Japanese candlesticks and naked trading

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Japanese Candlesticks for Online Trading

Contrary to what some of you might think, trading naked does not mean trading with no clothes on, but using charts free of any indicators. This is where Japanese candlesticks play an important role because the shapes they take and the patterns they form are an indication of future price direction. A Japanese candle shows us the Open, High, Low and Close of the period analyzed. If we are using a Daily chart, one completed candlestick will give us the highest point reached by price during the day, the lowest price, the open price, and the close price. The same goes for a 1-hour candle or a 1-minute candle (this applies to all Japanese candles). Here is a graphic explanation:

This is a bearish candle, which means that the Closing price is lower than the Opening price (the price fell by the end of the analyzed period). The upper wick shows the highest point reached by price and the lower wick shows the lowest point reached by price in our period. This is the basic information that we get from a Japanese candlestick but now comes the interesting part: I am going to explain how to use some of the most important Japanese candlesticks.

How to Use Different Types of Japanese Candlesticks

The Pin Bar

This is one of the most powerful candlesticks and you might remember it from the Pinocchio Strategy. The Pin bar (Pinocchio or simply Pin) tells a story and we must know how to read it: in the beginning, the Bears were strong and confident, pushing price lower, but by the end of the period, the Bulls starting to become more and more powerful, pushed price higher than the opening point and managed to close it higher, with a small upper wick. After a candle like this one, the Bulls are in control and prices are more likely to move even higher. A Bullish Pin bar has the following characteristics: it has a big lower wick, a small body (the body is about one-third of the length of the whole candle) and a small upper wick. A Bearish Pin is an opposite. You will not always see perfect Pin bars like the one in our picture above, but they can still be categorized as a Pin. Sometimes in a Bullish Pin, the closing price will not be higher than the opening price. That is still a Bullish Pin bar, but it will not be as powerful as the one in our picture.

Doji Candle

A Doji candle is formed when the Open price and Close price are almost the same, which will create a very small body and long wicks. Usually, in a Doji candle, the upper and lower wicks are almost the same length, but if they are not, the candle still qualifies as a Doji as long as the opening price and the closing price are almost the same. Look at the picture below to see what a Doji candle looks like:

Usually the Doji candle signifies indecision in the market. Neither the Bulls nor the Bears can move price in one direction and this causes the price to fluctuate up and down during the period and eventually close almost at the same point where it opened. If after a strong, prolonged move in one direction, several Doji candles appear, we must be aware of a possible reversal, but given that the Doji is mainly an indecision sign, the price can go either way because eventually one of the two sides will win the battle.

Marubozu Candle

A Marubozu candle is a clear indication of one-sided strength: a bullish Marubozu means that the Bulls are in complete control and a bearish Marubozu candle signifies that the Bears are in total control. Here is how Marubozu candles look like:

Marubozu is a single candlestick, not a formation and in the picture above I exemplified both Bearish and Bullish ones, but that doesn’t mean that you have to find them together to qualify as a Marubozu. The characteristics of this type of candle are long bodies, signifying strong selling or buying pressure (depending on the type of candle – bullish or a bearish) and no upper or lower wicks, signifying that the other side of the market has no power. Although a perfect Marubozu is hard to find, when we find one it is a clear indication that price will continue in the direction indicated by it. One more important and helpful thing to know is that whenever you see a breakout accompanied by a Marubozu candle, it is most likely to be a real breakout and not a false one. Here is a picture:

In the picture above, the price was confined to a range, finding Resistance at the top and Support at the bottom. About halfway into the ranging period, price tried to escape to the downside, but that resulted in a false breakout as we can see. Then again, price tried to break the bottom of the range, but this time, a Marubozu appeared and the breakout was clearly confirmed by it.

Japanese Candles – Candle Formations

Ok, guys, this is where it gets a bit more complicated because we are going to talk about formations composed of two candles. So far, we covered the basics, explaining how a candle is formed and presenting you three of the most important types of candles, the Pin, Doji, and Marubozu. In this second part of the article, we will up our game and take a look at double-candle formations, which means that more attention must be paid to both candles. Let’s get down to business and start talking about the first formation.

Engulfing Pattern

The name gives us a hint about the formation, but I want to make sure everything is crystal clear. In a valid engulfing formation, the second candle totally engulfs the body of the first one. The bullish engulfing is formed of a bearish candle followed by a larger bullish candle and the bearish engulfing is formed of a bullish candle followed by a larger bearish candle. In the picture below we have the bullish engulfing to the left and the bearish engulfing pattern to the right.

A bullish engulfing pattern can appear after a down move or a period of consolidation and it shows us that the bulls, after a good rest and an energy drink are strong enough to start taking control of the market. Their strength appears in the form of a big, engulfing candle. Sometimes the second candle can engulf more than one previous candle, just like in my picture above. Pay attention when that happens, because it’s an even stronger signal. The same principles apply to the bearish engulfing pattern. Often we can see the retracement ending with an engulfing formation and that’s a good time for us to join the resuming trend.

Tweezers

This type of pattern can usually be spotted after an extended move in either direction.

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Tweezer Tops

Appear after an uptrend or an extended move up. The first candle must match the main trend or the latest move (so it will be a bull candle) and the second will be a counter trend candle (so it will be a bear candle), but both must test the same highs. Check out the picture below:

Notice the first candle is bullish and it’s followed by a bearish candle and they both test the same high point. After the candle formation is complete, price reverses and a down move starts.

Tweezer Bottoms

Appear after a downtrend or an extended down move. The first candle must match the main trend or the latest move (so it will be a bear candle) and the second will be counter-trend (bull candle), but they will both test the same low. Here is the picture to go with the explanation:

Again, notice the valid sequence: the first candle is the same as the recent move (down), the second is counter-trend (up) and both must test the same low point.

Tweezer bottoms and tops suggest strong support or resistance at that level and give us a hint that the level will hold and the price will reverse. They can mark the end of a trend, the beginning of a reversal or retracement or even the end of the retracement as they are reversal patterns. One more important point is that Tweezer bottoms or tops can look different than the ones I show on my pictures, but the sequence must be the same: trend candle – counter-trend candle – testing the same high/low.

Inside Bar

The last dual candlestick formation that we are going to talk about today is the Inside Bar. This is formed when the second candle has the Open and Close inside the range of the first. You could almost say that it is the opposite of the Engulfing pattern. Check out the picture:

On the picture I have circled four inside bars and each one marks a reversal. Notice that the second candle (inside bar) in the formation has the Open and Close inside the range of the first candle, named Mother Bar. Inside bars can appear either in an uptrend or a downtrend and there are no special requirements like in the case of the Tweezers. Sometimes the Mother bar is followed by more than one Inside bar; this gives more strength to the signal, although it’s not a common situation.

I’ll be honest, the history of Japanese Candlesticks and the names of the signals got me into using them as much as their usefulness. The thought of ancient traders using these charts for rice futures in feudal Japan mixed with the martial arts sounding names brings a thrill of mystique akin to watching a really good samurai or kung-fu movie. Harami, Bearish Attack, Doji, and Three Black Crows all carry a bit of the exotic but the thing is, they also carry a fair bit of weight when it comes to technical analysis and making an argument for trade.

How to Read Japanese Candlesticks?

The thing about the candles, and just about any form of technical analysis, is that the individual candlesticks, the patterns, the signals, and their meanings are all relative. They are relative to each individual asset and to market conditions; each market has its own characteristics, average daily range, volatility, etc. A long white candle on one chart may be a spinning top on another, a Doji one day may be a sign of balance, on another, it may be a sign of indifference. What this means is that the first rule to reading the candles is to understand what kind of move is an average move and one without true meaning, and which ones are real signals and you have to do this for each asset you trade.

The strength of the signal is also relative to its position on the chart. A reversal signal that appears in the middle of a range is less likely to bear fruit than one that appears just below resistance. So, questions to answer include what kind of market is it and where the candle is appearing. Is it a bull market, a bear market, a ranging market? Is the signal appearing in the middle of a range, near support or near resistance? If the market is trending, reaches a peak and produces a bearish signal it may mean reversal or it may not, at this point, the best thing to do may be to exit current positions or wait for the next bullish entry.

Some Rules To Weed Out Good Candle Signals From Bad Ones

1. The size of the candle relative to recent candles and historic candles. If an asset has a typical range of 0.5% and today’s candle is 1% there is a good chance it is more meaningful than the average. It is possible for two candles to form an engulfing pattern or a piercing pattern, or for a small doji to look like a shooting star, but if they are only average size or smaller they are more likely the result of random market action. This true for white, black and doji candles.

2. A lot of traders fail to realize the impact of volume and do so at their own peril. The higher the volume of trades behind a move the stronger it is, the weaker the volume the weaker the move is. This is also true of white, black and doji candles. A high volume combined with a large move is the strongest signal while a small volume with a small candle is the weakest signal. Big candles with low volume, or small candles with high volume, are also signals worth taking note of as they can precede reversals and breakouts.

3. Trend And Fundamentals. Having a good grasp on-trend and fundamentals is important. If you know that fundamentals are positive and the trend is up then you can target only the candle signals that are in agreement with that outlook, ie trend following pullbacks and continuations, and ignore those that don’t.

4. Support And Resistance. Support and resistance are two of the most important things for any trader to be familiar with. These are areas where buyers and sellers can expect to enter the market and thereby keep prices from falling or rising further. Candles signals that appear near these lines are more likely to profit than ones that don’t. In a rising market resistance lines may prevent otherwise good signals from profiting while support lines are great places for entry. The same is true in reverse for bear markets, resistance during upswings are great places for entry. I like to use Fibonacci Retracements to find my support and resistance levels.

Why do Japanese Candlesticks Suck?

If all the signals given by the Japanese candlesticks would be 100% accurate, we would have found the Holy Grail. Unfortunately, like all other tools, they sometimes fail and cannot be trusted always; at least not on their own, so they must be combined with other tools.

Also, the candles, formations, and signals presented above are just some of the most important ones, but if you want to use more of them, you will have to remember all their shapes, names and prediction value. The candle types and patterns presented here are very simple and easy to understand, but even these can give a newbie a bad headache, not to mention that there are formations composed of three or even more candles and that’s where things really start to suck.

Why Japanese candlesticks Don’t Suck?

Developed by Japanese rice traders in the 18th century, candlesticks have been used by them ever since and relatively recent they started to receive credit in the Western trading world. Today almost all the charts we see use Japanese candlesticks. Their predictive value is probably the reason for their longevity and their wide use. As we know, price is driven by people and people are driven by emotions; with the help of Japanese candlesticks we can take a peek inside the mind of the majority and gauge the market sentiment, which will hopefully make us better, more profitable traders.

Wrapping It Up

Developed by Japanese rice traders in the 18th century, candlesticks have been used by them ever since and relatively recent they started to receive credit in the Western trading world. Today almost all the charts we see use Japanese candlesticks. Their predictive value is probably the reason for their longevity and their wide use. As we know, price is driven by people and people are driven by emotions; with the help of Japanese candlesticks we can take a peek inside the mind of the majority and gauge the market sentiment, which will hopefully make us better, more profitable traders.

Forex Training Group

If you are a fan of trading with naked charts, without the use of crowded indicators that can cloud your judgement, then this material will definitely appeal to you. In this article, we are going to talk about trading price action using candlestick analysis. I will go through some of the most important candlestick patterns and will explain to you their potential.

What are the Japanese Candlesticks?

Japanese candlesticks is a visual form for displaying charts invented in the 18 th century by a Japanese rice trader named Munehisa Homma. They differ from bar charts and line charts, because they give more information and can be more easily read. Let’s take a look at the image below:

This simple sketch points out all the information a Japanese candlestick will give you. The two candles displayed are a bullish (green) and a bearish (red) candle. Each candle shows the price at which the candle (the time frame) was opened, the price at which the candle was closed, the highest and the lowest price reached. Note that the bearish candles (red) move downwards, so “close” and “open” places are switched. Now look how Japanese candlesticks looks on a price chart.

Much better than the bar or line chart, don’t you think?

How to use Japanese candlesticks?

A Japanese candlestick chart provides the trader with crucial information about price action at any given point in time. Traders often confirm their signals with Japanese candlestick patterns, improving the odds of success on a trade.

Trading price action using candlestick analysis alone is a very common trading technique. Yet, candlestick trading tends to be the most powerful when confirmed with additional indicators or when combined with Support and Resistance zones.

Candlestick patterns in Forex are specific on-chart candle formations, which often lead to certain events. If recognized on time and traded properly, they can assist in providing high probability setups.

Forex candlestick patterns are classified within two types – candlestick continuation patterns and candlestick reversal patterns. We will now go through the most common reversal and continuation patterns and we will discuss their potential.

Single Candlestick Patterns

Doji (reversal / indecision)

Doji is a very easy to recognize candlestick. We have a Doji whenever the price closes at the exact same level where it has opened. Thus, the Doji candle looks like a dash with a wick.

Note that sometimes there are cases when the price doesn’t move at all from the opening. In these cases the Doji candle is simply a dash with no wicks. Take a look at this image:

The Doji candle has a reversal character when it is formed after a prolonged move. The reason for this is that during a bullish (or bearish) market, the occurrence of a Doji candle indicates that the bulls are losing powers and the bears start acting with the same force.

Thus, the candle closes wherever it was opened. Just remember: when you get a Doji on the chart after a prolonged move, there is a chance that the price will reverse its direction.

Spinning Tops (undefined)

This candle could be bearish and bullish. It has a very small body and longer upper and lower candle wick, which have approximately the same size. Have a look at the image below:

The Spinning Tops have undefined character.

The reason for this is that this candle indicates that buyers and sellers are fighting hard against each other, but none of them could gain dominance.

Nevertheless, if we get this candle on the chart during a downtrend, this means that the sellers are losing steam, even though buyers cannot prevail.

Marubozu (continuation)

This is another easy to recognize candle. The Marubozu candlestick has a body and no candle wick as shown below:

The Marubozu candle is a trend continuation pattern. Since it has no wicks, this means that if the candle is bullish, the uptrend is so strong that the price in the candle is increasing and never reaches below the opening of the bar

Hammer and Hanging Man (reversal)

The Hammer candle and the Hanging Man candle have small bodies, small upper wick and long lower wick. These two candles look absolutely the same. Here they are:

These two candles are classified as reversal patterns. The difference between them, though, is that the hammer indicates the reversal of a bearish trend, while the hanging man points to the reversal of a bullish trend.

Inverted Hammer and Shooting Star (reversal)

The Inverted Hammer and the Shooting Star are the mirror images of the Hammer and the Hanging Man. They have small bodies, small lower candle wick and long upper wick as shown below:

The Inverted Hammer and the Shooting Star both exhibit reversal behavior, where the Inverted Hammer refers to the reversal of a bearish trend, while the Shooting Star indicates the end of a bullish tendency.

Double Candlestick Patterns

Bullish and Bearish Engulfing (reversal)

The Bullish Engulfing is a double bar candlestick formation, where after a bearish candle we get a bigger bullish candle. Respectively, the Bearish Engulfing consists of a bullish candle, followed by a bigger bearish candle. Have a look at this image:

The two Engulfing candle patterns indicate trend reversal. In both the Bullish and Bearish Engulfing pattern formation the second candle engulfs the body of the first. The Bullish Engulfing indicates the reversal of a bearish trend and the Bearish Engulfing points the reversal of a bullish trend.

Tweezer Tops and Bottoms (reversal)

The Tweezer Tops consist of a bullish candle, followed by a bearish candle, where both candles have small bodies and no lower candle wick. The two candles have approximately the same parameters.

At the same time, the Tweezer Bottoms consist of a bearish candle, followed by a bullish candle. Both candles have small bodies and no upper candle wick as shown in the image below:

As we said, the two candles of the Tweezers have approximately the same size. Both candlestick patterns have reversal character. The difference between these two formations is that the Tweezer Tops signal a potential reversal of a bullish trend into a bearish, while the Tweezer Bottoms act the opposite way – they could be found at the end of a bearish trend, warning of a bullish reversal.

Triple Candlestick Patterns

Morning Star and Evening Star (reversal)

The Morning Star candlestick pattern consists of a bearish candle followed by a small bearish or bullish candle, followed by a bullish candle which is larger than half of the first candle.

The Evening Star candle pattern is the opposite of the Morning Star pattern. It starts with a bullish candle, followed by a tiny bearish or bullish candle, followed by a bearish candle which is bigger than half of the first candle. The image below will illustrate the two formations:

Both of these candlestick groups have reversal character, where the Evening Star indicates the end of a bullish trend and the Moring Star points to the end of a bearish trend.

Three Soldiers (reversal)

The Three Soldiers candlestick pattern could be bearish or bullish. The Three Bullish Soldiers consists of three bullish candles in a row:

  • A smaller bullish candle
  • A bigger bullish candle, which closes near its highest point
  • An even bigger bullish candle, which has almost no candle wick

At the same time, the confirmed Three Bearish Soldiers should have the following characteristics:

  • A smaller bearish candle
  • A bigger bearish candle, which closes near its lowest point
  • An even bigger bearish candle, which has almost no candle wick

The image below displays a valid Three Bullish Soldiers and Three Bearish Soldiers:

The Three Soldiers candlestick pattern has a reversal character.

The Three Bullish Soldiers candlestick pattern can end a bearish trends and can bring about a new bullish movement. At the same time the Three Bearish Soldiers could be found at the end of bullish tendencies, signaling an upcoming bearish move.

Candlestick Chart Analysis

Now that we have gone through some of the more reliable candlestick patterns in Forex trading, we can now see how some of these patterns look on a price chart and how we can use them as part of a price action trading strategy! Have a look at the chart below:

This is the daily chart of the EUR/USD for the period Jul 21 – Oct 8, 2020. Our candlestick chart analysis shows three successful bearish chart patterns. The first one is an evening star. As we already mentioned, the Evening Star candlestick chart pattern has a bearish character. This is exactly what happens on our chart. We get four bearish candles which corresponds to a drop in price of 126 pips. The second pattern we get from our candlestick analysis is the Hanging Man candle at the end of a bullish trend. After the appearance of the Hanging Man candle, the price of the euro decreased versus the dollar about 387 pips for three days! The third candlestick pattern on our chart is another Evening Star. At the end of the bullish trend, the Evening Star pattern followed thru with a drop of 40 pips for one day.

Let’s now go through another chart example illustrating other Japanese candlestick patterns:

This is the 4-hour chart of the USD/JPY for the period Aug 28 – Sep 28, 2020. As you see, this chart image is pretty rich with Japanese candlestick patterns. We first start with a Doji candle after a strong price decrease. We get the Doji reversal pattern and we record an increase of 97 Pips. The next candlestick pattern we get is the Three Bullish Soldiers, which appears after a slight price retracement. After the Three Soldiers reversal pattern the USD price increases about 86 pips versus the Yen.

The third candle pattern on the chart is the Spinning Top, which as we said has undefined character. This means that after a Spinning Top candle, the price might either increase or decrease, depending on the context of price action at the time. In our case, the price reverses its direction on the following bar, which also forms a Morning Star pattern, and we observe an increase of 138 pips. The price increase after the Spinning Top is immediately followed by another Doji reversal pattern. As a result of that, we get a rapid drop of 182 pips. The last candlestick pattern on the chart is a single Hammer candlestick after a bearish trend. We confirm our Hammer and the price of the dollar increases about 163 pips.

Let’s now go to the USD/CHF, where we will mainly discuss the bullish and bearish Engulfing Pattern:

So, above we have the 4-hour chart of the USD/CHF for Jul 22 – Aug 21, 2020. We start with a small Doji candle after a trend correction. The result we get after the Doji is a rapid price increase of 62 pips. Then after a period of price consolidation, we get a Bearish Engulfing. A single candle drop of 39 pips appears on the chart right after the Engulfing! Not long after, we get another Bearish Engulfing, which comes after a correction in a bearish trend. The price of the USD decreases with 50 pips for about 12 hours after this Bearish Engulfing. 10 days later, we spot a Bullish Engulfing on the chart, which comes after a bearish trend. This is the most profitable price move on this chart, which leads to an increase of 100 pips for three days. This bullish trend finishes with the last chart pattern on the image – a third Bearish Engulfing. This again results in a price reaction to the downside. The overall result from these five price movements is equal to 264 pips.

Let’s analyze another Forex chart using candlestick patterns!

This is the 4-hour chart of the Aussie (AUD/USD) for the period Sep 17 – Oct 19, 2020. We start with a Bearish Engulfing after a price increase. We confirm the pattern and we observe a steady price decrease equal to 284 pips for 6 days. Now that’s a strong reaction! The bearish trend ends with a morning star, which points to an eventual reversal. The reversal of the trend follows in more of a consolidation phase. The increase in price from the morning star is equal to 46 pips. The price decreases to the same level and we get another reversal pattern – a Bullish Engulfing! A strong bullish trend emerges after the Bullish Engulfing pattern. We could have traded the first increase of 110 pips until we get a Doji reversal candle, which resulted in a 66 pip correction.

Soon afterward we see another Bullish Engulfing formation. The price records dramatic increases on strong momentum. Furthermore, after a short corrective movement, the bullish trend gets confirmed by the Three Bullish Soldiers candle pattern, which is another confirmation that the bulls definitely dominate! We stay in the market until we get the Bearish Engulfing at the end of the trend. The overall price increase equals 384 pips. After the Bearish Engulfing we get a decrease of 160 pips. Then, after a new increase, we get the Hanging Man candlestick pattern, which is followed by a new price decrease of 80 pips. The total price action in this example equals about 1,000 pips for 1 month, More than enough opportunity to make high probability trade setups using candlestick patterns.

As you can see, trading Forex with Japanese candlestick patterns could be very profitable. Japanese candlesticks are the preferred way to display Forex charts, because of the depth of information it provides. Although we discussed 13 successful candlestick pattern trades, there can be many fake signals that show up as well. Therefore, it is always good to match your candlestick pattern signal with an additional trading tool.

This could be a moving average, a volume indicator, a momentum oscillator or Support and Resistance levels based on previous swings. Fibonacci Retracement levels are another good trading tool to confirm candlestick patterns. Try to use uncorrelated technical confluence when trading candlestick signals in order to eliminate as many false signals as possible. When adding an additional layer of confirmation to your candlestick trading strategy, you might even increase your candle pattern success rate to more than 60-65 %.

Japanese candlesticks and naked trading

Japanese candlesticks are the most used technical tool, mostly they use it in naked trading which does not mean you trade in front of computer naked, you can keep your clothes on. It means that when you do technical analysis you have chart free without any indicator except japanese candles. Obviously they plan now the most important role but they can do that beacuse each japanese candle gives us enough information and if we form them together and look at them, they form patterns from which we can indicate where the price will go in future.

WHAT YOU WILL LEARN HERE:

  • What is japanese candlestick?
  • How japanese candlestick looks?
  • How to use different types for trading?

WHAT IS JAPANESE CANDLE?

Japanese candle will show us based on the time frame of course where is the open and close price and also the highest and lowest peak in the specified time. So if we will use hourly chart, means that one japanese candlestick will represent one hour and will give use information where the price was the highest in this hour and where it was the lowest and also the open and closing price as we said. Same goes for all other time frames. Here is how japanese candle looks:

As you can see we have on the left, bullish candle which is used in an uptrend and on the right we have bearish candle which represent downtrend. The bullish candle has the closing price higher then the opening price. You can see the upper shadow or also called wick which shows highest point that price reached and on the down side you can see the lower shadow or wick to where the price went down the most in period of time. This is the information you get from japanese candlestick but we have different forms of candlestick which can be used in trading.

HOW TO USE THEM?

You have seen what japanese candle is and what kind of information it can give you. Now, let us take a look at various japanese candles and how you can use them for trading purposes and what they represent.

PIN BAR

If you are following our school you remember this pin bar from pinocchio strategy. If we focus now on the right pin bar from the picture which is bullish one meaning it goes uptrending. You still have to know how to read such candlesticks. As you can see, the bears were pushing price down but the more we went too the end of the period, the more bulls were pushing the price up and managed to push it higher then the opening was. It closes a little lover that is why a little upper shadow or wick is made. After such candle, means that bulls are now in control and they have reversed the price to go uptrending and will more likely move up. Bearish or downtrending pin bar is opposite as you can see from the picture aswell.

DOJI CANDLE

This kind of sub-japanese species of candle forms when there is almost the same open and close price which as you can see from the picture creates a small body and long shadows or wicks. Most usual doji candles have almost the same lower and upper shadow or wick lenght. But you can see that others also qualify as doji candle since the open and close price are almost the same.
When you see a doji candle on a chart it means there is no specific direction and therefore there is indecision on the market. Eventually one side will prevail and move to that direction, so focus on the trend.

MARUBOZU CANDLE

This candle represent good indicator of strenght. If doji has no specific direction this has high direction. When you see a marubozu that is bullish you can be certain that bulls are in control and vice versa if you see bearish marubozu. As you can see charactheristics of a marubozu are, long bodies with no shadows or wicks which gives you strong indication. Although they are really rare to find but when you do, you know it is a good indicator that price will go in the direction it is indicated.

FINALE

No matter what, there is no 100% signal that japanese candles are always right but most of the time they give us the correct information. This is just basic formations we have mentiond while you have even more shapes it is good to learn when you for example join two or three together. Today actually almost everyone uses japanese candlesticks when trading since they are the best when it comes to predicting values.

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