Japanese Candlesticks

Japanese Candlesticks Analysis is a form of technical analysis developed in the 1700s that lets trader visually see if bulls or bears are in control of a market.


  1. Solid filled in section (bodies) - defined by the open and close price for the time period in qustion
  2. Vertical black lines (shadows) - mark the intraperiod high and low
  • The body is colored red if the price closed lower than the open.  green if it closed higher
  • Lets us visually see if bulls or bears are in control of market
  • There are hundreds of candlestick patters

  • Popular Candlestick Patterns

    • Engulfing Pattern:
      • When the body of a candle engulfs (higher top and lower low) the entire boy of  the previous candle
      • Suggests that the market should move in the same direction for the next 3-5 periods
      • Bullish Engulfing if price is up on the period
      • Bearish Engulfing is price is down on the period
    • Dark Cloud Cover:

    • Failed Bullish/Bearish Engulfing
    • Dark Cloud cover/Piercing Pattern
    • Morning Star/Evening star
    • Three Inside Up/Three Inside Down
    • Three White Soldiers/Three Black Crows
    • Rising/Falling Three Methods
    • Bullish/Bearish Engulfing Shadow

    Japanese Candlesticks Combined With Elliot Waves

    • Focus on bullish candlestick patterms in an up-trending market
    • Focus on bearish candlestick patterns in a bearish market

    History of Japanese Candlestick Analysis

    • Has been around for hundreds of years
    • First used by Japanese rice traders in the 1700s
    • Munehisa Homma is credited for creating them