How to read Japanese candlestick charts

Japanese candlesticks are a way of presenting the price action over a set period of time. They provide useful information, such as the market sentiment or possible reversals in the markets, by showing the price movement in a specific way.

The video player is loading...

A Japanese candlestick chart shows you more information

When you trade something, whether it is forex, stocks or commodities, you will use price charts to see the price movement in the markets.

Consider the following two charts:

Line vs candlestick chart

The line chart on the left is a very simple way of showing the price movement. It displays the information with a simple line using a series of data points. It is the type of chart that you may be used to seeing in magazines and newspapers that shows the price movement of stocks and shares.

A line chart is simplistic and only displays price movement in a line. A Japanese candlestick chart shows more information within each individual candlestick.

The Japanese candlestick chart to the right shows the same price movement, however it is made up of individual candlesticks. Traders prefer to read candlestick charts because they include more information than a line chart and can be more useful for making trading decisions.

Japanese candlesticks represent a set period of time

If a Japanese candlestick chart is set to a 30 minute time period, then each individual candle will form over thirty minutes. Likewise, if the chart is set to a 15 minute time period, then each candle will take fifteen minutes to form.

Consider the following charts:

30 minute and 5 minute chart

Each chart shows the price action for the EUR/USD. The two candles in the green shaded area in the left chart are two 30 minute candles. This represents the exact same period as the twelve shaded candles on the 5 minute chart to the right.

Each Japanese candlestick represents a specific time frame. If the time period is set for 30 minutes, then each individual candle will take 30 minutes to form.

The two charts are showing the price action of the same asset, only the chart to the left is showing the price action over a much longer period than the chart to the right.

This is because the chart to the left is a 30 minute chart, meaning that each candle took thirty minutes to form, and the chart to the right is a 5 minute chart, meaning that each candlestick took five minutes to form. The 30 minute chart therefore shows a much broader time scale of price action than the 5 minute chart.

Each candle shows the open, close, high and low price

Take a look at the following image:

Candlesticks showing the high, low, close and open

The wide part of the candlestick is called the body. It represents the open and close of the period. This means that if the chart is a 1 hour chart, then each candlestick body will show the opening price for that 1 hour period and the closing price for that 1 hour period. The wicks at the top and the bottom of the candlestick show the highest and lowest price reached during that 1 hour period. A chart that displays the open, high, low and close price for a given period is referred to as a OHLC chart.

OHLC
The opening price, highest price, lowest price and closing price of a given period is often referred to as the OHLC. Charts that display this information are often called OHLC charts.

The different colours of the body tell you if the candlestick is bullish (rising) or bearish (falling). At tradimo, we have set our candlesticks to orange for bearish candles and blue for bullish candles. It does not matter what colour your candlesticks are; they can be set to any colour in your trading software.

If the candlestick is bullish, then the opening price is always at the bottom and the closing price is always at the top. If the candlestick is bearish, then the opening price is always at the top and the closing price is always at the bottom.

The different colours simply provide a means for you to instantly tell if they are bullish or bearish.

Looking for a mentor?

Matthias from our Tradimo Premium team will design a learning plan tailored to you that gives you access to new courses and live webinars every month as well as priority private email support.

Order our Tradimo Premium Service now

A closer look at a bearish Japanese candlestick

Daily candle information

The candlestick in this illustration is a period of 1 day, which means that the candle took an entire day to form. The currency pair is the EUR/USD.

From the candle you can identify the following information:

  • The candle is bearish because of its orange colour. This means that over the course of a single day the price of the EUR/USD dropped. There were more sellers than buyers throughout the day; the price was lower at the close of the day than when it opened.
  • The price at the beginning of the day opened at 1.38278.
  • The price at the end of the day closed at 1.34497.
  • Throughout the day, the highest price that the buyers pushed the EUR/USD to was 1.38600.
  • Throughout the day, the lowest price that the sellers pushed the EUR/USD to was 1.34125.

This, however, only shows the OHLC for that day. If you wanted to see the price movement in more detail, you would go to a lower time frame.

Using the example above, to find out more specifically what happened during the course of that day – that day being the single candlestick shown – you could go to a 1 hour time frame chart. This chart would show candlesticks that more accurately depict the price movement throughout the day.

Similarly, you could go to an even lower time frame – say, a 15 minute or a 5 minute time frame – and find out how the price behaved in even more detail.

You will explore the methods of choosing which time frame best suits your trading style in further lessons.

A further example using a bullish Japanese candlestick

Hour candle information

The candlestick in this illustration is a one hour period, which means that the candle took an hour to form. The currency pair is EUR/USD.

From the candle you can identify the following information:

  • The candle is bullish because it is blue. This means that over the course of an hour, the price of the EUR/USD increased. There were more buyers than sellers throughout the hour; the price was higher at the close of the hour than when it opened.
  • The price at the beginning of the hour opened at 1.3016.
  • The price at the end of the hour closed at 1.3175.
  • Throughout the course of the hour the highest price that the buyers pushed the EUR/USD to was 1.3185.
  • Throughout the hour the lowest price that the sellers pushed the EUR/USD to 1.2956.

Although a trader can use practically any time period for each candle, the most common periods are M1 (1 minute), M5, M15, M30, H1 (1 hour), H4, D1 (1 day), W1 (1 week) and MN1 (1 month). The time frames that are available for your use will depend on the trading platform you choose to use.

Summary

So far, you have learned that ...

  • ... the Japanese candlestick chart shows you more information than a simple line chart.
  • ...the Japanese candlestick chart is the most common type of chart used by traders
  • ... Japanese candlesticks represent the time that the candle takes to form, which is referred to as a time frame.
  • ... each candlestick tells you the open, high, low and close (OHLC) price of the time frame for that candle.
  • ... an orange candle means that the price has moved down and a blue candle means that the price has moved up.

Looking for a Top Broker? Sign up through Tradimo & get extra benefits!

eToro Plus500 Markets.com FXFlat

See all top brokers


  • Thanks a lot the ur illustration is very clear to me thanks ,but let know how download the video.
  • fundamentals are always the best to start a journey
  • usefull information thanks
  • good information for beginners. At first I was getting edgy following the redirects but now that explains! will definitely bookmark most of the topics.
  • Hello
    fundamentals are always the best to start a journey
  • A very usefull information for a beginner trader
  • I DON HAVE AN ACCESS TO THIS CANDLESTICK, I'M USING THE NORMAL LINE CHART , COULD I ASK FOR SOME TIPS TO HOW GET THE MAXIMUM FROM THE LINE CHART PLEASE?
  • Hi Kamil,
    How come you don't have access to candlesticks? What platform do you use? It is possible to load candlesticks on almost all platforms. It is because retail traders use mostly candlestick, to a much lesser extent, bar charts. Line charts are mostly used by investors, hedge funds, banks who focus more on fundamentals and less on technicals.
    Let me know so i can help you further!
    Regards.
    Peter
  • Hallo this japanese candlestick,technical analysis,my freind it rocks high.Good work keep it up.
  • A very simple and excellent explanation.
  • your videos are not playing on chrome or firefox....my flash player is up to date as well. I am unsure at this point.
  • hi Viwe23,
    They play fine for me. It could also depend on your location. Where are you located and what are the version numbers of your browsers?
    Regards.
    Peter
  • Though Candlestick chart is a very useful guide to trade but i prefer using line and bar charts to analyze because of its simplicity and as easy as a-b-c.
  • Hi Josten,

    It's good to hear from you.
    I would like to have the full title of the full title of the e-book on FX with Japanese Candlestick Pattern. I tried to ordered once without success. My credit card was not accepted by the vendor, and between I had to have my laptop repair and lost the information.

    I cannot get your website when I clicked it just now. The message was the page requested not found. Your Sunday mail on "Swing Trading with Candlestick Patterns " only appears on my iPhone not with the mail on my laptop. Very strange!!

    I don't know which broker I should open my account with. A demo one first of course. Which software your broker uses? I intended to open an account with SaxoBank , however, I cannot even understand how to use their trading Platform software. So it is very worrying. I hope will be able to get on with a trading platform software I would like to practise, because I must try and earn a little bit of income. Hope I will be able to. So I can have supplementary income of what I have loss in Pound Sterling. My income is pound sterling. Thank you for listening and understanding my problem.
    Thanks
  • Dear Hoover,

    I think the link has been blocked on Tradimo. I suggest we take this offline. You are always welcome to email me and connect with me personally to let me help you with your problems.

    You can always click onto my profile avatar and you will see my website. I have listed my website on the Tradimo profile. You may choose to connect with me personally or you may choose to write me an email using my contact details.

    I will respond to you as fast as I can as I am very active in managing my personal brand pages and trading groups. Feel free to connect with me anytime! I wish you an enjoyable trading journey ahead.

    Safe trade to you.
  • Dear Jesten,
    Thank you for your reply. It's very kind of you to understand my problem. I am quite IT illiterate so I cannot find my way around with link and so on that easily. Thank you for your offer and kind understanding and I will bear in mind that I can ask for your help anytime.

    Thanks,

    Best wishes,
  • Are japanese candles better than OHLC bars
  • Hi Abdo111,

    Both Japanese Candlesticks and OHLC bars

    • Display high, low, open and close prices
    • Don't show the sequence of events between the open and close
    • Provide much more information than the line chart

    But:

    • In candlestick charts, the relationship between open and close is depicted by the color of the body, whereas with bar charts that relationship is shown by horizontal lines standing out from the vertical line.
    • The bar chart emphasises the closing price of the stock in relation to the prior period's close. The candlestick places the highest importance on the close as it relates to the open of the same day.

    So different people have different preferences and it's hard to say which one is better. You can try them both and see what suits you best smile.
    Hope this helps you
    Sebastian
    PS: Check out our [c url=https://learn.tradimo.com/premium]Premium Service for more personalised help. We also have a special offer for new traders here: http://en.tradimo.com/trading-start/

Register Now - It's free!

By clicking on the "Get instant access" button, you agree that you have read, understood, and accepted the Terms & Conditions.
Or