Here is your ultimate guide to mastering the art of candlestick patterns to make faster and better trading decisions and profits.
What are candlestick patterns? Japanese candlesticks show the opening, closing, high and low prices over a specific time frame. They form unique patterns that reflect market sentiment – bullish, bearish or neutral. Let’s dive into these patterns step by step! Bullish Candlestick Patterns (Buy Signals) Single Candlestick Patterns Hammer: Small body with long lower wick indicates a reversal after a downtrend. Inverted Hammer: Long upper wick indicates a potential bullish reversal. Dragonfly Doji: Price opens and closes at the same level with a long lower shadow. Two Bullish Candlestick Patterns: Green candle completely engulfs the previous red candlestick – a strong signal of a trend reversal. Piercing Line: Green candle opens below and closes above the middle of the red candlestick. Tweezer Bottom: Two candlesticks with lower lows after a downtrend. Three+ Candle Patterns Morning Star: Three-candle reversal pattern after a downtrend. Three White Soldiers? Three consecutive long green candlesticks – a strong confirmation of an uptrend. Bearish Candlestick Patterns (Sell Signals) Single Candlestick Patterns Hanging Man: Looks like a hammer but appears at the top of a bullish trend signal reversal. Shooting Star: Small body, long upper wick, indicates bearish pressure. Gravestone Doji: Doji candle with long upper wick, indicating market rejection at higher prices.Two Dark Cloud Cover Candlestick Patterns: Red candle closes below the midpoint of the previous green candle. Bearish Harami: Small red candle inside the body of the previous green candle. Tweezer Top: Two candles with higher highs after an uptrend. Three+ Evening Star Candlestick Patterns: Opposite to the Morning Star - indicates a bearish reversal. Three Black Crows: Three long red candles - strong confirmation of a downtrend. Neutral Patterns: Watch for breakouts or pullbacks Doji: Indicates market indecision. Spinning Top: Small real body with long wicks on both sides. Marubozu: No wicks, pure momentum candle. Hikaki Pattern: False breakout, watch for trend reversals. J-Hook Pattern: Indicates a resumption of an uptrend after a pullback. How to Trade Candlestick Patterns Like a Pro with Trendline Combinations: Patterns work best when confirmed by trendlines or key support/resistance levels. Volume Validation: Higher volume = stronger confirmation. Don’t trade in isolation: Use it in conjunction with RSI, MACD or Fibonacci retracements for better accuracy. Wait for confirmation: Always wait for the next candle to confirm the pattern. Use stop loss orders: Protect yourself from false breakouts or invalid patterns.Tips for spotting high probability setups Look for patterns near key support or resistance areas. Prefer patterns during volatile market sessions. Avoid volatile and low volume markets - patterns are more reliable in trending markets. Trend Context in the Ultimate Candlestick Checklist: Is the pattern forming at the end of a trend or range? Volume Confirmation: Are big players involved? Pattern Completion: Has the last candle confirmed the pattern? What is your favorite candlestick pattern? Comment below and share your thoughts! Let’s master these patterns together and level up our trading game.