Want to decode price action psychology? Candlestick patterns are your go-to tool! They don’t just look pretty – they tell the story of market sentiment, power struggles, and potential reversals or continuations. 🚀 Here’s your ultimate guide to mastering the art of candlestick patterns for better trading decisions. 👇
What are candle patterns?
Candlesticks show the opening, closing, high, and low prices over a specific period of time. They form unique patterns that reflect the sentiment of the market – bullish, bearish, or neutral. Let’s dive into these patterns step by step!
Bullish Candlestick Patterns 🚀 (Buy Signals)
Single Candle Patterns
Hammer 🛠️: Small body with a long lower wick - indicates a reversal after a downtrend.
Inverted Hammer: Long upper wick - indicates a potential bullish reversal.
Doji Dragon Fly: The price opens and closes at the same level with a long lower shadow.
Two candle patterns
Bullish Engulfing: A green candle completely engulfs the previous red candle – a strong signal of a trend reversal.
Breakout line: A green candle opens below and closes above the middle of a red candle.
Tweezers Bottom: Two candles with identical bottoms after a downtrend.
Three or more candlestick patterns
Morning Star: A three-candle reversal pattern after a downtrend.
Three White Soldiers 🪖: Three consecutive long green candles - strong confirmation of an uptrend.
Bearish Candlestick Patterns ⚠️ (Sell Signals)
Single Candle Patterns
Hanging Man: Looks like a hammer but appears at the top of an uptrend – indicates a reversal.
Shooting Star: Small body, long upper wick - indicates bearish pressure.
Doji Gravestone: Doji with a long upper wick, indicating market rejection at higher prices.
Two candle patterns
Dark Cloud Cover: A red candle closes below the midpoint of a previous green candle.
Bearish Harami: A small red candle inside the body of a previous green candle.
Tweezers Top: Two candles with identical tops after an uptrend.
Three or more candlestick patterns
Evening Star: Opposite of Morning Star - indicates a bearish reversal.
Three Black Crows 🐦: Three long red candles - strong confirmation of the downtrend.
Neutral Patterns: Watch for breakouts or pullbacks 🔄
Doji: Indicates uncertainty in the market.
Spinning Top: A small, real body with a long wick on the sides.
Marubozu: No wicks - pure momentum candle.
Hikkake Pattern: Fake Break, Watch Out for Trend Reversals.
J-Hook Pattern: Indicates the resumption of an uptrend after a pullback.
How to Trade Candlestick Patterns Like a Pro 🎯
Combine with trend lines: Patterns work best when confirmed by trend lines or key support/resistance levels.
Check with size: bigger size = stronger confirmation.
Don't trade in isolation: use 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 markets with low volume - patterns are more reliable in trending markets.
The Ultimate Candle Checklist ✅
Trend context: Is the pattern forming at the end of a trend or range?
Volume Confirmation: Are the Big Players Involved?
Pattern Completion: Did the last candle confirm the pattern?
💬 What is your favorite candle pattern?
Comment below and share your thoughts! Let's master these patterns together and level up our trading 🔥📈