It should have a short body at the top, with a lengthy wick beneath. In a downtrend, it'd be red with a short body at the bottom and a tall wick above.

The second candle is the opposite colour, but otherwise identical. So together, the two look like a pair of tweezers. Triple candlestick patterns are often seen as some of the strongest signals of an upcoming move. A morning star plays out as a market hits a point of indecision after an extended downward movement, then begins to recover.

It consists of three candlesticks:. An evening star is the opposite of a morning star, showing a bull market that hits a point of indecision and then begins to retrace. It looks the same as a morning star, but with a green candle at the beginning — after an extended uptrend — and a red one at the end. Both evening and morning stars can be formed with a doji in the middle. This indicates a stronger period of indecision, and is sometimes taken as a sign that the subsequent move will be more pronounced.

The three white soldiers pattern appears after an extended downtrend and small consolidation.

The basics of Japanese candlestick patterns on crypto charts - AAX Academy

Technical traders use it as one of the clearest signs that the bear market is over. The three black crows pattern is the opposite of the three white soldiers. It appears after an uptrend, consists of three consecutively longer red candles and is taken as a strong signal that the bull market is over. The second candle should have a short or non-existent lower wick, and the third should have close to no wick at all.

A technical trader may take the three black crows as an opportunity to open a short position to attempt to profit from the following bear run. The three inside up pattern is another trend reversal indicator, appearing after a downtrend and signalling the beginning of a potential reversal. Buyers should now have overpowered sellers, arresting the market's decline and possibly kicking off a new bull trend.

The three inside down is a reversed inside up. It consists of a long green candle, followed by a red candle that closes at least halfway down the one before. Then another red candlestick that closes below the low set by the first. When a three inside down appears after a bull market, traders who watch for patterns might see an opportunity for a profitable short position. The rising three or rising three methods is a candlestick pattern that occurs within an uptrend, and is used to identify an impending continuation.

The three sticks within a rising three all occur after a green candle with a large body. They are all typically bearish, and trade within the range set by the previous bullish candle. Here, the uptrend has paused while buyers wait to see whether sentiment is turning. In a falling three, the opposite happens. A tall red candle is followed by three smaller green ones — then another tall red candle resumes the bear run. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument.

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A Japanese candlestick chart shows you more information

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Japanese candlestick trading guide. Patrick Foot Financial Writer , Bristol. What is a Japanese candlestick? Find out more about the different types of charts in IG Academy How to read Japanese candlestick patterns To read Japanese candlestick patterns, you'll need to familiarise yourself with three elements on each candle: its colour, its body and its wick. On most charts today, green candlesticks indicate upward movement and red ones a move down. However, occasionally white up and black down is used instead On a green candle, the top of the body is the close and the bottom is the open.

On a red one, the opposite is true On both red and green sticks, the top of the wick sometimes called the shadow is the highest point that the market has hit within the period — and the bottom is the lowest. Top 18 Japanese candlestick patterns. Single candlestick patterns These are some of the simplest patterns you can find, comprising just one trading period. Spinning tops A spinning top is formed when a candlestick has a long wick both above and below a narrow body.

A green marubozu opened and closed at its lowest and highest levels respectively A red marubozu opened and closed at its highest and lowest levels respectively If we visualise the movement within a green marubzuo, there'd be no price action above or below the open and close prices:. Doji In a doji pattern, the open and close prices are exactly equal or almost exactly equal. There are four main types of doji to watch out for: Long-legged doji have a lengthy wick both above and below the body Gravestone doji have a high wick above the body and nothing underneath Dragonfly doji have a long wick beneath the body and little to no wick above it Four-price doji have no wick at all.

Hammer If a market forms a hammer after an extended move down, then technical traders believe that it might be about to mount a bullish fightback. Inverted hammer Inverted hammers look exactly the same as hammers, just upside down. Hanging man A hanging man looks identical to a hammer, the only difference being where it crops up.

The price action within a hanging man might look like this:.

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In a green shooting star, they've pulled it back to just above the open In a red shooting star, they've pulled it down below the open Both indicate that a reversal may be imminent. Engulfing In the engulfing pattern, a candlestick is immediately followed by another larger one in the opposite direction. Harami A harami is essentially a backwards engulfing pattern: a candlestick is followed by a much smaller one in the opposite direction. Homing pigeon A bullish homing pigeon, meanwhile, looks similar to a harami — except that both candlesticks are red.

Tweezers In a tweezers pattern, two identical candlesticks in opposite directions appear after a bull or bear market. Morning star A morning star plays out as a market hits a point of indecision after an extended downward movement, then begins to recover. It consists of three candlesticks: A red one with a large body, which is part of the downtrend A candle with a short body — often a spinning top — indicating that bulls are entering into the session A green stick with a tall body confirming that a reversal has begun.

Traders may take this as a sign that the recovery will turn into a lasting uptrend.

Japanese Candlesticks Decoded

Evening star An evening star is the opposite of a morning star, showing a bull market that hits a point of indecision and then begins to retrace. Three white soldiers The three white soldiers pattern appears after an extended downtrend and small consolidation. The three soldiers are: A green candle after a downward move Another green candle, with a bigger body than the first and little to no upper wick A third green candle, with a body that at least matches the second and little to no wick whatsoever.

Three black crows The three black crows pattern is the opposite of the three white soldiers. Three inside up The three inside up pattern is another trend reversal indicator, appearing after a downtrend and signalling the beginning of a potential reversal. The three candles in an inside up pattern are: A substantial red one that continues the previous downtrend A green stick with a body that closes at least halfway up the previous candle's — so the market has recovered half of the last period's losses A green candle that closes above the high of the first one.

Three inside down The three inside down is a reversed inside up. Rising and falling three The rising three or rising three methods is a candlestick pattern that occurs within an uptrend, and is used to identify an impending continuation. But after the rising three, another large green stick shows that the bull market is back on. Japanese candlesticks summary Japanese candlestick charts enable you to analyse price action at a glance Technical traders might use them to spot upcoming trends, reversals and continuations There are three main types of pattern: single, double and triple Open a live IG account to start trading now.

Explore the markets with our free course Discover the range of markets and learn how they work - with IG Academy's online course. Try IG Academy. You might be interested in…. How much does trading cost? Find out what charges your trades could incur with our transparent fee structure. A wider body marks the area between the open and the close, referred to as real body.