Basic Japanese candlestick patterns are graphical representations of price action on a candlestick chart that can provide signals about potential future movements in the market. Here are some of the most basic Japanese candlestick patterns:

  • Hammer:
    • A hammer is a candle with a small body at the top and a long wick at the bottom.
    • It indicates a possible bullish reversal after a downtrend. Buyers overwhelmed sellers at the end of the period.
  • Shooting Star:
    • A shooting star is similar to a hammer but appears at the end of an uptrend.
    • It indicates a possible bearish reversal, as sellers overwhelmed buyers at the end of the period.
  • Doji:
    • A doji is a candle with a very small body that opens and closes near the same price.
    • It indicates market indecision and may signal a possible trend reversal.
  • Bullish Engulfing:
    • A bullish pattern in which a bullish candle “engulfs” the entire previous bearish candle.
    • It suggests a potential change from a downtrend to an uptrend.
  • Bearish Engulfing:
    • A bearish pattern in which a bearish candle “engulfs” the entire previous bullish candle.
    • It indicates a potential change from an uptrend to a downtrend.
  • Hanging Man:
    • Similar to a hammer but appears at the end of an uptrend.
    • It may indicate a possible bearish reversal.
  • Piercing Pattern:
    • A bullish pattern in which a bullish candle closes above the midpoint of the previous bearish candle.
    • It suggests a potential bullish reversal.
  • Morning Star:
    • A bullish pattern consisting of a bearish candle, followed by a doji or small candle, and then a bullish candle.
    • It indicates a possible change from a downtrend to an uptrend.
  • Evening Star:
    • A bearish pattern consisting of a bullish candle, followed by a doji or small candle, and then a bearish candle.
    • It suggests a possible change from an uptrend to a downtrend.