The Types of Japanese Candles Every Trader Must Master: Complete Guide to Gain Confidence in Your Analyses

Why Mastering Japanese Candle Types Is Your First Step Toward Profitable Trading

When you enter the world of trading, you encounter three main approaches: fundamental analysis (studying news, financial reports, and economic factors), speculative analysis (trying to guess without a solid basis, which we do not recommend), and technical analysis. The latter is where Japanese candle types shine as your most reliable tool.

Why? Because while other traders get lost interpreting complex numbers, you will be able to read the market like an open book. Japanese candles originated in Japan’s rice markets centuries ago and have become the universal standard for understanding what is really happening on price charts.

Basic Anatomy: Japanese Candle Types Explained Simply

A Japanese candle is not just a line on the chart. It’s a visual summary of four critical data points that occurred during that time period:

• Open: the initial price
• High: the highest point reached
• Low: the lowest point touched
• Close: the final price

This is known as OHLC (Open, High, Low, Close).

Each candle has two main parts:

1. The body: shows where the price opened and closed
2. The wicks: reveal how high and low the market tried to go

Color is important: generally, green indicates buyers gained (the price went up), while red means sellers took control (the price went down). But here’s where it gets interesting: a long wick tells a completely different story than a large body.

The Most Profitable Japanese Candle Types for Your Trading

Engulfing Candle: The First Sign of a Trend Reversal

The engulfing candle appears when two candles of opposite colors meet and the second literally “engulfs” the first. This means buyers or sellers regained control aggressively.

Imagine this in EUR/USD: you see a bearish candle followed by a much larger bullish candle that completely surrounds it. It’s like the market is saying: “Wait, I changed my mind.” This pattern suggests an upcoming trend change.

But here’s the golden advice: never trade solely based on this pattern. Look for confluences. If the engulfing candle appears right where a historical support level turns into resistance, then you have a strong opportunity.

Doji: Indecision Shouts Opportunity

The doji candle is the symbol of indecision. It has a very small body (the opening and closing prices are almost identical) but long wicks on both sides. It’s like buyers and sellers are in an intense duel that ended in a tie.

Why is this important? Because after indecision comes a strong move. The doji acts as a pause before the storm. In Bitcoin, for example, we’ve seen dojis that preceded movements of hundreds of dollars.

Spinning Tops: The Close Relative of Doji

Spinning tops are very similar to dojis but with a slightly larger body. They also represent indecision, but the difference is that market participants had a bit more activity (higher volume). The long wicks of the spinning top show exactly where buyers and sellers were rejected.

Hammer: The Most Reliable Reversal

Imagine a candle with a small body but a long, thin wick downward (or upward in a downtrend). It’s the hammer pattern, and it’s highly reliable.

A bullish hammer in an uptrend shows that sellers tried to take control, pushed the price down, but ultimately buyers regained ground and won. This means: “Attention, the bearish move could end here.”

The opposite is equally valid: a bearish hammer in a downtrend indicates buyers attempted resistance but failed.

Hanging Man: Inverted Hammer with Reversal Context

This is where many traders get confused. The hanging man has the same shape as the hammer, but the context is different:

• Hammer: previous bullish candles + pattern = continuation upward
• Hanging Man: previous bearish candles + pattern = reversal upward

The appearance is identical, but the context changes everything. That’s why it’s so important to look at what happened before.

Marubozu: Absolute Strength

The marubozu (which means “bald” in Japanese, because it has no wicks) is pure dominance. It’s a candle with a huge body and no or microscopic wicks.

A bearish marubozu shows that sellers had total control throughout the period. A bullish marubozu demonstrates that buyers never ceded even for a second. These patterns indicate a strong continuation of the trend.

Quick Table: Japanese Candle Types at a Glance

How Japanese Candle Types Reveal Hidden Supports and Resistances

Here’s the secret many traders don’t know: line charts (which only show closing prices) hide crucial information.

Look at EUR/USD over a specific period. If you use a line chart, you might think the price broke support at 1.036. But if you switch to Japanese candles, you’ll see the long wicks of several candles rejecting that level. They never truly broke it; they just touched that level and bounced multiple times.

Candles show you the “true” battle between buyers and sellers. Long wicks are failed attempts. Large bodies are decisive victories.

The Winning Strategy: Japanese Candle Types + Confluences

An isolated candle pattern is just a suggestion. But when you combine:

• A specific candle type (like a hammer)
• With a historical support level
• And a Fibonacci retracement at 61.8%
• And perhaps a nearby moving average

Now you have confluence. Now you have confidence.

For example, in EUR/USD, you identified a clear support at 1.036. The candles approached that level, the wick rejected it, and right at that point (1.036) coincided with a 61.8% Fibonacci retracement level. That was your perfect entry to go long.

The Time Factor: Why Timeframe Matters

A hammer on a daily candle is infinitely more relevant than a hammer on a 15-minute candle.

Why? Because a daily candle represents everything that happened in 24 hours of decisions by thousands of traders. A 15-minute candle could be just the action of a few operators.

Here’s another truth: a 1-hour candle is made up of four 15-minute candles. If you look at the 1-hour candle and see a long wick upward with a close downward, it suggests the price initially rose during that hour but then fell sharply afterward. Breaking it down into 15-minute segments, you’ll see exactly when that change occurred.

Japanese candle types work on any timeframe, from 1 minute to 1 month. What changes is reliability: larger timeframes, bigger gains.

Practice Now: Tips to Train Your Trader’s Eye

1. Use a demo account before risking real money

There are no shortcuts here. Open a practice account and spend hours observing historical charts. Look for the patterns we discussed. Try to predict what will happen after each candle.

2. Start with higher timeframes

Analyze EUR/USD, Bitcoin, gold on daily candles. Patterns will be clearer. Once you master Japanese candle types on daily charts, move down to 4 hours, then 1 hour.

3. Combine candle types with tools

Don’t let candles work alone. Add:

• Fibonacci retracements
• Moving averages
• Historical support and resistance levels
• Volume

4. Record your analyses

Every day, do 5-10 technical analyses without trading. Just write: “I see a bullish hammer here, I would wait for confluences before entering.” This trains your mind risk-free.

5. Think like a professional athlete

A soccer player doesn’t play 5 matches a week. They train 3 hours daily and play a match on the weekend. You should analyze the market continuously but only open trades when confluences are obvious. Fewer trades, better trades.

Japanese Candle Types in All Markets

The best part is that these patterns work in:

• Forex (Forex)
• Cryptocurrencies
• Commodities
• Stocks
• CFDs

Human behaviors are the same everywhere. Fear and greed create the same candle patterns in Bitcoin as in EUR/USD.

Your Next Step

You now know the Japanese candle types. You’ve seen how they work, what each one means, and how to combine them with tools for maximum precision.

The question now is: will you study these patterns until you master them completely? Because once you train your eye, market opportunities will be obvious. You won’t need complicated indicators or dense fundamental analysis.

You’ll only need one candle, one confluence, and the confidence to know exactly what’s happening on the chart.

Start today with a demo account. Tomorrow, look for Japanese candle types in historical data. Next week, you’ll have seen more patterns than many traders in their entire careers.

The market rewards those who truly learn. Are you ready?