Japanese candlestick chart

It is unique charting method invented by the Japanese several centuries ago. Today, this wonderful tool is widely used by traders around the world, however, 30 years ago, Japanese candles were used mainly by oriental financiers.

The Japanese invented a magnificent thing, which is very useful to use when analyzing a graph in combination with other graphical analysis tools. There are many figures formed from one or from a set of Japanese candles, which are the object of analysis when making trading decisions

Books are devoted to such formations; within the framework of this article we will consider basic concepts and some interesting figures.

To begin with, what does a Japanese candle look like and what information can be extracted from one candle. One Japanese candlestick most informatively describes the user-defined time frame: minute, 5 minutes, hour or day

At the same time, the wide part of the candle is called the body, the thin lines above and below the body are the shadows. The body of the candle shows what the trading range was in a given time frame. If the closing price was lower than the opening price, the candle body is painted black; if it is higher, the candle body is traditionally not painted over. Shadows show the lows and highs in accordance with the selected time frame. Information on the Bittrex crypto exchange website (as in most trading terminals) is displayed on a chart when you hover over a candle as follows:

O (open, open price), C (close, close price), H (high, high) L (low, low). For information, volume V is also indicated.

Candles with a long black body mean sales and are typical for a bearish trend. Candles with a long white body indicate a bullish trend. If the body of the candle is small (such candles are called spinning tops), this shows the struggle between the bulls and the bears. If the candle’s body is completely absent, such candles are called doji.

This type of candle is one of the most significant trend reversal signals. If we see doges in a growing trading range, this usually indicates a lack of strength among buyers to continue to allow quotes to grow

In the case of a downtrend, the logic is exactly the same. One way or another, you need to look at the confirmation of reversal signals according to the indicators of technical analysis, and then close or open a position

⠀ Another criterion for determining the moment of a trend change is the absorption model – bullish or bearish. If the formation is implemented, two candles of different colors are used for analysis, while the size of the body of the subsequent candle should be much larger than the previous

It is also important that a strong trend is necessarily traced on the market.

And finally, another significant signal of a trend reversal – a curtain of dark clouds (Dark-cloud cover). The formation is as follows: with a strong bullish trend, a black candlestick looms with an opening price higher than the previous closing price, while the closing price of the black candlestick is below the middle of the white candlestick