Japanese Candlestick Patterns — Complete Reference

Japanese candlestick charting originated in 18th-century Japan, developed by rice trader Munehisa Homma. Each candlestick shows four data points: open, high, low, and close for a period. The "body" is the area between open and close — a filled/red body means the close was below the open (bearish), while a hollow/green body means the close was above the open (bullish). The thin lines above and below the body are "wicks" or "shadows" showing the high and low.

Single-candle reversal patterns — Doji: A candle where the open and close are virtually equal, creating a cross or plus sign. The doji indicates indecision — neither buyers nor sellers are in control. A doji after a strong uptrend (bearish signal) or downtrend (bullish signal) suggests the trend may be losing momentum. Variations include the long-legged doji (long upper and lower shadows), dragonfly doji (long lower shadow, no upper shadow — bullish), and gravestone doji (long upper shadow, no lower shadow — bearish).

Hammer and Hanging Man: Both have small real bodies at the top with long lower shadows (at least 2× the body length). A Hammer appears after a downtrend and is bullish — sellers pushed the price down, but buyers fought back and closed near the high. A Hanging Man appears after an uptrend and is bearish — same shape but different context signals different meaning. The Inverted Hammer (small body at bottom, long upper shadow) after a downtrend is also bullish. The Shooting Star (same shape as inverted hammer) after an uptrend is bearish.

Two-candle patterns — Bullish Engulfing: A small bearish candle followed by a larger bullish candle whose body completely "engulfs" the previous candle's body. It signals strong buying pressure and a potential reversal from a downtrend. Bearish Engulfing is the opposite: a small bullish candle followed by a larger bearish candle. Engulfing patterns are more significant at key support/resistance levels and when accompanied by high volume.

Harami patterns: A large candle followed by a small candle whose body is entirely within the previous candle's body (the Japanese word "harami" means pregnant). Bullish Harami: a large bearish candle followed by a small bullish candle — suggests selling pressure is diminishing. Bearish Harami: a large bullish candle followed by a small bearish candle — suggests buying pressure is fading. Harami crosses (where the second candle is a doji) are considered stronger signals.

Three-candle patterns — Morning Star: A three-candle bullish reversal pattern. First candle: large bearish. Second candle: small body (can be bullish or bearish) that gaps below the first — this is the "star" showing indecision. Third candle: large bullish that closes at least halfway into the first candle's body. Evening Star is the bearish version: large bullish candle, small star candle that gaps up, then large bearish candle closing at least halfway into the first candle. Three White Soldiers: three consecutive bullish candles with higher closes — strong bullish continuation. Three Black Crows: three consecutive bearish candles with lower closes — strong bearish continuation.

Important context rules: (1) Candlestick patterns should always be interpreted in context — a hammer at a key support level is much more significant than one in the middle of nowhere. (2) Volume confirmation strengthens any pattern. (3) Patterns at the end of a prolonged trend are more reliable than those mid-trend. (4) Always look for follow-through: a bullish pattern should be confirmed by a bullish candle the next day. (5) In the Egyptian market, patterns on daily charts work well for swing trading. Watch for engulfing patterns at EGX30 index support levels for broad market signals. This is not financial advice.