Japanese candlestick patterns (also known just as candlestick patterns) are patterns that are formed by the candlesticks (or bars) of a graphical trading chart. These patterns consist of one, two, or three candlesticks (or bars), and are classified as either bullish or bearish depending upon the patterns themselves, and where they occur in relation to recent price movement (e.g. after a long down trend, etc.).
History
Japanese candlestick patterns originated in Japan (hence the name), and where originally used by japanese rice traders as part of their technical analysis. As a result, the candlestick patterns originally have japanese names (such as nagare boshi), but most of the patterns now also have english names (such as shooting star).
Use in Trading
Japanese candlestick patterns are used by technical analysis traders either independently or as part of a trading technique or system. Each candlestick pattern is classified as bullish or bearish based upon the pattern itself and where it occurs in relation to the recent price movement. The candlestick patterns are primarily used with candlestick charts, but can also be used with bar charts, so traders that prefer bar charts to candlestick charts can also use the candlestick patterns in their trading. Some charting software includes indicators that are designed to detect and highlight the candlestick patterns as they occur.
