How to Read Candlestick Charts: The Complete Beginner’s Guide 1

What is a Japanese Candlestick?
Before you can trade patterns, you must understand the "DNA" of a single candlestick. Unlike a
simple line chart that only shows the closing price, a Japanese candlestick tells you the
complete story of price action over a specific time period using four data points:

1. Open: The opening price.
2. High: The highest price reached during the period.
3. Low: The lowest price reached during the period.
4. Close: The closing price.

How to Read the "Body" and "Wicks"
● Bullish Candle: The Open is BELOW the Close. This means buyers won the session.
● Bearish Candle: The Open is ABOVE the Close. This means sellers won the session.
● The Wicks (Shadows): The thin lines above and below the body represent the extreme
high and low prices, showing price rejection.
The Top 5 Bullish Reversal Patterns
A bullish reversal pattern signifies that buyers are momentarily taking control, usually forming
after a price decline.

1. The Hammer The Hammer is a 1-candle pattern that signifies rejection of lower prices.
● Recognition: Little to no upper shadow. The lower shadow is about 2–3 times the length
of the body.
● Meaning: Sellers pushed price down at the open, but huge buying pressure stepped in
to close the price near the highs.


2. Bullish Engulfing Pattern A 2-candle pattern where buyers completely overwhelm sellers.
● Recognition: The first candle is bearish. The second candle is bullish and its body
completely "covers" (engulfs) the body of the first candle.
● Meaning: Buyers have won the battle emphatically.


3. Piercing Pattern Similar to the Engulfing pattern but slightly weaker.
● Recognition: The second bullish candle closes above the 50% mark (halfway point) of
the previous bearish candle.


4. Tweezer Bottom A 2-candle pattern indicating the market is struggling to trade lower.
● Recognition: The first candle shows rejection of lower prices. The second candle
re-tests that exact low and closes higher.


5. Morning Star A powerful 3-candle reversal pattern.
● Recognition:
1. A long bearish candle.
2. A small-bodied candle (indecision).
3. A strong bullish candle closing more than 50% into the first candle's body.
● Meaning: Sellers are exhausted, and buyers have taken control.


Next lesson will be posted on next week
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-TuffyCalls (Team Mubite)