What are candlestick patterns?

Candlestick patterns are formations created by one or more candlesticks on a price chart that help predict future price movements. Each candlestick shows four key prices: open, high, low, and close for a specific time period. Patterns like hammer, doji, and engulfing can signal potential trend reversals or continuations.

How do you read candlestick patterns?

To read candlestick patterns, examine the body (difference between open and close) and wicks/shadows (highs and lows). Green/white candles indicate closing price above opening price (bullish), while red/black candles show closing below opening (bearish). The size and position of bodies and wicks reveal market sentiment and potential future direction.

What is a hammer candlestick pattern?

A hammer candlestick pattern has a small body at the top with a long lower shadow (at least twice the body size) and little to no upper shadow. It appears at the bottom of downtrends and signals potential bullish reversal. The pattern shows sellers pushed prices down but buyers regained control by the close.

What is a doji candlestick pattern?

A doji candlestick pattern occurs when the opening and closing prices are virtually identical, creating a cross-like shape. It indicates market indecision where buyers and sellers are in balance. Doji patterns often signal potential trend reversals, especially when appearing after strong moves.

Are candlestick patterns reliable for trading?

Candlestick patterns can be useful trading tools but should not be used in isolation. Their reliability increases when combined with other technical indicators, support/resistance levels, and volume analysis. No pattern guarantees success, and proper risk management is essential when trading based on patterns.

What is the difference between bullish and bearish engulfing patterns?

A bullish engulfing pattern consists of a small bearish candle followed by a larger bullish candle that completely engulfs the previous candle, signaling potential upward reversal. A bearish engulfing pattern is the opposite: a small bullish candle followed by a larger bearish candle, indicating potential downward reversal.

How do you use candlestick patterns for entry and exit points?

Use candlestick patterns to time entries by waiting for pattern completion and confirmation (next candle moving in predicted direction). For exits, set stop losses beyond pattern extremes and take profits at resistance/support levels. Always combine patterns with volume analysis and other technical indicators for better accuracy.

What is a shooting star candlestick pattern?

A shooting star candlestick pattern has a small body at the bottom with a long upper shadow (at least twice the body size) and little to no lower shadow. It appears at the top of uptrends and signals potential bearish reversal. The pattern shows buyers pushed prices up but sellers regained control by the close.

What timeframes work best for candlestick patterns?

Candlestick patterns work on all timeframes but are generally more reliable on longer timeframes (daily, weekly) than shorter ones (1-minute, 5-minute). Higher timeframes reduce market noise and provide stronger signals. Many traders use multiple timeframes: longer for trend direction and shorter for precise entry timing.

How do morning star and evening star patterns work?

Morning star is a three-candle bullish reversal pattern: large bearish candle, small indecision candle (often doji), then large bullish candle. Evening star is the opposite: large bullish candle, small candle, then large bearish candle. Both signal potential trend reversals when appearing after sustained moves.

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Pattern Categories

Explore candlestick patterns organized by their market significance and trading applications

Hammer

Bullish Reversal High Reliability

A hammer appears at the bottom of a downtrend, featuring a small body with a long lower shadow. It signals potential bullish reversal when found at support levels.

Structure: Small body, long lower shadow (2x body), minimal upper shadow

Psychology: Bears pushed price down but bulls regained control

Confirmation: Next candle closes above hammer's high

Shooting Star

Bearish Reversal High Reliability

A shooting star forms at the top of an uptrend with a small body and long upper shadow. It indicates potential bearish reversal when found at resistance levels.

Structure: Small body, long upper shadow (2x body), minimal lower shadow

Psychology: Bulls pushed higher but bears regained control

Confirmation: Next candle closes below shooting star's low

Bullish Engulfing

Bullish Reversal Very High

A two-candle pattern where a large bullish candle completely engulfs the previous bearish candle. Strong reversal signal in downtrends.

Structure: Small bearish candle followed by large bullish candle

Psychology: Shift from bearish to bullish sentiment

Confirmation: Volume increase on engulfing candle

Bearish Engulfing

Bearish Reversal Very High

A large bearish candle that completely engulfs the previous bullish candle. Powerful reversal signal at the top of uptrends.

Structure: Small bullish candle followed by large bearish candle

Psychology: Shift from bullish to bearish sentiment

Confirmation: Break below previous support levels

Morning Star

Bullish Reversal Very High

A three-candle pattern consisting of a bearish candle, small-bodied candle (doji/spinning top), and a bullish candle. Strong reversal signal at market bottoms.

Structure: Bearish → Small body → Bullish candle sequence

Psychology: Selling exhaustion followed by buying pressure

Confirmation: Third candle closes above first candle's midpoint

Evening Star

Bearish Reversal Very High

A three-candle bearish reversal pattern: bullish candle, small-bodied candle, then bearish candle. Signals trend exhaustion at market tops.

Structure: Bullish → Small body → Bearish candle sequence

Psychology: Buying exhaustion followed by selling pressure

Confirmation: Third candle closes below first candle's midpoint

Inverted Hammer

Bullish Reversal Medium to High

Similar to shooting star but appears at market bottoms. Long upper shadow with small body signals potential bullish reversal when buyers step in.

Structure: Small body, long upper shadow, minimal lower shadow

Psychology: Selling pressure met with buying support

Confirmation: Next candle closes above inverted hammer's high

Hanging Man

Bearish Reversal Medium to High

Similar to hammer but appears at market tops. Long lower shadow with small body suggests selling pressure is building despite higher prices.

Structure: Small body, long lower shadow, minimal upper shadow

Psychology: Bulls losing control, bears testing lower

Confirmation: Next candle closes below hanging man's low

Piercing Pattern

Bullish Reversal High Reliability

A bullish candle that opens below the previous bearish candle's low and closes above its midpoint. Strong reversal signal in downtrends.

Structure: Bearish candle followed by bullish candle closing above midpoint

Psychology: Selling exhaustion meets strong buying pressure

Confirmation: Bullish candle closes above 50% of previous candle

Dark Cloud Cover

Bearish Reversal High Reliability

A bearish candle that opens above the previous bullish candle's high and closes below its midpoint. Indicates selling pressure at market tops.

Structure: Bullish candle followed by bearish candle closing below midpoint

Psychology: Buying exhaustion meets aggressive selling

Confirmation: Bearish candle closes below 50% of previous candle

Tweezer Tops

Bearish Reversal Medium Reliability

Two or more candles with similar highs that test the same resistance level. Shows rejection at key price levels and potential trend reversal.

Structure: Multiple candles with nearly identical highs

Psychology: Strong resistance at key level prevents further upside

Confirmation: Break below the pattern's lows with volume

Tweezer Bottoms

Bullish Reversal Medium Reliability

Two or more candles with similar lows that test the same support level. Indicates strong support and potential bullish reversal.

Structure: Multiple candles with nearly identical lows

Psychology: Strong support prevents further downside

Confirmation: Break above the pattern's highs with volume

Bullish Harami

Bullish Reversal Medium Reliability

A small bullish candle completely contained within the previous large bearish candle. "Harami" means pregnant in Japanese, suggesting new trend birth.

Structure: Large bearish candle followed by small contained bullish candle

Psychology: Selling momentum slows, buyers start entering

Confirmation: Break above first candle's high

Bearish Harami

Bearish Reversal Medium Reliability

A small bearish candle completely contained within the previous large bullish candle. Indicates potential trend change from bullish to bearish.

Structure: Large bullish candle followed by small contained bearish candle

Psychology: Buying momentum slows, sellers start entering

Confirmation: Break below first candle's low

Bullish Marubozu

Bullish Continuation High Reliability

A strong bullish candle with no shadows, opening at the low and closing at the high. Shows complete bullish dominance and trend continuation.

Structure: Large bullish body with no upper or lower shadows

Psychology: Complete bullish control throughout the session

Trading: Enter on pullbacks with trend continuation

Bearish Marubozu

Bearish Continuation High Reliability

A strong bearish candle with no shadows, opening at the high and closing at the low. Indicates complete bearish dominance and trend continuation.

Structure: Large bearish body with no upper or lower shadows

Psychology: Complete bearish control throughout the session

Trading: Short on rallies with trend continuation

Three White Soldiers

Bullish Continuation Very High

Three consecutive bullish candles with progressively higher highs and closes. Strong bullish momentum and trend continuation signal.

Structure: Three consecutive bullish candles with higher closes

Psychology: Sustained buying pressure and bullish momentum

Trading: Strong trend continuation - ride the momentum

Three Black Crows

Bearish Continuation Very High

Three consecutive bearish candles with progressively lower lows and closes. Strong bearish momentum and trend continuation signal.

Structure: Three consecutive bearish candles with lower closes

Psychology: Sustained selling pressure and bearish momentum

Trading: Strong downtrend continuation - follow the momentum

Rising Three Methods

Bullish Continuation High Reliability

A five-candle pattern starting with a long bullish candle, followed by three small bearish candles, and ending with another long bullish candle. Shows temporary consolidation in uptrend.

Structure: Long bullish → 3 small bearish → Long bullish candle

Psychology: Brief profit-taking followed by renewed buying

Trading: Continue holding long positions or add on breakout

Falling Three Methods

Bearish Continuation High Reliability

A five-candle pattern starting with a long bearish candle, followed by three small bullish candles, and ending with another long bearish candle. Shows temporary relief in downtrend.

Structure: Long bearish → 3 small bullish → Long bearish candle

Psychology: Brief short covering followed by renewed selling

Trading: Continue holding short positions or add on breakdown

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Trading Applications

🎯

Entry Signals

Use reversal patterns like hammer and engulfing patterns to identify optimal entry points at trend changes.

Wait for pattern confirmation
Combine with support/resistance levels
Use appropriate position sizing

🛡️

Risk Management

Set stop losses based on pattern structure and use pattern failure as exit signals.

Place stops beyond pattern extremes
Exit if pattern fails to confirm
Adjust position size based on pattern reliability

📊

Market Psychology

Understand the sentiment behind patterns to better predict market movements.

Analyze volume with pattern formation
Consider market context and trends
Watch for pattern clusters at key levels

⏰

Time Frames

Apply patterns across different time frames for multi-timeframe analysis.

Higher timeframes = stronger signals
Use lower timeframes for precise entries
Align patterns across multiple timeframes

Quick Reference Guide

Pattern

Type

Reliability

Best Context

Confirmation

Hammer

Bullish Reversal

High

Downtrend bottom

Next candle breaks high

Shooting Star

Bearish Reversal

High

Uptrend top

Next candle breaks low

Bullish Engulfing

Bullish Reversal

Very High

Downtrend/Support

Volume increase

Bearish Engulfing

Bearish Reversal

Very High

Uptrend/Resistance

Volume increase

Doji

Indecision

Context Dependent

Any trend

Next candle direction

Morning Star

Bullish Reversal

Very High

Strong downtrend

Third candle confirmation

Inverted Hammer

Bullish Reversal

Medium-High

Downtrend bottom

Next candle breaks high

Piercing Pattern

Bullish Reversal

High

Downtrend/Support

Closes above 50% of prev candle

Dark Cloud Cover

Bearish Reversal

High

Uptrend/Resistance

Closes below 50% of prev candle

Tweezer Tops/Bottoms

Reversal

Medium

Key support/resistance

Break of pattern levels

Rising Three Methods

Bullish Continuation

High

Strong uptrend

Final candle new highs

Harami

Reversal

Medium

After strong moves

Break outside pattern range

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Pattern Categories

Hammer

Shooting Star

Bullish Engulfing

Bearish Engulfing

Morning Star

Evening Star

Inverted Hammer

Hanging Man

Piercing Pattern

Dark Cloud Cover

Tweezer Tops

Tweezer Bottoms

Bullish Harami

Bearish Harami

Bullish Marubozu

Bearish Marubozu

Three White Soldiers

Three Black Crows

Rising Three Methods

Falling Three Methods

Doji

Spinning Top

Gravestone Doji

Dragonfly Doji

Long-Legged Doji

Interactive Pattern Recognition

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Trading Applications

Entry Signals

Risk Management

Market Psychology

Time Frames

Quick Reference Guide

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