Essential Candlestick Patterns for Beginners

Mastering a few key patterns can give beginners a strong foundation. Here are three effective ones:

1. The Hammer and Inverted Hammer

Hammer: Indicates potential bullish reversal; the long lower wick shows rejection of lower prices.

Inverted Hammer: Signals bullish reversal in a downtrend but appears at resistance levels.

2. Bullish and Bearish Engulfing Patterns

Bullish Engulfing: A smaller red candle is followed by a larger green candle, signaling upward momentum.

Bearish Engulfing: The opposite of the bullish pattern, forecasting a potential downtrend.

3. Doji Candlestick

A Doji forms when the open and close prices are nearly the same, suggesting indecision in the market.

When combined with other patterns, it can signal trend reversals.