Lesson 6: Basic Japanese Candlestick Patterns

You’ve learned about Japanese candlesticks and their different parts in the previous lesson. Now, it’s time to learn about some of the basic types of Japanese candlestick patterns. 

Lesson Highlights 

• There are many different types of Japanese candlestick patterns. 
• Marubozu candlesticks are Japanese candlesticks with no upper or lower shadows. 
• Doji candlesticks are easily recognizable by their extremely short bodies. 
• Spinning tops are formed during periods of market indecision when neither buyers nor sellers can gain an upper hand. 

Marubozu 

The Marubozu pattern refers to a candlestick with neither upper nor lower shadow. It derives from the Japanese word “marubozu,” which literally means “bald head” or “shaved head.” 

A marubozu candle’s high and low are the same as its open and close, depending on whether the candle’s body is filled or hollow. 

Marubozu candlesticks can be either black or white. 

A white marubozu candlestick has a long body with no shadow. Its open price is at the same level as its low, and its close price mirrors the high. This candlestick pattern indicates bullish market sentiment. 

Black marubozu candlesticks have long bodies with no shadows. A black marubozu’s open equals its high, and its close is at the same level as the low. It signals bearish market sentiment. 

Doji 

Doji candlesticks are characterized by their extremely short bodies. This candlestick’s pattern is so short that its open and close appear to be at the same level. 

A doji candlestick pattern often appears as a thin line in charts, similar to the image below. 

There are four primary types of doji candlesticks: 

• Long-legged Doji – A long-legged doji is easily identifiable by its long upper and lower shadows. 
• Dragonfly Doji – A long lower shadow with the close, open, and high at virtually the same level depicts a Dragonfly Doji. It indicates a possible trend reversal. 
• Gravestone Doji – Gravestone Doji is the opposite of the Dragonfly Doji. It signals a potential bearish reversal and is characterized by a long upper shadow with the close, open, and low are almost the same level. 
• 4-Price Doji – A 4-price Doji is a rare candlestick pattern that indicates market indecision. You can easily identify a 4-price Doji as it appears to be almost like a single line as its open, close, high, and low are very close. 

Doji Candlesticks indicate market indecision. 

Spinning Tops 

A spinning top candlestick pattern is similar to a Doji in that it signals market indecision and a short body. The bodies of spinning tops are longer than a Doji’s, but they're still short compared to other patterns. 

The color of the spinning top’s body is largely irrelevant. The short body shows very little movement from its open and close. Its shadows indicate sellers and buyers vying for dominance but neither gaining the upper hand. 

Spinning top candlesticks may also signal a possible reversal. Spinning tops formed during an uptrend suggest a shortage of buyers and herald a potential trend reversal. Conversely, a spinning top forming during a downtrend can be a sign of seller scarcity and an impending reversal. 

In the next lesson, you’ll learn about another technical indicator popular among market analysts: the Fibonacci retracement.