Forex traders need to know: How to read candlesticks like a pro

Forex trading is not guessing. Successful traders must have the skill to read candlesticks correctly because this is the language the market speaks to you every second. This article will introduce an in-depth guide on how to read and interpret candlesticks so you can make trading decisions with more confidence.

Before diving into the content: What are candlesticks?

Candlesticks are basic price charts that display 4 key data points within a specified time frame:

• Opening price (Open)
• Closing price (Close)
• Highest price (High)
• Lowest price (Low)

When viewing candlesticks, you will see the candlestick (body) and the wicks/shadows (wicks/shadows) that tell the story of the battle between buyers and sellers.

Clear explanation of candlestick structure

White candlestick (Bullish)

When the closing price is higher than the opening price, you will see a white candlestick. This indicates:

• Buyers (Bulls) dominate the market during that period
• Buying pressure is stronger than selling pressure
• The longer the candlestick, the greater the buying strength

Black candlestick (Bearish)

When the closing price is lower than the opening price, a black candlestick appears, indicating:

• Sellers (Bears) dominate the market
• Selling pressure is stronger than buying pressure
• The longer the candlestick, the more evident the selling strength

What are wicks/shadows? (

Wicks are the small lines extending from the body of the candlestick, indicating:

• Short wicks: Narrow trading range, little conflict
• Long wicks: Intense battle between buying and selling, but one side wins

Why are candlesticks better than other charts?

) 1. Clear market sentiment Line charts ###Line Chart( or bar charts )Bar Chart( only show whether prices are up or down, but candlesticks reveal the conflict between buyers and sellers through the shape of the wicks and body.

) 2. Clear and easy to understand patterns Each candlestick has its own story. When combined with other tools like Support-Resistance or Trend Lines, they can serve as trading signals.

3. Long history = proven effectiveness

Candlesticks have been around for over 200 years, invented by Japanese rice traders, and are still used today because they work.

Basic candlestick pattern profiles

Doji: Market hesitation

Characteristics: Open = Close

Doji indicates a balance between buying and selling forces. It may signal the end of the current trend. There are 4 subtypes:

• Standard Doji: Price rises and falls back to the same level
• Gravestone Doji: Long upper wick ###buying pushed up but was pressed down( → Reversal signal from an uptrend
• Dragonfly Doji: Long lower wick )selling pushed down but was bought back( → Reversal signal from a downtrend
• Four Price Doji: Very short wicks )extreme indecision or consolidation( → Avoid trading

) Marubozu: Strong decisive candle

Characteristics: Full-bodied candlestick with no wicks

• Marubozu White: Open = Lowest price, Close = Highest price ###Buyers in complete control(
• Marubozu Black: Open = Highest price, Close = Lowest price )Sellers in complete control(

Marubozu indicates a clear market decision.

) Spinning Top: Indecision

Characteristics: Short body with long wicks on both ends

This shows intense conflict but no clear winner, possibly indicating a weakening trend.

Recognizing advanced patterns: 1, 2, 3 candlesticks

One-candlestick pattern

Hammer & Hanging Man

Shape like a hammer with a long lower wick

• Hammer ###at the bottom of a downtrend(: Sellers tried to push the price down, but buyers stepped in → Potential reversal to an uptrend
• Hanging Man )at the top of an uptrend(: Buyers pushed the price up, but sellers stepped in → Potential reversal to a downtrend

⚠️ Tip: Don’t trade immediately on this signal. Wait for the next candlestick to confirm.

)# Inverted Hammer & Shooting Star Opposite shape with a long upper wick

• Inverted Hammer ###at the bottom of a downtrend(: Buyers show strength even after attack → Uptrend may follow
• Shooting Star )at the top of an uptrend(: Sellers attack the rally → Downtrend may follow

) Two-candlestick pattern

Bullish Engulfing & Bearish Engulfing

Two consecutive candles where the second engulfs the first

• Bullish Engulfing: Black candle + larger white candle that engulfs it → Reversal from downtrend to uptrend
• Bearish Engulfing: White candle + larger black candle that engulfs it → Reversal from uptrend to downtrend

Tweezer Tops & Tweezer Bottoms

Two candles with matching upper or lower wicks (like a clamp)

• Tweezer Tops ###at the top of an uptrend(: Clear resistance → Possible reversal down
• Tweezer Bottoms )at the bottom of a downtrend(: Clear support → Possible reversal up

) Three-candlestick patterns

(# Morning Star & Evening Star Strong reversal signals consisting of 3 candles

• Morning Star )from downtrend to uptrend###: Black candle + small Doji + large white candle
• Evening Star ###from uptrend to downtrend(: White candle + small Doji + large black candle

)# Three White Soldiers & Three Black Crows Three consecutive candles in the same direction

• Three White Soldiers: 3 large white candles in sequence, increasing in size → Strong uptrend
• Three Black Crows: 3 large black candles in sequence, increasing in size → Strong downtrend

(# Three Inside Up & Three Inside Down 3 candles with special positioning

• Three Inside Up )from downtrend to uptrend###: Long black candle + small white inside + large white breakout
• Three Inside Down ###from uptrend to downtrend(: Long white candle + small black inside + large black breakout

Correct interpretation of candlesticks

) Don’t think of candlesticks as 100% signals

Truth: Candlestick success rate is about 50-60% when used alone.

Don’t rely solely on candlesticks. Combine with:

• Support & Resistance: Key price levels
• Trend Lines: Main trend direction
• Volume: Trading volume
• Fundamental data: News, economic events

( Key positions

At trend extremes )Top/Bottom( candlesticks are more effective than mid-trend )Mid-trend(

) Timeframes

Use multiple timeframes (Multiple Timeframes), such as:

• Daily for main direction
• 4-Hour or 1-Hour for entry points
• 15-Minute for fine-tuning

Summary of key takeaways

( What do candlesticks tell us?

• White = Buyers win | Black = Sellers win
• Short wicks = Little conflict | Long wicks = Intense conflict

) Remember:

• Doji = Hesitation ###Await confirmation###
• Marubozu = Clear stance (One side dominates)
• Spinning Top = No clear winner (Indicates weakening trend)
• Engulfing = Reversal ###More powerful(
• Morning/Evening Star = Trend reversal )Trend is turning around###

Highest rule

Success rate of candlestick patterns depends on:

1. Position within the trend
2. Nearby Support/Resistance levels
3. Volume accompanying the signal
4. Market context

Forex trading requires understanding that no signal is 100% accurate. The more factors you combine, the higher your chances of success.

⚠️ Investing and trading involve risks. You may lose all your capital. Think carefully and manage risks properly.