Trader Lab · Technical analysis
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Japanese candlesticks: what each candle tells you
Each candlestick sums up four prices for one period: open, high, low and close. Knowing pattern names helps, but where the candle forms and on which timeframe matter more than its shape.
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Four prices in one candle
A close above the open makes a bullish candle; a close below it, a bearish one. The wide part is the body, the thin lines above and below are the wicks.
| Part | Meaning |
|---|---|
| Body | Distance from open to close; long bodies show strong one-way moves. |
| Upper wick | Price reached the high and sellers pushed it down. |
| Lower wick | Price fell to the low and buyers lifted it back. |
Single candles to know
- Large candle: long body, short wicks; strong momentum.
- Doji: open and close nearly equal; the market is undecided.
- Hammer: long lower wick, small body on top. At a low or support it can signal a bounce.
- Shooting star: long upper wick, small body below. At a high or resistance it can signal a drop.
Two- and three-candle patterns
- Bullish and bearish engulfing: the second body fully covers the first; a bullish engulfing after a fall is a classic reversal sign.
- Harami: a small candle inside the previous large body; momentum is fading.
- Three soldiers, three crows: three strong candles in a row, often at the start of a trend.
Location matters more than shape
A hammer at a support zone tested several times means far more than one in the middle of a range. Candles that form at moving averages or Fibonacci levels deserve the most attention.
Which timeframe
Patterns on 1- and 5-minute charts are noisy and fail often. Read candles on the 1-hour or 4-hour chart and use a shorter one only to time the entry. Never judge a pattern before the candle closes.
Candles on gold
Gold moves hard at the London open (11:00 GST in summer, 12:00 in winter) and with US data in the afternoon. An engulfing candle on the 1-hour chart at those times carries more weight than a similar one in the quiet morning. More in gold technical analysis.
Questions
Can I trade on candlesticks alone?
Candle shapes alone give many false signals. Combine them with the trend and support and resistance zones, and set the stop before entering.
What is the best timeframe for candlesticks?
None is always right. Higher timeframes give fewer, clearer signals with wider stops. Pick one that fits the hours you actually trade.
What is the difference between a hammer and a shooting star?
A hammer has a long lower wick and usually appears at lows; a shooting star has a long upper wick and appears at highs. Both show price being rejected.