on the upward trend, a second large-bodied bullish candle appears above without forming a hole.

Candle patterns that indicate the continuation of a downward movement

The following Japanese candlestick patterns indicate a change in the trend from a downtrend to an uptrend or an interval, so they appear after a downtrend. Ordered from left to right: Hammer, Bullish Escape, Doji and Bullish Envelope

Japanese Candles and Trading

In trading,  the study of Japanese candles is very important because trading in the short and very short term , the use of Japanese candles allows us to identify the price behavior in the recent past. With this, we can identify the trend of the asset and observe possible patterns that indicate continuation or change of the trend.