Japanese candlesticks are not lagging, they reflect price action in an easier way to understand. Since they occupy more space on the chart, the relationship between the open and the close is clearer to observe than with barcharts. Candles patterns are often ahead of indicators to signal market reversals.
- Candlestick patterns do not give price targets
- Can be used in any market and any timeframe
- Short bodies indicate indecision while long bodies show clear opinion
- Shadows represent price extremes
- Don't analyze candle patterns in isolation, always consider the prior trend (exception: Kicking pattern)
- Confirm with horizontal support/resistance levels or trendlines
- For a signal, wait for the close of the candle to reveal itself
Below are the same two 1 hour charts of the EUR/USD. See for yourself...