Trader Lab · Technical analysis
FxPro. Japan
How to read candlestick charts
A candlestick packs the open, high, low and close of one period into a single bar. Learning the names helps, but where a candle appears and on which timeframe matters more than its shape.
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The four prices in one candle
Every candle shows the open, high, low and close of its period. If the close is above the open the candle is bullish; below, it is bearish. The thick part is the body and the thin lines are the wicks (or shadows).
| Part | What it tells you |
|---|---|
| Body | The distance between open and close. A long body means a strong move in one direction. |
| Upper wick | Price reached the high but sellers pushed it back. |
| Lower wick | Price fell to the low but buyers brought it back. |
MT4 and MT5 let you change colours, and their defaults differ from most Japanese broker charts, so check which colour means bullish on your own screen first.
Single candles worth knowing
- Big bullish or bearish candle: long body, short wicks; strong momentum.
- Doji: open and close almost equal; buyers and sellers are balanced and the market is undecided.
- Long lower wick (hammer): heavy selling was bought back. Near a low it can mark a bounce.
- Long upper wick (shooting star): buying was sold into. Near a high it can mark a drop.
Two- and three-candle patterns
- Engulfing: the second body completely covers the first. A big bullish candle engulfing a bearish one after a fall is a classic reversal signal.
- Harami: a small candle inside the previous big body. Momentum is fading; wait to see which way the next candle breaks.
- Three soldiers or three crows: three strong candles in the same direction, common at the start of a trend.
Location beats shape
The same long lower wick means much more at a pullback in an uptrend, or at a low that has held several times, than in the middle of a range. Candles that form where moving averages or Fibonacci levels sit are the ones worth attention.
Which timeframe
Patterns on 1-minute and 5-minute charts are noisy and fail often. Beginners usually do better reading shapes on the 1-hour or 4-hour chart and using a shorter chart only to time the entry. A candle can change shape until it closes, so do not call a pattern before the bar is finished.
Practise on a demo
- Open MT5 on a free FxPro demo and load the USDJPY 1-hour chart.
- Find ten engulfing candles and ten long wicks in past data.
- Note where each formed and what the next five candles did, then narrow down the conditions that worked.
Where to put the stop: how to set a stop-loss.
Questions
What colour is a bullish candle?
There is no fixed rule. Many Japanese brokers show bullish candles in red or white and bearish ones in blue or black, while MT4 and MT5 use different defaults. Check your chart settings.
Can I trade on candlesticks alone?
Shapes alone produce many false signals. Most traders combine them with the trend, horizontal levels or moving averages, and decide the stop before entering.
Which timeframe is most reliable?
No timeframe is always right. Longer charts give fewer false signals but bigger ranges and risk. Pick one that matches the hours you can actually trade.