Japanese candlesticks: reading a chart as a beginner (doji, hammer…)

BULLSAGE Trader by MyBotIA · Published on 5 November 2026 · Educational content prepared with AI assistance, calculations checked. No personalised financial advice.

One candle, four prices

• The body connects the opening price and the closing price of the period (one minute, one hour, one day…).
• The colour shows the direction: usually green (or white) if the close is above the open, red (or black) if it is below.
• The wicks (or shadows) reach up to the highest price and down to the lowest price traded during the period.

Where do Japanese candlesticks come from?

Their origin is traditionally credited to 18th-century Japanese rice merchants, in particular Munehisa Homma, who traded on the Dojima market in Osaka. Historians qualify this story: today’s graphical representation took shape later. In the West, the method spread with Steve Nison’s book Japanese Candlestick Charting Techniques, published in 1991.

The patterns to know (and what they really say)

• Doji: open and close almost identical, with a near-invisible body. Buyers and sellers were evenly matched: it shows hesitation, not a reversal signal on its own.
• Hammer: small body at the top of the candle, long lower wick (at least twice the body). The price fell and was then bought back. It is mostly noticed after a decline, near a support (a price level where buying has tended to stop falls).
• Shooting star: the opposite of the hammer, a long upper wick after a rise. The price was rejected on the way up.
• Engulfing (bullish or bearish): the body of one candle completely covers the body of the previous one, in the opposite direction.

Why one candle is not enough

The same pattern does not mean the same thing everywhere. A hammer in the middle of a directionless market says almost nothing; a hammer on the previous day’s low, in an uptrend, with high volume, says more. Three questions before drawing any conclusion:

1. Where? Is the candle forming on an important level (support, resistance, recent high or low)?
2. In what context? What is the trend on the higher timeframe?
3. Is it finished? A candle only exists once it has closed. A hammer halfway through the hour can end up as a big red candle.

Entering before the candle closes is one of the mistakes found most often when rereading a trading journal.

From candles to a trade plan

A pattern can act as a trigger, never as a complete plan. The plan also says where the scenario becomes wrong (the stop-loss, often just below a hammer’s lower wick), how much you are risking (the position size) and what you are aiming for. To practise reading candles live without risking money, use the crypto trading simulator and follow the learn trading from A to Z path.

This article is educational and is not investment advice.