How to read Japanese candles? The complete guide for beginners

The Japanese candles are one of the most widely used tools in technical analysis. They quickly visualize the evolution of an asset's price and identify trading opportunities.

Whether you trade synthetic clues, Forex or other markets, understanding Japanese candles is an essential skill.

In this guide, learn how to read and interpret them.

What is a Japanese candle?

A Japanese candle represents the evolution of the price over a given period.

Each candle indicates four important informations:

• the opening price;

• the closing price;

• the highest price;

• the lowest price.

This information allows us to observe the behaviour of buyers and sellers.

The different parts of a candle

A candle consists of two elements:

Body

• It represents the difference between the opening price and the closing price.

The wicks

• They show the highest price and the lowest price achieved during the period.

The wicks are often used to detect price rejections or market hesitations.

What does an upper candle mean?

A raised candle indicates that the closing price is higher than the opening price.

It shows that buyers dominated during the period observed.

A succession of bull candles may indicate an upward trend, but it is preferable to confirm this analysis with other technical elements.

What does a down candle mean?

A lower candle appears when the closing price is lower than the opening price.

It reflects a sales pressure during the period concerned.

As with bull candles, it is recommended to analyze them in their context rather than draw conclusions from a single candle.

The best known candle figures

Some configurations frequently return:

• Doji;

• Hammer;

• The Shooting Star;

• Marubozu;

• the Haussary Enclosure;

• the Enclosing downhill.

These figures are often used to identify potential changes in dynamics, but they never guarantee future market developments.

Errors of beginners

The most frequent errors are:

• make a decision on a single candle;

• ignore the general trend;

• forget support and resistance;

• neglect risk management.

Japanese candles are an analysis tool among others and gain to be used with a complete strategy.

Conclusion

Japanese candles are essential for understanding market movements.

By learning to recognize their structure and key figures, you will gradually improve your ability to analyze graphics and make more thoughtful decisions.

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Step 1: Create your Deriv account for free

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You will learn:

Reading Japanese candles

Identifying trends

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Managing your risk

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