Japanese Candles: Everything You Need to Know to Read the Market

If you trade crypto, forex, or stocks, Japanese candles are your best buddy. These charts originated in Japan 400 years ago (rice traders invented them) and they remain the most used tool to understand what is happening with prices in real time.

The Structure Is Simple

Each candle shows you 4 key data points:

• Opening: price where the period begins
• Close: price where it ends
• Maximum: the highest peak reached
• Minimum: the lowest floor touched

Two Basic Types

Green Bullish Candle: The close is above the open → buyers won Red Bearish Candle: The closing is below the opening → the sellers won

Patterns You Must Recognize

Hammer: Small body + long lower shadow. Appears when an asset falls and suddenly rebounds → signal that it may start to rise.

Hanged Man: Similar to the hammer but appears after rises → be careful, it could turn down.

Bullish Engulfing: Two candles; the second completely engulfs the first. It signifies a shift of power to buyers.

Bearish Engulfing: A large red candle engulfs a small green one. Sellers took control.

Why It Matters

The candles tell you:

• Impulse: How strong is the movement? You see it in the size of the body.
• Volatility: Long shadows = a lot of uncertainty
• Turning Points: Popular patterns indicate where the trend may reverse.

The basics: learn to read these patterns and you will see opportunities that other traders miss.