Basic Japanese Candlestick Patterns

Japanese candlestick patterns are undoubtedly the most trusted visual tool in forex technical analysis. Each helps you recognize when the market shows indecision, strength, or signs of reversal. 

Let us guide you about the most basic formations, which gives you the foundation to spot opportunities, avoid false signals, and build confidence as you grow into advanced strategies.

Spinning Top

The Spinning Top signals indecision, which means the market has no clear direction. Bulls push the price higher, and bears push it lower, but neither side wins. The result is a small body with long shadows that show the back-and-forth struggle.

Let’s understand it better with a forex example. Suppose EUR/USD is in a strong uptrend and a Spinning Top forms near resistance at 1.1000. Buyers try to push the price above the resistance, but sellers push it back down. The candle closes near its open, leaving both long upper and lower shadows. The pattern tells you that bullish momentum is weakening.

The candle does not confirm a reversal by itself. It only shows that momentum is slowing and that the trend is vulnerable. Traders wait for the next candle. A bearish confirmation candle closing below 1.0980 could signal the start of a reversal. On the other hand, a bullish candle closing above 1.1020 could show that buyers regained strength and the uptrend continues.

The Spinning Top acts like a warning. It tells you the market is at a decision point, and your job is to confirm direction with the next candles or with tools like RSI, MACD, or volume.

How to Identify a Spinning Top?

• Small real body showing minimal difference between open and close.
  Long upper and lower wicks, almost equal in length.
• Appears after both uptrends and downtrends, often near areas of exhaustion.

How to Trade the Spinning Top?

• Check the trend context – in an uptrend, it may point to buyer exhaustion; in a downtrend, it may suggest seller exhaustion.
• Wait for confirmation – a bullish candle after a downtrend Spinning Top signals potential reversal; a bearish candle after an uptrend Spinning Top signals weakness.
• Combine with indicators – RSI, MACD, or volume analysis can confirm the reliability of the signal.
• Use stop-loss orders – place them just beyond the wick to manage risk in case the market continues in the prior trend.

Marubozu (White & Black)

The Marubozu has its roots in Japanese candlestick charting created by Munehisa Homma in the 18th century. The word means “bald head” or “shaved,” because the candle shows no shadows. It represents full control by either buyers or sellers.

It’s like: a White Marubozu shows buyers marching forward without pause, while a Black Marubozu shows sellers pressing down with no resistance. There is no indecision in this formation.

Suppose GBP/USD is trading at 1.2600 and forms a White Marubozu that closes near 1.2700. The session shows relentless buying interest, and traders take it as a sign the uptrend may continue toward the next resistance. On the other hand, if EUR/JPY is in an uptrend and a Black Marubozu appears after reaching 160.00, the candle warns that sellers have stepped in with force, and a reversal could start.

How to Identify Black Marubozu?

• The candlestick has a long, filled (black or red) body.
• No visible upper shadow (open = high).
• No visible lower shadow (close = low).
• Sellers push the price down from the very start until the very end of the session.
• The candle usually forms during a downtrend to confirm bearish strength or at the top of an uptrend as a warning of reversal.

How to Identify White Marubozu?

• The candle has a long hollow body (white or green, depending on chart color scheme).
• Open price = Low price (no lower shadow).
• Close price = High price (no upper shadow).
• Buyers control the entire session from start to finish.
• Often appears in an uptrend to confirm bullish momentum.
• When it forms at the bottom of a downtrend, it can act as an early bullish reversal signal.

How to Trade White Marubozu?

• Enter long if it forms after a downtrend or near strong support.
• Place stop-loss just below the low of the candle.
• Take profit at the next resistance zone or recent swing high.
• Use volume or momentum indicators to confirm buyer strength.
• Avoid chasing if the candle appears after a long rally without support nearby.

How to Trade Black Marubozu?

• Enter short if it forms after an uptrend or near strong resistance.
• Place stop-loss just above the high of the candle.
• Take profit at the next support zone or recent swing low.
• Use momentum or bearish confirmation signals (RSI, MACD, follow-up candles).
• Avoid shorting blindly if the candle appears after a steep drop with no clear support.

Doji

The Doji is one of the most recognisable Japanese candlestick patterns. It forms when the opening and closing prices are almost the same, leaving the candle body very small or appearing like a thin line. The long shadows above and below the body show that buyers and sellers pushed the price in both directions but ended in balance.

Types of Doji

• Standard Doji: Neutral indecision.
• Dragonfly Doji: Open, high, and close are near the top of the range, long lower shadow. Often bullish when confirmed.
• Gravestone Doji: Open, low, and close are near the bottom of the range, long upper shadow. Often bearish when confirmed.
• Long-Legged Doji: Long upper and lower shadows, shows strong indecision and market volatility.

How to Identify a Doji?

• Open and close prices are almost equal.
• Very small or no real body.
• Upper and lower shadows can vary in length.
• Shape often looks like a cross, plus sign, or inverted cross.

What It Signals?

• Indicates indecision or balance between buyers and sellers.
• Alone, it does not confirm reversal but warns that momentum is weakening.
• Importance increases when it appears after a strong uptrend or downtrend.

How to Trade the Doji?

• Look for context as it appears after a trend or at support/resistance levels.
• Wait for the next candle to confirm direction.
• Combine with indicators such as RSI, MACD, or volume for stronger confirmation.

For example, if EUR/USD rallies sharply and then prints a Doji near resistance, a bearish follow-up candle can confirm a short entry.

Hammer

The Hammer is a classic Japanese candlestick pattern that often signals a potential bullish reversal. Traders watch it closely because it shows selling pressure early in the session followed by strong buying recovery. The long lower shadow makes it look like a hammer driving into support levels.

For example, if USD/JPY drops to 140.20 and prints a Hammer with a long lower shadow reaching 139.80, then closes near 140.15, traders may prepare for a bullish reversal. A strong bullish candle closing above 140.20 the next day can confirm the setup.

How to Identify a Hammer?

• Appears after a downtrend.
• Small real body near the top of the candle range.
• Long lower shadow at least twice the length of the body.
• Very little or no upper shadow.
• Color of the body (white/green or black/red) is less important, but a white/green body is considered more bullish.

What It Signals?

• Bears push the price down during the session.
• Bulls step in and drive the close near the high.
• Market psychology shifts from selling pressure to potential buying strength.
• Works best when confirmed by a strong bullish candle on the next session.

How to Trade the Hammer?

• Look for it at the end of a downtrend or near strong support.
• Enter long when the next candle closes above the Hammer’s high.
• Place stop-loss below the Hammer’s low.
• Set profit target near the next resistance or use a risk-reward ratio like 1:2.
• Confirm with indicators such as RSI oversold levels, MACD crossovers, or strong volume.

Hanging Man

The Hanging Man is a bearish Japanese candlestick pattern. It appears after an uptrend and warns that buying pressure is fading. The shape looks similar to the Hammer, but its context at the top of a rally makes it a potential reversal signal.

For example, if EUR/USD climbs to 1.1050 after a strong rally and forms a Hanging Man with a long lower shadow down to 1.0990, then closes at 1.1045, traders wait. If the next candle opens weak and closes below 1.1040, it can confirm a bearish reversal.

How to Identify a Hanging Man?

• Forms after an uptrend.
• Small real body near the top of the candle range.
• Long lower shadow at least twice the length of the body.
• Very small or no upper shadow.
• Color can be white/green or black/red, but a black/red body is considered more bearish.

What It Signals?

• Buyers push prices higher, but heavy selling during the session pulls the price down.
• Strong buying near the close lifts it back up, but the long lower shadow shows sellers had strength.
• It warns that demand is weakening and supply pressure is rising.
• The pattern becomes meaningful only if the next candle confirms with a bearish close.

How to Trade the Hanging Man?

• Wait for confirmation: a bearish candle closing below the Hanging Man’s body.
• Enter short after confirmation, not before.
• Place stop-loss above the Hanging Man’s high.
• Profit target can be set at the nearest support level or using a risk-reward ratio (e.g., 1:2).
• Confirm with RSI overbought signals, MACD crossovers, or volume spikes.

Shooting Star

The Shooting Star is a bearish reversal candlestick that forms at the top of an uptrend. Its long upper shadow shows strong early buying, but the close near the session’s low reveals sellers taking control. The shape resembles a star falling from the sky, which is why traders call it a Shooting Star.

For example, suppose GBP/USD rallies to 1.3100. A Shooting Star forms with a long upper shadow reaching 1.3160 but closes near 1.3110. If the next candle drops below 1.3100, traders may view it as a signal that bullish momentum is exhausted and a downtrend could start.

How to Identify a Shooting Star?

• Appears after an uptrend.
• Small real body near the bottom of the candle range.
• Long upper shadow at least twice the size of the body.
• Very little or no lower shadow.
• Body color can be bullish or bearish, but a bearish (red/black) body gives a stronger signal.

What It Signals?

• Buyers push the price up strongly during the session.
• Sellers step in and drive the close near the low of the day.
• Market sentiment shifts from bullish enthusiasm to bearish pressure.
• The pattern warns of weakening buying power and a possible reversal.

How to Trade the Shooting Star?

• Wait for confirmation: a bearish candle closing below the Shooting Star’s body.
• Enter a short position after confirmation.
• Place stop-loss above the Shooting Star’s high.
• Profit targets can be set at the next support zone or using a 1:2 risk-reward plan.
• Confirm with overbought RSI, volume decline on rallies, or bearish MACD signals.

Final Words

If you plan on trading Japanese candlestick patterns, you must make sure you approach them with structure and discipline. Each candle tells a story of market psychology, but no single signal works in isolation. You need confirmation from the following candles, alignment with the broader trend, and support from technical tools such as moving averages, RSI, or volume.

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