Japanese Candlesticks for Traders: From Theory to Practice

If you are just starting to trade crypto or stocks, you have probably heard about Japanese candlesticks. They are not just beautiful charts — they are the language that markets have been speaking for over 300 years.

Where did these candles come from?

It all started in the 18th-19th centuries with the Japanese rice trader Munehisa Homma. The guy noticed that prices move cyclically because people behave the same way in similar situations. Demand rises — price soars. Panic — price falls. Simple and logical.

Homa developed a system of four indicators that helped predict demand. Later, this evolved into modern candlestick patterns that are equally well used by professionals and beginners.

What is a candle in general?

A candle is simply a visualization of price movement over a certain period of time (minute, hour, day, month). Each candle shows:

• Opening — at what price the period started
• Closing — at what price it ended
• Maximum — upper shadow (the highest price)
• Minimum — lower shadow (the lowest price)

Green/white candle = buyers won ( price rose ). Red/black candle = sellers won ( price fell ).

The body of the candle ( thick part ) shows the distance between the opening and closing. The shadows show how deeply the market has fallen or risen.

Candles vs Bars: What's the Difference?

Bars are the Western equivalent, just vertical lines with sticks. The information is the same, but candles look clearer and are read faster. That's why candles are more popular.

Key patterns to know

Mолот (Hammer)

Short body + long lower shadow. Appears at the bottom of a falling trend and says: “Hey, buyers have woken up!” A signal for a reversal upwards. At the top of the trend, this same candle is called hanged man and indicates a reversal downwards.

Doge

The body is almost absent, the shadows are long. This is a fish on the shore — the market doesn't know what to do. It often appears before a sharp movement. Varieties: Gravestone (upper shadow), Dragonfly (lower shadow).

Engulfing (

Two candles in a row. The second candle completely “swallows” the first.

• Bullish engulfing: red + large green = reversal upwards
• Bearish engulfing: green + large red = reversal down

) Harami Long candle + small candle inside ### like a matryoshka(. Signal that the momentum is exhausted and the trend will soon reverse.

) Evening Star ### Three candles:

1. Long green (rise)
2. Small body (uncertainty)
3. Long red (fall)

Appears at the peak and means: downward reversal is ready.

( Morning Star ) Reverse combination at the bottom. Signal for the rise trend.

Advisory on Timeframes

Analyze on larger timeframes ###4H, 1D(. On 5-minute charts, there is a lot of noise and false signals. A short timeframe may show a reversal signal, but the hourly chart sees it as a regular wave in a larger rising flag. Experienced traders look at the daily chart and understand that this is a trap.

The main rule

Candles work because they show the market psychology. A green candle with long shadows = bulls tried but failed, bears took control. This is a war between buyers and sellers in real time.

Combine candlestick patterns with support/resistance and volume — and you have a serious tool for analysis.