Classic Japanese candlestick trading strategies

Ted Capwell Updated:

The technical format for quote building in the form of Japanese candlesticks operating on the financial market is the most convenient and effective in terms of successful forecasting. The popularity of Japanese candlesticks is due to their broad capabilities in regards to building workable and universal trading strategies. This means that strategies based on building patterns of this type of quote chart have found wide application in futures trading. Today, we will look at some simple forecasting techniques based on patterns that are formed when building these types of quotes.

Japanese candlestick strategy

To use the forecasting mode based on candlestick patterns, we will require certain technical capabilities of the trading terminal for working with options trades, as well as specific trading conditions that will maximize the market participant’s opportunities on the issue of risk management. We can recommend the trading terminal our our top rated companies as the most optimal in terms of the main parameters of effective trading. Traders are offered the following set of services, trading conditions, and technical tools:

• A chart with functionality for using Japanese candlesticks

• A set of assets from 80 positions

• Trades with yields of up to 90%

• Options with expirations in the range of 1 minute to 24 hours

• A variable time frame for the trading chart

• Trading conditions with these parameters – trades from $1, the minimum investment in trading is $10

With these conditions it is possible to effectively apply any professional system of market forecasting for futures contracts.

So, let’s consider the two most effective and successful Japanese candlestick patterns for options trading — the engulfing model in the form of quote reversal and the continuation of the trend.


Candlestick trading strategy

The engulfing model on technical quotes in the form of Japanese candlesticks has the following format: when trend movement is building upwards on the quote chart, a market situation is formed in which the growing quote candlestick is completely engulfed by the body of the following price candlestick directed downwards:


Japanese candlestick strategy


An important point: when identifying the engulfing model, only the size of the body of the price candlestick should be taken into account, this does not include any shadows or tails. This pattern will allow you to accurately determine breaks in trends, which is effective for working with this type of contract.

This signal format for registering trades on the options market is used in two modes – as a signal for registering a trade when the trend reverses or as a signal for the end of short-term correction of the price and trading in the direction of the main trend. The first format does not cause complications – just use the moment you identify the pattern to open your trading positions. Let’s discuss in more detail the engulfing model which signals the continuation of trend movement.

Japanese candlestick trading strategy – the engulfing model — continuation of the trend

For this format of using the model, it’s all a bit more complicated, but no less effective for options trading. In order to trade, you first need to identify the trend. Then you wait for the price to roll back in the opposite direction to the trend movement and you look for the formation of the candlestick model – this moment indicates the completion of correction and serves as a signal to register your trade:


Japanese candlestick trading strategy


The signals for working with contracts DOWN use the format of the candlestick model with the reverse construction:


Classic Japanese candlestick trading strategies


Thus, the technical chart independently generates high-precision trading signals with an efficiency level of at least 85%. This figure means you can achieve an average of 250% in capital gains per trading week.

Money management for the “Japanese candlestick” strategy

This mode of market forecasting is characterized by a high level of cyclicity of trading signals, which means it is also accompanied by a high level of risks. To avoid large volumes of trading losses, it is recommended that you follow the simple limitations in the classic rules of money management:

• When trading with the minimum level of investment, we use trades of the initial cost parameters

• When trading with large volumes of investments, we use trades with costs limited to the level of 5% of the amount of trading capital

Thus, the simple, highly cyclical pattern of Japanese candlestick building makes it possible for you to quickly and safely increase your operating capital funds.



“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”