Candlesticks in Trading [Japanese Candle Secret]

Published: October 9, 2020 by Andrew

When you study the chart of a stock on a trading platform, you can examine it with different chart schemes, but the most captivating and immediate is the one based on the famous Candlesticks; that thanks to the colors and the shape highlight the most important components of the price: opening, closing, maximum and minimum.

To use Candlesticks on a platform you need to follow these steps:

  • Register with a regulated and secure broker.
  • Practice on the Demo account to familiarize yourself with the trading platform.
  • Make the minimum deposit required and use Candlesticks on the real market.

Thanks to online brokers like eToro it is possible to apply the chart pattern of Japanese candlesticks to each market.

Candlesticks meaning

In trading charts there are different methods to visualize prices but one in particular has taken hold becoming the most used ever and we are talking about Candlestics or Japanese candles.

These candles show the opening, closing, high, low and direction prices of a specific stock in a given timeframe.

The origin of this way to view market prices comes from Japanese rice traders. Already in 1700 a trader named Homma, realized the link between prices and the “emotions” of the traders and the candles showed these emotions clearly.

Technically, Candlestics are formed by a body, usually colored according to the direction of the price; and from a wick that comes out above and below the body and indicates the movement of the price beyond the entry and exit levels of the candle, marking the highs and lows in that specific period of time.

Candlesticks meaning

Where you can view the Candlesticks

Candlestics can be viewed on the trading platforms made available to the best online brokers.

In these platforms, in addition to various trading tools and indicators, stock charts, forex charts and those of the main online tradable stocks are available.

These charts have numerous settings, including the representation modes which are usually: lines, bars or candles (Candlestics).

The best trading platforms to view Japanese candlesticks are those offered by CFD Brokers, commission-free intermediaries that allow you to trade on stocks, indices, forex, commodities, etc. Here are the distinctive features of these online brokers:

  • They offer CFDs, contracts that allow you to trade both up and down (short selling)
  • They don’t charge commissions
  • They have at least one license issued by CONSOB or CySEC
  • They use a trading platform with International assistance

Here are the best online brokers on the market that allow you to use Candlesticks to view price charts:

Platform: etoro
Min. Deposit: 50€
License: Cysec
  • Social Trading (Copy the best)
  • Simple and intuitive
  • ➥ Start
    1star 1star 1star 1star 1star
    Platform: xtb
    Min. Deposit: 100€
    License: Cysec
  • Free demo
  • Free Course
  • ➥ Start
    1star 1star 1star 1star 1star
    Platform: iqoption
    Min. Deposit: 50€
    License: Cysec
  • Free demo without limitations
  • Minimum deposit low
  • ➥ Start
    1star 1star 1star 1star 1star
    Platform: ubrokers
    Min. Deposit: 250€
    License: Cysec
  • Free Training
  • Zero Commissions
  • ➥ Start
    1star 1star 1star 1star 1star
    Platform: trade
    Min. Deposit: 100€
    License: Cysec
  • Free demo
  • Free course trading
  • ➥ Start
    1star 1star 1star 1star 1star
    72.30% of retail CFD accounts lose money
    Platform: forextb
    Min. Deposit: 250€
    License: Cysec
  • Free trading course
  • Free trading signals
  • ➥ Start
    1star 1star 1star 1star 1star

    Best Trading Platforms with Candlesticks

    The brokers we have listed are not all the same, to choose the best platforms ever, it is necessary to evaluate the services, security, reliability and many other parameters.

    OnlineTradingCourse.net, a leading site in the evaluation of brokers, has carried out a series of tests on the trading platform and from these analyzes it was found that the best platforms for online trading with Candlesticks, are those provided by eToro, ForexTB and Trade.com .

    eToro: Candlesticks and automated trading

    eToro is the online broker with the largest number of users in the world and its trading platform allows you to represent each stock with Candlestics, in a personalized and intuitive way.

    CONSOB and CySec have issued the licenses for Europe to this online broker, which allows it to trade in total safety.

    In the eToro platform you can set the Japanese candles on any chart but for those who prefer automatic investments, eToro has developed a system called Copy Trading.

    This automatic trading system allows you to copy the market operations of the best traders in the world (on eToro) automatically and for free.

    To use Copy Trading you need to follow these steps:

    • Register for free on eToro
    • In the “People” section, choose the traders to copy, based on how much they earn.
    • With a click, Copy Trading will copy the operations of the chosen traders into your account.
    • At that point you will get the same returns as these trading experts (in proportion to the investment made), at no additional cost.

    Returns depend on copied traders, here are some examples below:

    etoro forex candlesticks

    Click here and choose which trader to copy

    Before investing money on eToro, you can view the Candlesticks on a graph in the free Demo account, where there is no risk, because the money is virtual.

    Click here to sign up for free

    For more details you can read our full eToro review.

    ForexTB: Course with Candlesticks Patterns

    ForexTB has now become popular among investors, thanks to the free services it offers to its users.

    The security of this broker is guaranteed by the CySEC license which allows this Broker to offer its services throughout Europe.

    ForexTB allows you to view Candlestics on two trading platforms of your choice, both free:

    • Metatrader 4 is a platform with numerous tools available, which meets the needs of the most experienced traders.
    • The web platform is simple and accessible from any browser, without making any downloads.
    Choose the platform you prefer for free by clicking here

    To improve your training, if you are a beginner in trading, ForexTB offers you a Trading Course, considered the best on the market, which summarizes in a single pdf, the basics of technical analysis, including the main patterns with Candlesticks.

    Click here and download the Trading Course for free

    But if you are interested in a less theoretical support there are the Free Trading Signals that ForexTB sends to all investors. These are indications developed by Trading Central that achieve success rates of over 70%.

    Click here to get free trading signals

    Read our ForexTB review for more information.

    Trade.com: Free training to use Candlesticks

    Trade.com is characterized by a truly complete trading platform, which offers numerous professional tools free of charge. The reliability of this Broker is guaranteed by CONSOB.

    Try the Trade.com platform for free by clicking here

    Candlesticks are highly customizable thanks to the trading software of this Broker which allows you to study the basics of technical analysis on a very complete and totally free Trading Course.

    Download the free course by clicking here

    More experienced traders will be able to learn more about some aspects of trading, such as Candlestics patterns, through advanced video courses, which are also free.

    Click here to access the video courses for free (official link)

    To open a real account with Trade.com you only need 100 Euros, but to get started there is always the totally free and unlimited Demo account.

    Join Trade.com for free

    If you want to know more, you can read our Trade.com review.

    Candlesticks: useful informations

    • Candlestick charts show the maximum, minimum, opening and closing of a stock in a specific period.
    • The origins of candles come from Japanese rice traders who used them to monitor market prices.
    • Candlestics can be used by traders looking to identify specific patterns on price charts.

    Candlesticks or bar charts?

    Although usually the charts can also be viewed with lines, these lack a lot of information and are never used in trading except to display a simple trend in progress.

    Japanese candlesticks, also called candlesticks, show in addition to the “body” also the wicks or “shadows” with the highs and lows of prices in that time frame.

    If the upper wick of a bearish candle is short, it indicates that that day’s opening was close to the day’s high.

    A small wick above a bullish day instead indicates a close close to the daily high.

    The relationship between the opening, maximum, minimum and closing days determines the appearance of the daily candle. Bodies can be long or short and black or white (or green or red). The wicks can be long or short.

    Candlestics and bar charts show the same information, just differently.

    The charts with Japanese candlesticks are more visual, thanks to the color coding of the price bars and the thicker bodies, they better highlight the difference between the opening and closing.

    Candlesticks or bar charts

    Above you can see the graphical representation of the same ETF in the same timeframe, with the Candlesticks and bars.

    Some traders prefer one display method over another, but there is no better and no worse system, it comes down to personal preferences and tastes.

    Candlestick pattern

    The patterns that are formed with Japanese candlesticks are similar to those visible with bars but have a different graphic rendering and often allow you to “see” some details clearly.

    The white (empty) candle indicates a higher closing than the opening, while the black (full) candle indicates a lower closing than the opening.

    Candlesticks pattern

    We have decided to integrate our guide with the 5 graphic patterns formed with Candlestics, which show trading signals more clearly.

    These patterns only work within the bounds of the chart you are studying, whether it is intraday, daily, weekly or monthly. The reliability of these graphic schemes rapidly decreases beyond three / five bars after the scheme is complete.

    These patterns are based on the studies of Thomas Bulkowski and his 2008 “Encyclopedia of Candlestick Charts”.

    The schemes are divided into two types:

    • Reversal when candles predict a change in the direction of the price.
    • Continuation if the Candlesticks foresee a continuation in the current direction of the price.

    1. Three Line Strike

    Three Line Strike

    The bullish reversal pattern of the Three Line Strike is based on 3 black candles in a bearish trend, entirely “wrapped” by a single white bullish candle.

    The fourth candle (the white one) opens even lower than the previous low and closes higher than the high of the first (black) candle in the series.

    According to Bulkowski, this reversal predicts higher prices with an accuracy rate of 83%.

    2. Two Black Gapping

    Two Black Gapping

    The model is based on a bearish gap between two black candles which mark a significant gap.

    This is an important continuation pattern that predicts a continuation of the bearish trend indicated by the black candles.

    The odds of a broader bearish trend being triggered, according to Bulkowski, are 68%.

    3. Three Black Cows

    Three Black Crows

    This is a reversal pattern based on 3 consecutive black candles starting near the high of an uptrend.

    The three black candles mark consecutive lower lows and this pattern provides for the reversal of the previous uptrend and the continuation of the downside shown by the 3 initial candles.

    According to Bulkowski, this model has an accuracy rate of 78%.

    4. Evening Star

    Evening Star

    This is a very famous inversion model and starts with a very evident white bar and a very short subdivided black candle.

    A gap in the third candle of the pattern shows the completion of the reversal, which foresees a rather strong bearish trend, with an accuracy rate, again according to Bulkowski, of 72%.

    5. Abandoned Baby

    Abandoned Baby

    This inversion model is similar to the previous one but is inverted.

    Start with a black bearish candle, a gap and a doji candle (opening to close almost on the same level) or very short. The next white candle starts with an opening gap and completes the pattern.

    This pattern predicts a reversal and a relatively pronounced uptrend. According to Bulkowski, this model has an accuracy rate of 49.73%, making it by far the least reliable of the 5.

    candlesticks

    Conclusions

    Candlesticks are a very effective way of graphically displaying a stock price chart. In this guide we have shown how they work and what features they have, as well as the best brokers that allow you to view them.

    To practice with Japanese candles you can start from the Demo account which is always available for free with the brokers we have reviewed in this guide. After becoming familiar with the platforms you can switch to real trading by making the minimum deposit required by the broker.

    Here are the official links of the free Demo accounts offered by the best trading platforms:

    What are Candlesticks?

    They are a method to view the prices of a stock, with open, close, high and low.

    What Are Candlesticks For?

    They are used to graphically show the price movements of a stock very clearly.

    What are the most important patterns with Candlesticks?

    In the guide we have highlighted the 5 graphic patterns with the highest percentages of reliability.

    Better candles or bars?

    It simply depends on the trader’s personal tastes, there is no better or worse system.

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