Common Mistakes That New Traders Make When Using Japanese Candlesticks

Here are some common mistakes new traders make when using Japanese candlesticks.

1. You try to find meaning in EVERY candlestick that appears on the chart.

The market is often “noisy”. Not all candlesticks are useful for thinking about future price movements.

Instead of looking at each candlestick, focus on the candlesticks that are currently trading near important support and resistance levels.

So, first decide where you think these levels are, then start looking for candlestick patterns.

2. Your imagination is too strong.

If you need to zoom in on a candlestick chart by 500% or you need to squint at a candlestick chart thinking you're “looking at something”, there's probably nothing there.

There is no need to try to assign training labels to the candle formations you are observing.

Concentrate on looking for evidence of strong buying pressure when you want to buy and strong selling pressure when you expect to sell.

3. Your imagination is too weak.

Based on the textbook example, a Japanese candlestick pattern that should be formed after three candlesticks may actually require 5 or more candlesticks to form.

The fact that it takes four candles to form a three candlestick pattern does not mean that the pattern is invalid.

The meaning is the same. Understanding the price movement behind a candlestick pattern is more important than simply memorizing standard shapes.

4. You forget the forest from the trees.

If you don't take a step back and see the “big picture,” and focus consistently on a shorter time frame, such as a 5-minute chart, trades tend to go unanswered.

Don't focus too narrowly.

5. You dont wait for confirmation.

Do not wait for confirmation. Some candlestick patterns are considered “self-checking”, but most are not.

You must wait for the candlestick to close and fully form before acting on the pattern.

Always wait for an accurate confirmation that the price is moving in the direction you expect it to be.

For example, if you see the bottom with tweezers, it would be wise to check if the candlestick after the double candlestick pattern is closed higher before entering the long position.