Anatomy of a Candlestick
Before learning patterns, you need to understand what each part of a candlestick represents. Each candle tells a complete story of the battle between buyers and sellers.
🟢 Bullish (Green/White)
Close > Open
Buyers won this period
🔴 Bearish (Red/Black)
Close < Open
Sellers won this period
Reading Candle Psychology
Long Body
Strong momentum in that direction. Decisive move.
Short Body
Indecision. Neither side dominated.
Long Upper Wick
Sellers pushed back. Rejection of higher prices.
Long Lower Wick
Buyers pushed back. Rejection of lower prices.
No Wicks (Marubozu)
Total domination. Extreme momentum.
Equal Wicks
Indecision. Market testing both directions.
Single Candlestick Patterns
These patterns form with just one candle. They're often the first warning of a potential reversal.
Bullish Reversal Patterns
🔨 Hammer
Bullish ReversalAppears: At bottom of downtrend
Shape: Small body at top, long lower wick (2x+ body)
Meaning: Sellers pushed down but buyers rejected it strongly
Reliability: ⭐⭐⭐⭐ High
🌟 Inverted Hammer
Bullish ReversalAppears: At bottom of downtrend
Shape: Small body at bottom, long upper wick
Meaning: Buyers attempting to push up, testing resistance
Reliability: ⭐⭐⭐ Medium
🐉 Dragonfly Doji
Bullish ReversalAppears: At bottom of downtrend
Shape: Open = Close at top, long lower wick
Meaning: Complete rejection of lower prices
Reliability: ⭐⭐⭐⭐ High
Bearish Reversal Patterns
⭐ Shooting Star
Bearish ReversalAppears: At top of uptrend
Shape: Small body at bottom, long upper wick
Meaning: Buyers pushed up but sellers rejected it
Reliability: ⭐⭐⭐⭐ High
👻 Hanging Man
Bearish ReversalAppears: At top of uptrend
Shape: Same as hammer but at resistance
Meaning: Buyers losing grip, sellers testing
Reliability: ⭐⭐⭐ Medium
🪦 Gravestone Doji
Bearish ReversalAppears: At top of uptrend
Shape: Open = Close at bottom, long upper wick
Meaning: Complete rejection of higher prices
Reliability: ⭐⭐⭐⭐ High
Indecision Patterns
➕ Doji
IndecisionShape: Open ≈ Close, forms a cross
Meaning: Perfect balance - neither side won
Action: Wait for next candle to confirm direction
At extremes: Often signals reversal
🎯 Spinning Top
IndecisionShape: Small body, wicks on both sides
Meaning: High volatility but no clear winner
Action: Consolidation likely, wait for breakout
Double Candlestick Patterns
These patterns require two consecutive candles. They show a shift in momentum from one period to the next.
🟢 Bullish Engulfing
Strong Bullish ReversalFormation:
- Red candle (bearish)
- Green candle that completely engulfs the red body
Location: Bottom of downtrend
Meaning: Buyers overwhelmed sellers completely
Reliability: ⭐⭐⭐⭐⭐ Very High
🔴 Bearish Engulfing
Strong Bearish ReversalFormation:
- Green candle (bullish)
- Red candle that completely engulfs the green body
Location: Top of uptrend
Meaning: Sellers overwhelmed buyers completely
Reliability: ⭐⭐⭐⭐⭐ Very High
☁️ Piercing Line
Bullish ReversalFormation:
- Red candle (bearish)
- Green candle opens below low, closes above midpoint of red
Location: Bottom of downtrend
Reliability: ⭐⭐⭐⭐ High
🌑 Dark Cloud Cover
Bearish ReversalFormation:
- Green candle (bullish)
- Red candle opens above high, closes below midpoint of green
Location: Top of uptrend
Reliability: ⭐⭐⭐⭐ High
🔄 Tweezer Bottom
Bullish ReversalFormation: Two candles with matching lows
Location: At support/bottom
Meaning: Strong support level confirmed twice
Reliability: ⭐⭐⭐ Medium-High
🔄 Tweezer Top
Bearish ReversalFormation: Two candles with matching highs
Location: At resistance/top
Meaning: Strong resistance confirmed twice
Reliability: ⭐⭐⭐ Medium-High
Triple Candlestick Patterns
Three-candle patterns are less common but often more reliable. They show a complete shift in market sentiment.
⭐⭐⭐ Morning Star
Strong Bullish ReversalFormation:
- Long red candle (confirms downtrend)
- Small body candle (indecision/gap down)
- Long green candle closing into the first candle
Psychology: Sellers exhaust → pause → buyers take over
Reliability: ⭐⭐⭐⭐⭐ Very High
🌙 Evening Star
Strong Bearish ReversalFormation:
- Long green candle (confirms uptrend)
- Small body candle (indecision/gap up)
- Long red candle closing into the first candle
Psychology: Buyers exhaust → pause → sellers take over
Reliability: ⭐⭐⭐⭐⭐ Very High
💂💂💂 Three White Soldiers
Strong Bullish ContinuationFormation: Three consecutive long green candles, each opening within previous body and closing higher
Meaning: Strong buying pressure building
Caution: Watch for exhaustion if wicks appear
Reliability: ⭐⭐⭐⭐ High
🐦⬛🐦⬛🐦⬛ Three Black Crows
Strong Bearish ContinuationFormation: Three consecutive long red candles, each opening within previous body and closing lower
Meaning: Strong selling pressure building
Caution: Watch for reversal if oversold
Reliability: ⭐⭐⭐⭐ High
How to Trade Candlestick Patterns
🏆 The #1 Rule
Never trade a candlestick pattern in isolation. Context is everything. A hammer at random means nothing. A hammer at major support after a downtrend = high probability trade.
Pattern Trading Checklist
Pattern must form at a significant level (support, resistance, trend line, Fibonacci)
Reversal patterns need a trend to reverse. No trend = no valid reversal signal.
Larger candles = stronger signals. Tiny patterns are noise.
Enter after the next candle confirms the pattern direction.
Stop loss beyond the pattern's extreme (low of hammer, high of shooting star).
Entry Strategies
📈 Trading a Bullish Engulfing at Support
💡 Combine with Other Tools
Candlestick patterns work best when combined with:
Key Takeaways
Each candle tells a story - body size, wick length, and color reveal the battle between buyers and sellers.
Engulfing patterns are the most reliable - they show a complete shift in control.
Location matters more than the pattern - only trade patterns at significant levels.
Always wait for confirmation - the next candle should support your bias.
Higher timeframes = more reliable patterns - Daily hammers beat 5-minute hammers.