Master the 16 types of Japanese candlesticks: The practical guide for traders

Important Notice: Derivatives are high-risk instruments. Trading in these markets can result in significant short-term losses.

Japanese candlestick types are the fundamental tool of technical analysis. If you master these formations, you will be able to identify market opportunities more accurately. This article guides you through the 16 most relevant candlestick patterns you should recognize before executing your next trade.

Understand the basic structure of candlesticks

Before studying complex Japanese candlestick types, you need to understand their anatomy. Each candlestick you see on your chart is composed of three visual elements that tell the story of the price during a specific period.

The composition of a candlestick:

1. The body — The range between the opening and closing price of the session
2. The wick (shadow) — The upward and downward projections showing the extremes reached during the session
3. The color — Green (or white) when the price closes higher than it opened; red (or black) when it closes lower

This visual representation allows traders to process market information instantly. Over time, these individual candles form repetitive patterns indicating changes in the balance between buyers and sellers.

Six types of Japanese candlesticks to identify bullish reversals

These patterns typically emerge after periods of selling pressure, signaling that buyers are regaining control of the market. Recognizing them allows you to position yourself before an upward trend develops.

The Hammer: The recovery signal

This pattern shows a small body with an extended lower wick. It forms after a price decline, indicating that although sellers pressed during the session, buyers counterattacked strongly enough to recover lost ground. Green hammers are more bullish than their red counterparts.

Inverted Hammer: Buying pressure at heights

Similar in concept to the hammer but inverted: long upper wick and short lower wick. This formation demonstrates an initial rejection of higher prices, followed by rejection to the downside. It suggests that buyers will gain ground soon, but confirmation in the next session is needed.

Bullish Engulfing: Change of sentiment in two candles

This is a two-candle pattern where a small red body is completely engulfed by a subsequent large green candle. Despite the second session opening lower, buying pressure pushes prices upward, negating the previous day’s losses. The size of the green body determines the strength of the pattern.

Piercing Line: Breaking negative expectations

Consists of a long red candle followed by a long green candle, typically with a gap down at the second candle’s open. The price closes near or above the midpoint of the previous candle, demonstrating significant buying pressure that breaks intraday resistance.

Morning Star: Hope after darkness

This three-candle pattern marks a decisive change after a prolonged downtrend. A large red candle, followed by a small-bodied candle forming a “star,” and finally a large green candle. Market gaps between these candles reinforce the signal by showing a clear decrease in selling pressure.

Three White Soldiers: Unstoppable advance

A formation of three consecutive sessions with large green candles, each opening and closing higher than the previous, with minimal wicks. This pattern demonstrates a steady increase in buying power and is especially significant after an extended decline.

Six weakness patterns: Bearish candlestick types

These patterns typically emerge when a bullish market loses momentum. Recognizing them prepares you to close positions or activate sell orders.

Hanging Man: The bearish version of the hammer

Identical in shape to the hammer but located at the end of an uptrend. A small body with a long lower wick indicates that although buyers tried to keep prices high, selling pressure became evident. This pattern suggests the uptrend is losing traction.

Shooting Star: Rejection at heights

Shaped like an inverted hammer but formed in an uptrend, this pattern shows an initial gap up, an intraday rally, but a weak close near the open. Like a falling star, it reflects market rejection of maintaining high prices.

Bearish Engulfing: Reversal in two moves

A small green candle is engulfed by a subsequent large red candle. Indicates the peak of the uptrend and is especially problematic when the red candle closes significantly lower than the previous close. The deeper the fall, the more likely a downtrend will develop.

Evening Star: The inverted mirror of hope

This three-candle pattern is the bearish version of the morning star. A large green candle, a small intervening candle, followed by a large red candle that erases the gains of the first candle. It is especially confirmed when the third candle breaks the midpoint level of the first.

Three Black Crows: Unwavering conviction

Three consecutive red candles with large bodies and minimal wicks, opening each day near the previous close but closing progressively lower. This pattern clearly indicates sellers control the market for three sessions, signaling a possible start of a sustained decline.

Dark Cloud Cover: The invasion of pessimism

A red candle that opens above the previous green candle’s body and closes below its midpoint. Literally covers the previous optimism with a “dark cloud.” Short wicks reinforce the certainty that the bearish control is decisive.

Four types of indecision candlesticks: Continuation patterns

When candlestick types do not indicate a change in direction, they signal periods of consolidation or temporary indecision. These patterns are useful for identifying pauses before the dominant movement continues.

Doji: Perfect balance

A formation where open and close occur at nearly the same level, creating a cross or “+” symbol. With wicks of varying lengths but minimal body, the doji represents a balanced struggle where neither buyers nor sellers gain an net advantage. Individually neutral, but in the context of reversal patterns (like the morning star), it gains significance.

Spinning Tops: Market tug-of-war

Small body centered between similar-length wicks above and below. Show clear indecision: buyers push the price up, sellers push it down, and both end roughly where they started. Spinning tops indicate temporary consolidation, typically followed by movement in the direction of the preexisting trend.

Triple Bearish Formation: Resisting sellers

A long red body, followed by three small green bodies within the previous bearish range, ending with another long red body. Demonstrates that although there are buying attempts, selling pressure is too strong. Buyers fail to overcome resistance, confirming the continuation of the downtrend.

Triple Bullish Formation: Buyers prevail

The inverse of the previous pattern: two long green bodies intercalated with three small red bodies. Despite selling pressure, buyers maintain overall control. This pattern shows that even temporary corrections do not reverse the dominant uptrend.

Develop your trading strategy using candlestick types

Learning these 16 patterns requires consistent practice. Recognizing them on historical charts is not enough; you need to practice identifying them in real-time to develop operational intuition.

Practical recommendations:

• Start with the clearest patterns (hammer, engulfing, three soldiers/crows)
• Practice on higher timeframes before trading on short-term charts
• Always confirm candlestick patterns with other technical indicators
• Remember that Japanese candlestick types are probability tools, not absolute certainty
• Always manage your risk with appropriate stop-loss orders

Combining candlestick pattern analysis with volume, support/resistance levels, and other technical studies will significantly increase the reliability of your trading decisions. The most successful traders do not rely solely on a single method but use Japanese candlestick types as part of a broader analytical framework.