16 Essential Japanese Candle Patterns for Investors

Candlesticks visually represent price movements in financial markets and are fundamental for technical analysis. They allow me to quickly interpret market psychology by just looking at a few bars.

When I analyze a daily chart, each candle shows intraday activity with three basic elements: the body (opening-close range), the wicks (extremes of the day), and the color (green/white for upward moves, red/black for downward moves).

Bullish patterns that fascinate me

Bullish patterns appear after bearish trends and indicate possible reversals. I personally use them to consider long positions.

I love the Hammer: that small body with a long lower wick shows how sellers tried to push the price down but failed spectacularly. Its cousin, the Inverted Hammer, with a long upper wick, indicates that buyers will soon take control.

The Bullish Engulfing pattern is impressive: a small red candle completely engulfed by a larger green one. What a demonstration of buying strength!

The Piercing Line shows a brutal recovery after a decline, while the Morning Star offers a ray of hope in depressed markets.

The Three White Soldiers always impress me: three consecutive green candles advancing relentlessly.

Bearish patterns I fear

These patterns typically form after bullish trends, marking resistance levels. When I see them, I consider closing long positions or opening shorts.

The Hanging Man makes me nervous: it looks like a hammer but appears after upward moves. The Shooting Star is equally concerning with its extended upper wick.

The Bearish Engulfing pattern is devastating: a small green candle engulfed by a larger red one. The Evening Star signals the end of optimism.

The Three Black Crows terrify me: three consecutive red candles showing relentless sellers. And the Dark Cloud Cover darkens any prior optimism.

Continuation patterns I observe

The Doji, with almost identical open and close, reflects pure indecision. The Tops, with small bodies and similar wicks, indicate consolidation.

The Triple formations (bullish and bearish) suggest temporary pauses before continuing the dominant trend.

To master these patterns, nothing beats constant practice. Although they are powerful tools, I always combine them with other technical indicators to confirm signals. Experience has taught me that no pattern works in isolation in this complex world of investments.