Mwongozo Kamili wa Ishara za Vinara vya Kijapani kwenye Olymp Trade

Japanese Candlesticks on OlympTrade

Candlestick analysis allows you to understand and predict the market situation without the use of trading indicators. Trading using Japanese candlestick involves the search for particular candlestick chart patterns that help to predict price changes. The models of candlesticks gained their popularity due to their informative, simple presentation of the situation on the market trades and high accuracy of signals.

How do you read candlestick signals?

One or several candlesticks on the chart regularly form combinations that help traders decide to open or close a trade. These combinations are called “patterns”.

Candlestick patterns are divided into models that point to trend reversal and models that point to trend continuation. All one needs to do is to wait for a certain model to appear on the screen and make a trade based on the corresponding prediction.
 

How do you trade using single candlestick patterns?

Some Japanese candlestick models consist of a single candlestick. In these models, the shape and color of the candlestick indicate a reversal or continuation of a trend.

To get the clearest signals, analyze single candlestick patterns for longer time frames – one hour or longer. To confirm signals, additionally analyze other patterns discussed below.

Hammer

The Hammer pattern is a trend reversal indicator.

Visually, this candlestick looks like a hammer with a small body of any color and a long lower shadow. There is practically no upper shadow. At the same time, the lower shadow is usually twice as long as the body.

In such a situation, open an Up trade if the price fell before this, and open a Down trade if the price rose before this.
 

Shooting Star

The Shooting Star pattern is a trend reversal indicator.

Visually, this candlestick looks like an inverted hammer, with a small body of any color and a long upper shadow. There is practically no lower shadow. At the same time, the upper shadow is usually more than twice as long as the real body.

In such a situation, open an Up trade if the price fell before this, and open a Down trade if the price rose before this.
 

Doji

Doji is an indicator of closing due to indecision in the market. It usually appears when the supply and demand in the market are at an equilibrium.

Doji looks like a cross: the opening price is virtually equal to the closing price, and both shadows are long.

In this scenario, the decision about the trade should be made in the context of the previous price behavior.

How to trade using 2 candlesticks patterns

You can often find candlestick patterns consisting of one green and one red candle on a chart. They are close to each other in a certain way and give a signal that you need to open an up trade or a down trade.

The advantage of such models is that they give leading signals. The accuracy of signals increases when the market clearly shows an upward or downward trend.

Bullish Engulfing

Bullish Engulfing is a combination where the boundaries of the body of a green candle are larger than the boundaries of the body of a red one. The green candle follows the red one and completely engulfs it. This means that the price of the asset has risen more than it has fallen before.

As a rule, this pattern gives a signal about the end of the downtrend and the beginning of the uptrend.

Bearish Engulfing

Bearish Engulfing is a combination where the boundaries of the red candle body are larger than the boundaries of the green candle body. The red candle follows the green one and completely covers it. This means that the price of the asset fell more than it had grown before.

As a rule, this pattern gives a signal about the end of an uptrend and the beginning of a downtrend.

Piercing Pattern

A Piercing Pattern is a combination where the body of a green candle starts below the body of a red candle. The green candle follows the red one, while the closing price of the green candle is in the area of the upper part of the red candle body.

As a rule, this pattern gives a signal about the beginning of an uptrend. A Piercing Pattern works similarly to Bullish Engulfing, but it is not as strong. To confirm the signal, analyze other patterns as well.

Dark Cloud Cover

Dark Cloud Cover is a combination where the body of the red candle starts below the body of the green candle. The red candle follows the green one, while the closing price of the red candle is in the area of the lower part of the green candle body.

As a rule, this pattern gives a signal about the beginning of a downtrend. Dark Cloud Cover works similarly to Bearish Engulfing, but it is not as strong. To confirm the signal, analyze other patterns as well.

Bullish Harami

Bullish harami is a combination where a long red candle is followed by a shorter green candle. In this case, the body of the green candle does not exceed the boundaries of the red body.

As a rule, this pattern gives a signal about the beginning of an uptrend. To determine the trend more accurately, analyze the pattern together with a support line.

Bearish Harami

Bearish harami is a combination where a long green candle is followed by a shorter red candle. In this case, the body of the red candle does not exceed the body boundaries of the green candle.

As a rule, this pattern gives a signal about the beginning of a downtrend. To determine the trend more accurately, analyze the pattern together with the resistance line.

How to apply the patterns of three candlesticks with an average accuracy of signals

As high-precision patterns, the combination of three candlesticks with an average accuracy of signals can indicate a continuation or a trend reversal. They allow you to analyze the market more effectively than patterns from one or two candlesticks.

However, one should be careful to use this groups patterns in trading. It is recommended to combine them with other technical analysis tools to confirm the signals.

Three Stars in the South

The three Stars in the South pattern is formed on a downtrend.

It consists of three doji candles. Each subsequent candle is shorter than the previous one. In addition, the minimum price increases from candle to candle.

The Three Stars in the South pattern indicates that the downtrend is getting weaker and a bullish reversal is possible. If this pattern is formed on the chart, the price is likely to rise after the fall.

Bullish Doji Star

The Bullish Doji Star pattern begins with a long red candle.

It is followed by the doji candle. It is located below the previous candle, and there is a small gap down between them.

The third candle is also green. Its body is more than the body of the first red candle and almost covers it.

The Bullish Doji Star pattern indicates a bullish trend reversal. If this pattern is formed on the chart, the price is likely to rise after the fall.

Please note: you can enter the market by a Bullish Doji Star only if the pattern is formed on a downtrend.
 

Bearish Deliberation

The Bearish Deliberation pattern is the reverse of the three Stars in the South pattern. Bearish Deliberation is formed on an uptrend.

It consists of three doji candles. The first and the second candle is approximately the same size and the third much shorter than them. Opening and closing prices rise from candle to candle.

The Bearish Deliberation pattern indicates that the uptrend is weakening and the price may turn down. If this pattern is formed on the chart, it is likely that the price will fall after growth.

Downside Gap Three Methods

Downside Gap Three Methods is formed on a downtrend.

It starts with two long red candles with a gap down between them.

The third candle is green and its body covers the gap between the first two candles.

If the downside Gap Three Methods pattern is formed on the chart, as a rule, the downtrend continues.
 

How to apply three candle patterns with high signal accuracy

Patterns of three candlesticks give the most accurate signals compared to combinations of one or two candlesticks. For this reason, traders often use this type of candlestick combinations.

Patterns of three candles indicate the continuation of the trend or reversal of the asset price. They can be used both independently and in combination with other tools of technical analysis.

Three Inside Up

The Three Inside Up pattern is an extended version of the Bullish Harami pattern.

In this pattern the first candle is red.

It is followed by a shorter green candle, and its body does not go beyond the body of the red candle.

The third candle is also green, and its closing price is higher than the previous green candle.

As a rule, the three Inside Up pattern confirms that the trend turned around, and the price began to rise after the fall.

The Morning star

The Morning star begins with a long red candle.

It is followed by a short candle of red or green color. It has a small body because it closed next to the price at which it was opened.

The third candle is green, and its body covers most of the body of the first, long red candle.

Morning star usually indicates a bullish trend reversal. If this pattern is formed on the chart, the price is likely to rise after the fall.

Please note: the larger the body of the third green candle, the stronger the signal.
 

Morning Doji Star

The Morning Doji Star is a bullish pattern consisting of three candlesticks. The first candlestick (red) is the final candlestick on a downtrend. The second candlestick is a star. This is a candlestick with a small body and longer shadows. It can be any color. The third candlestick is green. This candlestick indicates the end of the pattern and the start of a bullish trend. In the Morning Doji Star pattern, the second candlestick is the doji candlestick. It has no (or practically no) body, and the shadows above and below are long.

The Morning Doji Star gives a stronger signal thanks to the doji. It indicates that the price is likely to reverse upward and will rise after a fall.

Three Outside Up

The Three Outside Up pattern is an extended version of the Bullish Engulfing pattern

In a Three Outside Up pattern the first candle is red.

It is followed by a green, and its body is larger than the body of the previous candle, that is, the second candle absorbs the first.

The third candle is also green. Its closing price is higher than the previous candle.

As a rule, the Three Outside Up pattern indicates a bullish trend reversal and the beginning of price growth after the fall.

Three White Soldiers

The Three White Soldiers pattern consists of three green candles. The opening price of each subsequent candlestick is within the boundaries of the body of the previous candlestick. The closing price steadily increases from one candlestick to the next.

The Three White Soldiers pattern usually indicates a continuation of the uptrend.
 

Tri-Star Bullish

The Tri-Star Bullish pattern is the reverse version of the Tri-Star Bearish pattern. A Tri-Star Bullish appears on a downtrend.

It consists of three doji candles. The first and third candlesticks are approximately on the same level, with the second — below them.

This pattern indicates a weakening of the downtrend. Most likely, the price will make a bullish reversal and begin to rise after the fall.

Due to the three-candles doji, a Tri-Star Bullish gives a strong signal. If this pattern appears on the chart, you should definitely pay attention to it.

The Evening Star

This pattern is the opposite of the Morning star pattern.

The Evening Star begins with a long green candle.

The next candle is short, it can be both red and green.

The third candle is red, and its body covers most of the body of the first, green candle.

Most often, the Evening Star indicates a bearish trend reversal. If this pattern appears on the chart, the price may start to fall after growth.

Pay attention to 2 points.

1. The larger the body of the third red candle, the stronger the signal.

2. The Evening Star pattern becomes a signal to enter the market only if it is formed after an uptrend.
 

Evening Doji Star

This pattern is similar to the Evening Star. Evening the Doji Star differs with the the second candle in it — a short candle doji, after which most often the trend unfolds.

Thanks to the doji, the Evening Doji Star pattern gives a stronger signal. It usually indicates that the price turned down and will fall after growth.

Three Outside Down

This pattern is reverse, the opposite of the three Outside Up pattern.

In a Three Outside Down pattern the first candle is green.

The average candle is red, and its body is larger than the body of the previous one, that is, the second candle absorbs the first one.

The third candle is also red, and its closing price is lower than the average.

The Three Outside Down pattern is an extended version of the Bearish Engulfing pattern. As a rule, Three Outside Down gives a signal that the trend has made a bearish turn, and the price begins to fall after growth.
 

Falling Three Methods

The Falling Three Methods pattern gives a signal that the downtrend will continue. Despite the name, it consists of five candlesticks, not three.

The Falling Three Methods starts with a long red candlestick.

It is followed by a series of three short green candlesticks that rise one after another.

These three candlesticks, including their shadows, must be within the boundaries of the first red candlestick.

After the series of green candlesticks, there is a large red candlestick whose closing price is below the closing price of the first red candlestick.

If this pattern appears on the chart, as a rule, the downtrend is continuing.

Three Inside Down

This pattern is the reverse version of the three Inside Up pattern.

The Three Inside Down pattern starts with a green candle.

It is followed by a short red candle, and its body does not go beyond the body of the first green.

The third candle is also red, and its closing price is lower than the previous red one.

The Three Inside Down pattern is an extended version of the Bearish Harami pattern. As a rule, Three Inside Down confirms a bearish trend reversal, and the price begins to decline after growth.
 

Three Black Crows

The three Black Crows pattern is the opposite of the Three White Soldiers pattern.

The Three Black Crows pattern consists of three red candles, which are consistently reduced. The opening price of each next candle is within the body of the previous candle.

If the body of the first red candle in the pattern is below the high of the green candle that precedes the Three Black Crows, this amplifies the signal.

Typically, Three Black Crows indicates that the trend has reversed and the price will fall after rising.

Please note: you can enter the market using this pattern only if Three Black Crows formed after an uptrend.
 

Tri-Star Bearish

The Tri-Star Bearish pattern consists of three doji candles. The first and third candlesticks are approximately on the same level, and the central one is above them.

This pattern indicates that the uptrend has become weaker and a bearish reversal is likely to occur. The price will start to fall after growth.

Thanks to just a three-candles doji, Tri-Star Bearish gives a very strong signal. If such a pattern is formed on the chart, it is necessary to pay attention to it.