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Basic Japanese Candlesticks –Pattern

Basic Japanese Candlesticks –Pattern


Basic Japanese Candlesticks – How they can help us with the perfect trading set-up

In this second part of understanding  basic Japanese candlesticks we are going to check out  patterns and their significance in trading. Here is a list of strange names for different candlestick patterns which all give us some important information about the direction where a price is headed.


Marubozu sounds like a crazy name for basic Japanese candlesticks. What it means is that there are no shadows from the bodies. This means that the price opened at one spot and rose or fell all the way to the closing price.Basic Japanese candlesticks

The price movement depends on whether you are looking at a hollow or full candlestick or a red and blue candlestick.

A Blue Marubozu shows us that the entry price was the lower part of the body and the closing price is the higher or the top of the candlestick. This is a very Bullish candlestick

A Red Marubozu shows us that the entry price was the higher part of the basic Japanese candlestick body and the closing price is the lower or the bottom of the candlestick.
This is a very Bearish candlestick

The Marubozu candlestick shows that either the buyers or the sellers are having full control of the situation.

Learn how to trade Japanese CandlesticjsSpinning Tops

Basic Japanese candlesticks have a variety of names depending on their shape and size. Spinning tops have long upper shadows and long lower shadows. Their bodies are very small. Their appearance is very much like a Spinning Top. What these basic Japanese candlesticks mean is that there is an equal fight between buyers and sellers and as a result there is indecision in determining the price.SPINNING-TOPS

The real body of the candlestick, whether it is red or blue (negative or positive) is very short. This shows that the opening and closing price are very close to each other. Therefore there has been little change in price. The fact that the shadows are so long, indicates that the Bulls and the Bears have been fighting it out, however none of them managed to have a winning hand.

Although the opening and closing price has been very close, the price had moved up and down significantly during the trading session. However no one was a winner.

If a spinning top candlestick forms during a downtrend, this usually means that the Bears have got no more energy left to push the price down and a reversal could be seen soon.

Alternatively, if the spinning top candlesticks forms during an uptrend, this signifies that the Bulls are out of fuel and they cannot sustain the price rise. This could be a reversal to a downtrend very soon.


In Basic Japanese candlesticks Doji are candlesticks which have an identical open and close price – or have such a similar opening and closing price that their bodies are extremely short. A Doji’s body is so small that it appears to be a thin line.

Similar to Spinning Tops, the Doji are showing that there is a huge price war between buyers and sellers, but none of them have moved from their stand point, in the price tug of war. The price may move above and below the opening price, but in the end closes in the same position or very close to it.

None of the traders will have managed to take control of the price and therefore the price remains at a standstill.

Below are examples of the four tyes of Doji basic Japanese candlesticks. Although you see that there is a variation from the upper and lower shadows, sometimes there is absolutely no movement. The result shows that negligible price movement.Basic Japanese candlesticks

There are four types of Doji

Special attention should be given to the preceding candlestick when a Doji is formed.

Doji could be a form of exhaustion! If the previous candlestick to a Doji is a series of Marubozus and long bodied candlesticks of the same colour, then it could mean that the buyers or sellers which were previously predominant, are now getting tired of holding their ground. Hence, the opposition is now ready to take control.

Doji and a Long Red Candlestick

As such if a Doji forms after a pattern of red candlesticks which would have been pushing the price down, the buyers are now waiting in anticipation for a price break out in their favour. It means that the sellers are very exhausted and are now weak. If the price is to continue falling, it would need a strong influx of sellers, but at this point, the sellers are maxed out! Buyers are making a bee-line to get into a great price and make some money by driving the price upwards.

LONG-RED-CANDLE -basic Japanese Candlesticks - learn how to trade binary options

Doji and Long Blue Candlesticks

New sellers are breathlessly trying to keep their foothold, but their strength is fading fast. After a series of conquered candlesticks, which have pushed the price upwards, we see a tie in the form of a DOJI. Therefore a reversal is almost a guaranteed fruit flan! The buyers are now excited about the possibility of selling at a high enough price and making some money as the price falls.

Basic Japanese candlesticks - learn how to trade binary optionsHanging Man and Hammer

In basic Japanese candlesticks the Hanging Man and Hammer look exactly the same but have different colours and therefore different meanings. A lot depends on the previous price movement. In both cases the Hanging Man and the Hammer have very long bottom shadows but almost no top shadow.

The Hammer forms when a there is a downtrend. It is called the Hammer because it is hammering out the bottom floor of the price support level.

In a market where there has been a significant downtrend, and the price has been falling, a basic Japanese candlestick which forms in the shape of a hammer signals that the bottom is near.

It is very likely that after the formation of a hammer, the price will start rising again. The very long shadow beneath the short and stout body tells us that the sellers have been fighting to keep the price down, but have been loosing ground. They buyers are the net winners, but they have only gained very little in terms of price push up.

Although a Hammer is a very strong indication for a reversal, this does not give a trader carte blanche to enter a buying trade. More confirmation may be required for the perfect trade set-up.

How does a Trader confirm a Reversal after a Hammer Candlestick formation?

One typical confirmation would be to see another blue candlestick or a succession of blue candlesticks forming, and closing higher than the previous closing price.Basic Japanese candlesticks - learn how to trade binary

How to Recognise a Hammer

• The real body is about one third the size of the long shadow below it
• The upper shadow is almost non-existent, or very slight
• The upper body is always at the upper end of the trading time frame or trading range.
• Whether the colour is blue or red, it is insignificant.

The hanging man is a reversal from an uptrend. It is a bearish reversal pattern. This can see fall as far as the resistance level or even break out from that level. What this basic Japanese candlestick shows you is that the sellers are becoming much stronger than the buyers.

The lower long shadow indicates that the bears have pushed down the price much lower during that particular trading session. The buyers or the bulls fought back but did not have enough strength to get much past the opening price. They were still net winners but not strong winners.

This is an automatic alarm system which tells us that the buyers are becoming very weak and that they may eventually be loosing breath. This is where the sellers will be flexing their heels to take advantage of the situation.

How to Recognise a Hanging Man

• The real body is about one third the size of the long shadow below it
• The upper shadow is almost non-existent, or very slight
• The upper body is always at the upper end of the trading time frame or trading range.
• Whether the colour is blue or red, it is insignificant. However a red body is more bearish than a blue body.

download copy buffettShooting Star and the Inverted Hammer

The shooting star and the inverted hammer basic Japanese candlesticks also suggest the possibility of a reversal pretty much like the Hammer and the Hanging Man. These candlesticks however work in different situations.Inverted Hammer and Shooting Star - basic Japanese candlesticks - learn how to trade binaryoptions

The inverted hammer happens when a price that has been dropping shows up a possibility of a reversal. The long shadow on its upper body indicates that Bulls are fighting hard to push the price higher.

Although the closing price is not far from the starting price, the fact that trading was pushed so far high, is a strong signal of a reversal. You must of course not assume that this will produce a definite reversal in a trend. Ideally you get a price confirmation from a series of blue candlesticks which close at a price higher than the inverted hammer.

The shooting star is a possibility of reversal on an uptrend. It is a bearish reversal and therefore will take the price down after a steady incline. The candlestick itself looks quite identical to the inverted hammer, but it happens during an uptrend. The shape tells us that the price has opened at price where it was driven quite high by the buyers, but eventually pulled back below the original entry price.

It is a situation which shows that although the buyers have attempted to keep the price bolstered, they did not manage, and although the sellers did not make a significant impact on the price, they were still the net winners. This usually indicates a reversal in an uptrend. As with the inverted hammer, a trader needs to ensure that the trend set by the shooting star candlestick is confirmed with future red candlesticks which close at a price lower than the shooting star basic Japanese candlestick itself.

Basic Japanese Candlesticks Conclusion

As has been shown, the shape and size of basic Japanese candlesticks play a very important role in determining where the price is going to be headed.  Used on their own candlesticks may not be telling us much about themselves, but when they are used in conjunction with other candlesticks, they tell us a story of a perfect trade set-up.

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