What Are Japanese Candlestick Patterns? How to Read and Use Them in Crypto Trading

1. What Are Japanese Candlestick Patterns?

Candlestick charts display price movement within a specific time frame. Each candlestick shows four key data points: opening, closing, highest, and lowest price.

Candlesticks are widely used due to their ability to visually reflect market psychology and investor sentiment.

2. Anatomy of a Candlestick

Body: The area between open and close price.

Wicks (Shadows): Thin lines showing high and low prices.

Colors:

Green (or white): Close > Open ⇒ bullish.

Red (or black): Close < Open ⇒ bearish.

3. Popular Reversal Candlestick Patterns

Hammer & Hanging Man: Indicate potential reversals.

Doji: Signals market indecision, possible turning point.

Engulfing Pattern: Strong reversal signal with two candles.

Morning Star / Evening Star: Three-candle patterns showing reliable reversals.

4. Continuation Candlestick Patterns

Three White Soldiers / Three Black Crows: Strong trend continuation.

Rising / Falling Three Methods: Confirm ongoing trends.

5. Applying Candlestick Patterns in Crypto Trading

Combine candles with support/resistance levels.

Use indicators like RSI or MACD for confirmation.

Avoid relying solely on candles—always consider broader technical context.

6. Conclusion

Mastering Japanese candlestick patterns helps traders detect trend changes and make more informed decisions. It’s a foundational skill for anyone serious about succeeding in crypto trading.