Candlestick Patterns

Reading a Single Candlestick

Each candlestick shows four pieces of data: the open, close, high, and low for a given time period. The thick part (body) shows the range between open and close. The thin lines (wicks or shadows) show the high and low extremes.

A green or white body means the close was higher than the open (bullish). A red or black body means the close was lower (bearish). Long wicks indicate rejection — the market tried to move in that direction but was pushed back.

Key Reversal Patterns

Hammer — a small body with a long lower wick at the bottom of a downtrend. Signals potential bullish reversal — sellers pushed prices down but buyers regained control.

Shooting Star — the opposite: small body with a long upper wick at the top of an uptrend. Suggests a bearish reversal.

Engulfing patterns — a candle that completely engulfs the previous one. A bullish engulfing after a downtrend is a strong reversal signal. A bearish engulfing after an uptrend warns of a downturn.

Doji — open and close are nearly identical, forming a cross shape. Indicates indecision and potential trend change, especially after a strong move.

Continuation Patterns

Not all patterns signal reversals. Three white soldiers (three consecutive large bullish candles) confirm upward momentum. Three black crows confirm bearish momentum. Rising three methods show a brief consolidation within an uptrend before continuation.

Using Patterns in Practice

No single candlestick pattern is reliable in isolation. They work best when they appear at key levels — support, resistance, moving averages, or Fibonacci retracements. A hammer means very little in the middle of a range. A hammer at a major support level after an extended decline is worth paying attention to.

Always combine candlestick analysis with other forms of confirmation before acting.