Zoom on Japanese Candlesticks

By Crypto Nation – 06 December 2020   

Japanese Candlesticks are the most common form of price display in trading. They are composed of a body, and wicks.

By default, a green candle indicates a price increase. Conversely, a red candle results in a drop of the price.

This display format is the most complete, because a single candle gives us 4 pieces of information :

• The opening price.
• The highest price reached.
• Conversely, the lowest price reached.
• And the closing price.

Japanese candlesticks are used in Technical Analysis (TA) of a market to represent price changes. Technical analysis over a past period is supposed to give indications on the future direction of the market or a price.

We then distinguish several types of Japanese candlestick figures, the most common being:

• Marubozu: Indicates a strong impulse.
  • Its body is full.
  • it has no, or very small wicks.
  • It can be bullish or bearish.

• Doji: Sign of hesitation.
  • it has no body.
  • its wicks are long.
  • There are several types of Dojis, but are always hesitant.

• Spinning Top: Sign of hesitation.
  • Almost no body.
  • The wicks are long.
  • Similar translation to Dojis, we see hesitation.

• Hammer: Translates into a sign of bullish impulse.
  • Defined by a small bullish body.
  • With a long wick down, without wick up.
  • Can also be compared to a rocket.

• Shooting Star: Irregular pulse sign.
  • Has a small bearish body.
  • With a long wick upwards, and without a low wick.