Japanese Candlesticks in Crypto: The Guide You Need to Avoid Losing Money

We all talk about candlesticks, but how many really understand them? Here’s the truth: they are not magic, they are just a reflection of what happened in the market. Nothing more.

The basic structure you should memorize

Each candle shows you 4 data points: open, high, low, and close. The body (the thick part) is the difference between open and close. The wicks (the sticks) mark the extremes of the movement.

• Green candle = the price went up (buyers won)
• Red candle = the price dropped (sellers won)

That's all. It's not complicated.

The patterns that really work (sometimes)

Bullish signals:

• Hammer: Small body with a long wick at the bottom. Appears after strong declines, suggests that buyers are coming back. It's not a guarantee, but it's a warning.
• Three white soldiers: Three green candles in a row. When you see this, the market is at least in a good mood.
• Bullish Harami: A large red candle followed by a small green one inside. Sellers lost momentum.

Bearish Signals:

• Hanged Man: Similar to the hammer but after rises. The shadows say they tried to lower the price.
• Shooting Star: Small body with a long shadow above on the top of trends. Sudden selling pressure.
• Three black crows: Three reds in a row. Sellers are winning.

What nobody tells you: Patterns alone are worth nothing. They are like reading a letter in a book. You need the complete context.

The Doji: confusion made candle

It is a candle where open = close ( or very close ). It means that nobody knows what will happen. Indecisive market. There are types:

• Dragonfly: Long mech below, body above. Can be a bounce or a trap.
• Gravestone: The opposite, long shadow above. Bassist in most contexts.
• Long-legged: Long wicks up and down. Total confusion.

What about price gaps in crypto?

Don't get upset. In crypto, the market runs 24/7, there are no closures. Traditional gaps do not exist here.

How to use this WITHOUT losing money

1. First learn, then operate. Really.
2. Combine indicators: RSI, MACD, moving averages. One candle + extreme RSI = stronger signal.
3. Look at multiple time frames: If you see the pattern on 1H and 4H, it is more reliable. If it only appears on 5 minutes, it is probably noise.
4. Stop-loss is your best friend: Define where you lose before you enter. Minimum risk/reward ratio 1:2.
5. Volume matters: A green candle without volume is a fairy tale.

The inconvenient truth

Candle patterns have an accuracy of… well, it depends. Sometimes they hit, sometimes they don't. The market is chaotic. That's why you need:

• Clear trading plan
• Strict capital management
• Multiple analysis tools
• Patience (a lot)

Japanese candles are a tool. They are not the tool. Use them well.