Japanese Candlestick Charting Techniques: Summary and Review

What this book is about

Steve Nison is the person who brought candlestick charting from Japan to Western markets, and Japanese Candlestick Charting Techniques is the book that did it. It was first published in 1991 by the New York Institute of Finance. Decades later it is still the standard reference on Japanese candlesticks, and still the right place to start.

The material covers what candlesticks are, how the major single-candle and multi-candle formations work, and the part most readers underweight: how to combine candlestick reading with Western technical analysis rather than treating the two as rival systems.

If you searched for “japanese candlestick” and landed here, the short version is this. A candlestick chart uses the same four prices as a bar chart (open, high, low, close), but it draws the distance between the open and the close as a solid or hollow body. That one change makes it far easier to see who controlled the session, buyers or sellers, and that is the whole reason the method spread.

Which Nison book is which

Nison wrote several candlestick books, and readers often mix them up. Here is how they relate.

Book	Year	What it is
Japanese Candlestick Charting Techniques	1991	The original reference. The book that introduced candlesticks to Western traders.
Beyond Candlesticks	1994	A follow-up that goes past candlesticks into other Japanese charting methods, such as three-line break, renko and kagi charts.
The Candlestick Course	2003	A workbook built for self-study. Every chapter has learning objectives, key terms, a lesson and a quiz, with detailed answers. It ends with progressive charting exercises and real-world chart drills.

The first book is where the vocabulary comes from. The Candlestick Course is where most people actually learn to use it, because it forces you to answer questions before you see the answer. The Chinese page linked from this page’s language switch covers this original book, in the Ding Shengyuan translation. Several points below still draw on The Candlestick Course, because it states Nison’s trading rules in a compact, checkable form.

Six things worth taking away

1. A candle is a record of a fight, not a shape to memorise

Most people learn candlesticks as pattern recognition: memorise a list of names, then hunt for them on a chart. It is the least efficient way to use the material.

Nison keeps returning to the underlying point: each candle is the outcome of a contest between buyers and sellers over one interval. A long lower shadow means sellers pushed price down and buyers drove it back with force. A long upper shadow means buyers pushed up and sellers rejected it decisively.

The body matters as much as the shadows. In his trading rules, a shrinking series of real bodies means the prior trend is losing force, and a long real body shows strong momentum in the direction of the close. Get that, and you stop needing the vocabulary. You can read a candle you have no name for.

2. A pattern without a location means nothing

This is the most common beginner error: reading formations in isolation.

A hammer at the bottom of a downtrend may be a reversal signal. The identical candle in the middle of an uptrend means something entirely different. Nison is explicit that a pattern’s reliability depends on where it appears and what came before it. Formations at meaningful support and resistance carry weight. The same formations in the middle of nowhere do not.

His logic is simple. Most candlestick signals are reversal signals, and a reversal needs a prior trend to reverse. A doji in the middle of a sideways range has nothing to reverse, so he tells readers to ignore it. A doji that forms right at a resistance level that has already turned price away twice is a different story.

3. The doji says different things in different places

The doji is often oversimplified as “indecision”. Nison’s reading is context-dependent:

• In an uptrend, a doji is a warning
• In a downtrend, a doji may mark a bottom, but it usually needs more confirmation
• In a range, a doji means close to nothing

In The Candlestick Course he gives the two trend cases names: a doji after a rally is a “northern doji”, and a doji after a decline is a “southern doji”. His experience is that the northern doji is the more reliable warning of a top than the southern doji is of a bottom. He also adds the exception: if a southern doji confirms a key support zone, take it seriously. Rules give you a bias. Location decides the weight.

4. Windows: gaps that act as support and resistance

What Western traders call a gap, Japanese technicians call a window. A rising window is bullish, a falling window is bearish, and the Japanese advice is to trade in the direction of the window, which makes it a continuation signal.

Nison corrects a common mistake here. A window requires a gap between the shadows, not just between the bodies. If the upper shadow of one candle and the lower shadow of the next overlap at all, there is no window. Once a window forms, the whole gap becomes a support zone (for a rising window) or a resistance zone (for a falling one). The most important level is the bottom of a rising window and the top of a falling window.

5. The close decides, and some patterns need confirmation

Two of Nison’s rules prevent a large share of bad trades:

• A support or resistance level is only broken when price closes beyond it. Intraday pokes do not count.
• A hanging man is only confirmed as bearish when a later session closes below its real body.

He also asks you to wait for the session to end before naming a candle. A bar that looks like a hammer at noon can look like something else at the close. His workaround is to use two timeframes: find support on the daily chart, then drop to an intraday chart and look for a bullish candle forming at that level.

6. Candlesticks combine with Western analysis, and they do not give targets

This is one of Nison’s real contributions, and the part people skip. His argument is not that candles replace moving averages, volume or RSI. It is that the combination is stronger than either alone. Because candlesticks use the same open, high, low and close as bar charts, every Western tool works on them unchanged.

Price pulling back to a long-term moving average is one piece of information. A bullish engulfing pattern forming exactly there is another. Together they are a materially better signal than either in isolation. In his trading rules, the more Eastern and Western signals converge on the same support or resistance level, the more likely that level holds.

There is a limit he states plainly: candlesticks can show you support and resistance, but they do not give price targets. Targets come from Western tools such as prior highs and lows or trendlines. So before any candlestick trade, define the risk (for a hammer, a stop under its low) and the reward. If both are the same size, Nison’s advice is to pass on the trade, however good the hammer looks.

The trading rules worth copying out

The Candlestick Course closes its main section with a list of trading principles. These are the ones I would pin next to the screen:

• When real bodies get smaller, the prior trend is losing force.
• A northern doji tends to be more significant than a southern doji.
• A doji in the middle of a trading range is not an important signal, because there is no prior trend to reverse.
• A series of long upper shadows during a rally means the bulls no longer fully control the market.
• Only trade a reversal signal in the direction of the major trend when opening new positions.
• Never trade on a candlestick signal without first weighing the risk and reward.
• Consider both the body and the shadows when reading a single candle.
• Candlesticks are best used as a tool, not a system.

Nison adds that market context changes every one of these rules. They are tendencies, not commandments.

A practice method: the sheet of paper

Nison’s answer to “what is the fastest way to master candlesticks?” is low-tech. Print a candlestick chart and cover it with a sheet of paper. Slide the paper slowly from left to right, revealing one or a few candles at a time. Each time, ask two questions: what is this pattern, and what is it telling me?

The exercise works because it removes hindsight. On a finished chart every reversal looks obvious. With the right side hidden, you face the same uncertainty you face live. Today the bar-replay feature in most charting platforms does the same job.

How this book differs from the others on our shelf

Book	Relationship to Nison	When to read it
The Dow Theory (Robert Rhea)	Defines what a trend is. Every “prior trend” Nison refers to rests on that definition.	Alongside this book. One covers the forest, the other the trees.
Technical Analysis of the Financial Markets (John Murphy)	The full Western framework of trends, patterns, indicators and money management that Nison says candles should be combined with.	After this book, to place candlesticks inside a complete method.
A Complete Guide to Volume Price Analysis (Anna Coulling)	Reads three key candles (shooting star, hammer, long-legged doji) against volume.	After you know the patterns, to add the volume dimension.
Al Brooks: Trends	Bar-by-bar price action reading. Goes much deeper into what each bar means in context.	Once candlestick basics feel easy.
The Disciplined Trader (Mark Douglas)	Covers the probabilistic mindset needed to act on signals that are never certain.	Any time, but especially after your first losing streak.

A suggested reading order

1. Read the basics: how a candle is built, then the single-candle chapters (spinning tops, doji, long bodies, hammers and hanging men).
2. Move to two- and three-candle patterns: engulfing patterns, dark cloud cover, piercing pattern, harami, morning and evening stars.
3. Study windows separately. They are underrated and they double as support and resistance.
4. Read the material on combining candles with Western tools, and copy out the trading rules.
5. Practise with the sheet-of-paper method or bar replay until you can name and interpret patterns without hindsight.
6. Then read The Dow Theory for trend structure and Technical Analysis of the Financial Markets for the full framework.

If you already know the names of the patterns, skip straight to step 4 and spend most of your time on practice. Where you keep getting the drills wrong is where you are misreading live charts.

An honest assessment

This is the first technical analysis book I recommend, without exception, and the reason is simple: candlesticks are the foundation everything else sits on. Without understanding what a candle is telling you, MACD and Bollinger Bands and Fibonacci levels are decoration on top of nothing.

Now the part people would rather not hear: candlestick patterns alone will not make you profitable, and Nison says as much himself. He is direct that candlesticks have limitations like any other tool. Patterns tell you something may be changing here. They do not tell you how to enter, where the stop belongs, or how much to risk. That requires a complete system around them.

So treat this as the starting point rather than the destination. After candlesticks come trend structure, money management, and psychology.

What the book changed for me was perceptual. Before it, I saw red and green blocks. After it, I saw the record of a fight and the emotion behind each candle. That shift does not reverse. Once you read charts this way, you cannot go back to seeing shapes.

A few practical cautions. Some of the Japanese names (belt-hold lines, high-wave candles, tweezers) sound strange at first; learn what they show rather than what they are called. The examples predate crypto and retail forex platforms, so if you trade those, redo the exercises on your own instruments. And no pattern is certain. A good signal shifts the odds in your favour, and the job is to act when the odds favour you and have a stop in place when they do not. That is the same probabilistic framing Mark Douglas builds his psychology work on.

Who should read it

Every beginner, first, before anything else. Experienced traders who learned patterns as a list of names and never went back to the logic underneath will also get more out of a reread than they expect. If you prefer to learn by doing, pair it with The Candlestick Course, which turns the same ideas into quizzes and chart drills.

Frequently asked questions

Who wrote Japanese Candlestick Charting Techniques?

Steve Nison, a Chartered Market Technician who is widely credited as the first person to introduce Japanese candlestick charting to Western traders. The book was first published in 1991 by the New York Institute of Finance.

What is the difference between Japanese Candlestick Charting Techniques and The Candlestick Course?

Charting Techniques (1991) is the original reference that explains the patterns and how to combine them with Western analysis. The Candlestick Course (2003) is a later workbook by the same author, organised as lessons with learning objectives, key terms and quizzes, followed by progressive charting exercises and real-world chart drills. Beginners who learn best by practice often get more from the course book; the 1991 book is the deeper reference.

Is this book good for beginners?

Yes. It assumes no prior knowledge of technical analysis. Some traders find it easier to start with the workbook format of The Candlestick Course and come back to this book as a reference, but either works as a first book.

Do candlestick patterns still work today?

The patterns describe how buyers and sellers behaved during a session, so they still carry information. What changed is that everyone can see them, which is why Nison’s emphasis on location, confirmation and risk-reward matters more than ever. A pattern at a well-tested level, confirmed by the close, is worth far more than the same shape in the middle of a range.

How do I get the PDF?

Message us on Telegram with the book title, using the button below, and we will send the file along with an invite to the reading group. You can also browse the rest of our English book library.