Here is an explanation of some popular Japanese candlestick patterns, divided between bullish and bearish patterns.
Bullish Patterns
1. Hammer
Description: Has a small body and a long lower wick (at least twice the size of the body).
Meaning: Indicates a possible bullish reversal after a downtrend, showing that buyers are regaining control.
2. Bullish Engulfing
Description: A large green candle completely engulfs the body of a previous red candle.
Meaning: Indicates that buyers have taken control, reversing the downtrend.
3. Morning Star
Description: A three-candle pattern: a long bearish candle, followed by a small candle (can be green or red), and then a long green candle.
Meaning: A bullish reversal signal indicating the end of a downtrend.
Bearish Patterns
1. Hanging Man
Description: Similar to the hammer, but appears after an uptrend. Has a small body and a long lower wick.
Meaning: Indicates a possible bearish reversal.
2. Bearish Engulfing
Description: A large red candle completely engulfs the body of a previous green candle.
Meaning: Indicates that sellers are gaining control, suggesting a bearish reversal.
3. Evening Star
Description: A three-candle pattern: a long bullish candle, followed by a small candle (can be green or red), and then a long red candle.
Meaning: A bearish reversal signal after an uptrend.
Continuation Patterns
1. Doji
Description: The candle has an almost nonexistent body, with long upper and lower wicks.
Meaning: Indicates indecision in the market. Depending on the context, it can signal continuation or reversal.