The Japanese Candlesticks were invented in Japan hundreds of years ago, and are still used in the forex world. Professional forex traders, but also amateur ones who are successful in the markets, use them to identify various patterns on the charts . Based on the formation of these candles, traders make decisions that lead them to buy or sell a certain underlying.
Looking at even just a Japanese candle, it is possible to know the closing price and the opening price, the maximum and the minimum. All in one design. This is a peculiarity that is very reminiscent of the ability of the Japanese to conceptualize a symbol, which actually has many more values and meanings, such as Ideograms, than the rest.
Japanese Spinning Tops Candles
These are candles that have upper and lower (long) shadows, and small bodies. Body color is not very significant. This pattern probably denotes indecision between buyers and sellers. The body, when small, shows that there has been little movement from opening to closing, and the long shadows show the tug-of-war between buyers and sellers, where no one has taken control.
Japanese candles Marubozu
These are Japanese candles whose bodies have no shadows. The highest point and the lowest point are the same as the opening point and the closing point. There are two types of Marubozu models, namely the White Marubozu and the Black Marubozu. Marubozu Bianca contains a long white body with no shadows. In this model, the opening price equals the lowest price, and the closing price equals the highest price. This pattern indicates an upward trend. The Black Marubozu contains long black bodies with no shadows. Here, the opening price equals the highest price, and the closing price equals the lowest price. This pattern denotes a decline.
Japanese Engulfing Candles
Japanese Engulfing Candles (meaning Enveloping) include a large white body that wraps around a small black body, in a downtrend. Conversely, bearish engulfing patterns are seen in the chart when the downside exceeds the upside, which is when a long black body wraps a small white body in an uptrend.
Maybe it’s a bit difficult to explain, but we believe that an image can summarize the Engulfings:
Credits: Images by Forex Brokers USA via www.forexbrokersusa.com
These 3, namely the Spinning Top, the Engulfing and the Marobozu are the three most important Japanese candle pattern formations. Even mastering one of these three will bring you a lot of profits in your account, as you will be able to get signals before anyone else.