Foreword and the history of candlesticks

Japanese candlesticks are the most popular way of displaying price in the world. Every trader looks at them every day – but few truly read them. This book has one goal: to teach you to understand the language of candles from the first letter to whole sentences, so that on the chart you see not just colored rectangles but the battle between buyers and sellers.

The book is built from the simple to the complex. We start with the history and anatomy of the candle, move through the most important principle – context – and then look in detail at 62 patterns: single candles, two-candle, three-candle and continuation patterns. For each pattern you'll find an illustration, recognition criteria, psychology and a concrete trading plan: entry, stop-loss and target.

In the final chapters we tie everything to real trading: how to combine candles with levels, trend and indicators, how to manage risk, example trades on simulated XAUUSD (gold) charts, the most common mistakes and a complete reference table.

How to use this book

• Read chapters 1–4 carefully – without them the patterns are useless.
• Learn the patterns in groups, not by rote. Understand the psychology – then you won't need to memorize the rules.
• After each chapter, open a chart and find at least 5 examples of each pattern on historical data.
• Use the reference table at the end as a “cheat sheet” next to your monitor.

The history of Japanese candlesticks

Japanese candlesticks were created in Japan in the 18th century, long before Western technical analysis appeared. Their creation is most often associated with Munehisa Homma (1724–1803) – a rice merchant from the town of Sakata who traded on the Dojima Rice Exchange in Osaka. Dojima is considered one of the first organized futures exchanges in the world – so-called “rice coupons” were traded there – contracts for future deliveries of rice.

Homma kept detailed records of prices and the weather and noticed something we consider obvious today: price depends not only on the supply and demand of rice but also on the emotions of traders – fear and greed. Legend has it that he made a huge fortune and was appointed financial adviser to the government. Some of the stories about him are probably exaggerated, but the ideas linked to his name survive to this day.

Candlesticks remained almost unknown in the West until 1991, when Steve Nison published the book “Japanese Candlestick Charting Techniques”. It was Nison who translated and systematized the Japanese terms and made candlesticks the standard for traders all over the world. Today practically every platform – MetaTrader, TradingView, cTrader – uses candlesticks as the default chart.

Why candlesticks won

• Visual clarity: with just one glance you see the open, close, high and low.
• Emotion: the size of the body and the wicks shows who won the battle and how convincingly.
• Universality: they work on every market (gold, currencies, stocks, crypto) and on every timeframe.
• Compatibility: they combine perfectly with Western tools – levels, trendlines, indicators.

The Japanese pattern names carry imagery from the martial arts, nature and everyday life – “three black crows”, “morning star”, “dark cloud cover”. This imagery is no accident: it helps you remember the meaning of a pattern, not just its shape.