The Japanese candlestick patterns are a method of technical analysis that was originally developed by Japanese rice traders in the 18th century. The Japanese candlestick patterns have remained popular, and are still used by many traders today.
Visual Technical Analysis
The Japanese candlestick patterns are visual patterns that are created by one, two, or three individual candlesticks on a graphical chart (usually a candlestick chart). The candlestick patterns are formed by the relationships between the individual candlesticks (e.g. the second candlestick being higher than the first candlestick, etc.), and the patterns do not require any mathematical calculations (e.g. the patterns are purely visual).
Bullish and Bearish Patterns
The individual Japanese candlestick patterns are classified as either bullish or bearish (with many patterns having both bullish and bearish versions), and the patterns are used as an indication of the upcoming price movement. The candlestick patterns do not provide specific trades (i.e. they do not provide exact entries and exits), so some additional analysis (and another method of technical analysis) is required in order to make trades using the Japanese candlestick patterns.
Markets and Time Frames
The Japanese candlestick patterns can be applied to any type of market (e.g. individual stocks, currencies, etc.), and can be used on any chart time frame (e.g. one minute, 15 minute, etc.). The patterns are usually used with a candlestick chart (hence the name candlestick patterns), but the same patterns can be used on a bar chart, as a bar chart provides all of the required information (i.e. the open, high, low, and close of the chart time frame), but the patterns cannot be used on a line chart because a line chart does not provide enough information (i.e. a line chart only provides the close of the chart time frame).
