A Guide to Japanese Candlesticks

Candlestick is one of the most common charting techniques available today. It originated from the technical charting style used by the Japanese for over 100 years during the 1700s. The technique involves short-term prospects, with outlooks lasting around eight to 10 trading sessions.

Candlestick help determine market turning points. By observing the patterns of candle movements, we can figure out whether a stock is a “buy” or a “sell”

Bullish Patterns, Buy Signals

Bullish Engulfing

It involves a black candle followed by a bigger hollow candle that fully engulfs the former. This pattern is a clear indication of a buy signal. It indicates a stronger signal when the hollow candle engulfs two or more black candlesticks.


The hammer is composed of a short body, long lower shadow, and a short upper shadow (or no shadow at all). This pattern points out a falling price reversing its course. However, it is recommended that we still wait for further movements, such as a hollow candle closing above the open of the hammer.

Morning Doji Star

It appears when there is a slight market movement with three candles: a black candle, a doji candle, and a hollow candle, closing beyond the middle of the first candle.

Bearish Patterns, Sell Signals

Bearish Engulfing

Bearish Engulfing is the exact counterpart of Bullish Engulfing.

Dark Cloud Cover

This pattern occurs before the price dips, in which a long hollow candle is followed by a black candlestick, opening at a new high and closes slightly lower from the middle of the hollow one. In forex trading, this pattern rarely appears. The black candlestick typically opens at the close level of the hollow candle. To confirm the Dark Cloud Cover pattern, a smaller red candle needs to appear.

Shooting Star

Shooting Star involves a black candlestick with a small body, long upper shadow, and a short lower shadow. Once it appears at the end of an uptrend, it is a clear indication of a “sell” signal.

The Candlestick trading technique has been proven efficient and effective for a long time now. Spot these signals now and become a successful trader with Trade12!