Japanese Candlesticks - All you need to know | FTMO - YouTube

All you need to know about Japanese candlesticks.

Hello traders, in this video we will learn everything about Japanese candlesticks as

they are the building blocks for a lot of technical analysis.

As you already know from the previous video, technical analysis study historical patterns

and behaviours of a given underlying asset.

Traders that are using technical analysis look at these historical patterns and behaviours

and base their decisions upon them.

But, if you open a new chart in your trading platform, there are no lines or indicators,

the only thing you will see are Japanese candlesticks.

Japanese Candlesticks belong to the most popular methods of technical analysis.

Searching for specific candlestick patterns was first used in the 16th century in Japan

at the rice exchange.

These were the very beginnings of technical trading.

As you can see from the image, this is the anatomy of the candlestick.

If the candlestick closes above the price where it opened, we call it a bullish candlestick.

If it closes below the price where it opened, it is called a bearish candlestick.

The green or red-colored area is called the body, and lines above and below bodies are called wicks.

Wicks represent the highest and lowest point where the market traded.

Japanese candlesticks are universal, you can use them on any timeframe you want, it doesn

t matter if you are using them on a 1/minute or 1-month chart.

So, what are the Benefits of using Candlestick Patterns while trading?

Among the greatest advantages of candlestick patterns are their simplicity and informational value.

After a brief familiarization, the trader can quickly analyze market developments and

determine what is happening in the market.

Are buyers stronger than sellers, or vice versa?

Can we expect the trend to cease, or on the contrary, could it gain in the strength again?

In fact, candlestick patterns can reveal the psychology of traders.

Various candlestick shapes can suggest who is stronger whether it is buyers or sellers.

Big green or red candlesticks with a very small wick can often times signal clean dominance

of buyers or sellers.

On the other hand, candlesticks that have a long wick show us that buyers or sellers

tried to push prices, but were not able to push it to their desired direction as they

got overcome by the opposite side.

There are literally hundreds, maybe thousands of candlestick patterns in existence, and

honestly you don t need to learn all of them.

The most important thing about using candlestick patterns is to put them into the context of

what the market is doing and where it is heading using levels of support and resistance or

other technical and fundamental indicators.

Also, looking at candlestick patterns at higher time frames such as H4, daily or weekly will

play much more significance compared to 1 minute or 5 minute timeframe.

This is simply because those higher time frames attract much more market participants.

In this video, we are going to show you the most important ones that you should know in your trading.

Lets start with the easiest one.

Long Day Bullish and Bearish Candlestick...Long Day Candlestick consists of just one candle

with a long body and short wick.

This candlestick usually shows strength or weakness and it can be used as a breakout

candle at the beginning of a trend.

\Most traders don t use Long Day Candlestick as entry or exit signals, but more as a confluence with their ideas.

The short day candlestick is an easy to spot pattern.

It consists of one candlestick.

Short day candlestick is defined by its length.

How short the candle must be?

This is not 100% defined, so you should always use your discretion and review past trading

periods to have a comparison.

Short day candlestick is not usually used as an entry or exit signal.

Short day candlestick pattern signals the fact that price stayed in the range during

a trading period, and we can expect an expansion soon.

They can be found in larger patterns providing relevance.

You should always wait to spot it in a larger context and think about what buyers or sellers

are trying to achieve in current market conditions.

A very simple and powerful candlestick pattern is called Marubozu.

Spotting Marubozu candlestick is one of the easiest things you can do.

It signals with a real long body without an upper or lower wick.

Bullish Marubozu candlestick shows us one pretty obvious thing, the buyers stepping in the market.

Opposite of that is a bearish marubozu that shows sellers stepping in.

There are two situations where you can make a trading decision with the Marubozu candlestick:

If you spot bullish Marubozu in an uptrend or bearish one in a downtrend, trend continuation is likely.

If a bullish Marubozu occurs in the downtrend or bearish in an uptrend, reversal is likely to happen.

The smart thing to do after you see a Marubozu candle is to wait for further confirmation

in terms of other candlestick patterns, support and resistance or indicators.

In the bullish case, there is only one small difference from a bullish Marubozu and that is a lower wick.

This candlestick suggests that we had some sellers trying to step in after the candle

opened but buyers were much stronger and closed higher.

If Bullish Closing Marubozu appears in an uptrend, it gives us a signal of continuation.

Another great location of Bullish Closing Marubozu is a key support area where we can

expect the price to rise higher.

Bearish Closing Marubozu is a bearish candlestick pattern that is signaled with a small upper

wick and a big bearish body.

There are 2 locations where you should be watching for Bearish Closing Marubozu....In

a downtrend, this signals that trend is likely to continue and at a key resistance level

where we can expect a new move down to begin.

Last Marubozu candlestick we will cover is the Opening type Marubozu.

Bullish Opening Marubozu has a small upside wick, it gives us bullish signals in the market.

It shows the fact that buyers took control straight from the open and even though they

met some sellers at the top, the bullish bias prevails.

Bearish Opening Marubozu signals strong conviction from sellers in the market.

Although there is a small lower wick, you can notice a price rally right after the candle opens.

Bearish Opening Marubozu in a downtrend signals continuation, in an uptrend it can signal

a possible trend reversal.

To sum Marubozu Candles up, they are a big either bullish or bearish candles overall.

They give a clean signal that buyers or sellers are stepping in.

The Spinning Top candlestick pattern is a neutral candlestick.

By neutral, we mean the fact that it doesn't matter that much, if the candlestick closes

bullish or bearish, the important factor is the candlestick closing location.

The Spinning Top candlestick pattern has a single candle with a small body and a long

wick...It signals indecision in the market, the general rule of thumb is that if we see

the Spinning Top Candlestick at resistance level, it's a short reversal signal.

Vice versa, spotting the spinning top candlestick at support area signals long reversal.

Similar to the spinning top candlestick, Doji is an indecision candlestick pattern.

You can recognize a Doji candle by a very small body and short wicks on both sides.

A Doji is often found at the tops and bottoms of trends, so it is considered as a sign of

possible reversal of the movement.

That being said, more complex Doji patterns can be also used in trend continuation.

Although Doji is an indecision candlestick pattern, there are three different variations

which are going to help us make more educated trading decisions, there are Long-legged Doji,

Gravestone Doji and Dragonfly Doji.

A long-legged Doji is very similar to the spinning top candlestick...Compared to regular

Doji, it is a much more dramatic candle with long upper and lower wicks.

Long-legged Doji is the same as the Spinning top candlestick, it signals indecision in

the market and a possible reversal in play.

Gravestone Doji is a bearish candlestick pattern.

It shows us a fact that buyers tried to step in, but sellers strongly overcame them and

pushed the price back to open.

In an uptrend, Gravestone Doji gives us an indication that the market is ready to turn

around..In a downtrend, we can use a Gravestone Doji as our continuation signal.

Dragonfly Doji is a bullish candlestick pattern.

It shows us a fact that sellers tried to step in, but buyers strongly overcame them and

pushed the price back to open.

In a downtrend, Dragonfly Doji gives us an indication that the market is ready to turn

around...In an uptrend, we can use Dragonfly Doji as our continuation signal

The engulfing is the two candlestick pattern.

Bullish engulfing forms with a small red candle on the left and big green candle on the right.

The big green candle on the right has to completely overlap the candle on the left.

The rule is Bullish engulfing candle has to trade below the low of the previous candle

and has to close above the highest point.

Bearish Engulfing forms with a small green candle on the left and big red candle on the right.

The big red candle on the right has to completely overlap the candle on the left.

The rule is Bearish engulfing candle has to trade above the high of the previous candle

and has to close below the lowest point.

The last candlestick pattern is the inside bar candlestick pattern.

If you compare it to the engulfing pattern, it is also two candlestick patterns, but the

candlestick on the right side is the actual opposite of engulfing.

It is a small candle that is completely inside the previous bar.

Inside bar pattern by itself is a neutral pattern, it means that it does not give us

the signal right away.

But highs and lows of the inside bar play a significant role, once they are broken,

we can trade in continuation to the upside or downside.

What is also worth mentioning is that when price tries to break high or low of the inside

bar and fails, we can enter the position, targeting the opposite side of the inside bar.

Alright traders, I hope you have enjoyed this video,

and If you have any questions, or

or you are struggling with something

or you are interested in something,

just let your comment down below.

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And I wish you steady study, and see you next time.