39 Different Types of Candlestick Patterns

Candlestick patterns are visual representations of price action in the financial markets. They are formed by the daily open, high, low, and close prices plotted as colored or hollow boxes known as “candles”. There are 39 major candlestick patterns that traders analyze to identify potential opportunities to buy and sell. These patterns provide insight into market psychology and future price direction.

Candlestick patterns are categorized into single, double, and triple bar patterns. Single bar patterns like the hammer and shooting star involve analysis of one candle. Double bar patterns such as tweezer tops and bottoms compare two candles. Triple bar patterns like morning and evening stars analyze three candle formations. Candlestick patterns derive their names from military signaling methods used in feudal Japan.

Candlestick Patterns

The most powerful and profitable candlestick patterns are continuation and reversal patterns that mark key support and resistance levels. These patterns signal when market momentum is shifting from bullish to bearish sentiment or vice versa. Some examples include the engulfing pattern, Harami pattern, dojis, and spinning tops.

The engulfing pattern is considered one of the strongest as it indicates a dramatic shift in market direction when a large candle totally engulfs the previous candle’s body. A bullish engulfing pattern signals strong buying momentum while a bearish engulfing pattern indicates increased selling momentum.

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Doji candlesticks also signal powerful indecision in the market when opening and closing prices are equal. The presence of a doji at key support or resistance levels warns of a potential reversal ahead. Dragonfly and gravestone dojis are even more significant when they form at swing highs or lows.

To effectively trade candlestick patterns, it is essential to combine analysis with other indicators like volume, support and resistance, and trend direction. No single candlestick pattern is absolutely predictive. But incorporating candlestick analysis into an overall trading strategy can greatly improve timing and execution.

1. Bullish Engulfing

The bullish engulfing pattern is a powerful two-candle reversal pattern that signals a potential change in trend from bearish to bullish. It appears at the end of a downtrend and indicates buying momentum is accelerating.

This pattern forms when a small red candle is followed by a large green candle that “engulfs” the body of the previous candle. Specifically:

  • The first candle has a small red body showing that bears were in control that day
  • The second candle opens below the close of the first candle
  • The second candle closes above the open of the first candle
  • The large green candle shows that bulls have overwhelmed the bears

A bullish engulfing pattern indicates the balance of power is shifting from sellers to buyers. The uptrend may continue as more traders take long positions.

Bullish Engulfing

Key Details

Parameter Description
Preceding Trend A downtrend (series of red candles)
Bullish Candle The second candle is a long green candle that engulfs the first
Size The larger the engulfing candle, the more significant the signal
Volume Volume should be higher on the bullish engulfing candle

The bullish engulfing pattern is even more powerful when it occurs at key support levels or after a period of indecision like a doji candle. This shows traders were unsure but ultimately buyers prevailed in driving price higher.

How to Trade the Bullish Engulfing Pattern

Traders will open long positions when a bullish engulfing pattern forms, placing stop losses below the low of the engulfing candle. Profit targets are set at key resistance levels or based on a reward/risk ratio like 2:1. It is key to wait for confirmation before entering trades as engulfing patterns can quickly reverse. Confirmation comes when price breaks above the high of the engulfing candle.

The bullish engulfing candlestick is a major reversal sign that marks the end of a downtrend. Its large size signals powerful buying pressure that is overcoming selling momentum. This pattern can lead to extended upside moves making it lucrative for traders to identify.

2. Bullish Spinning Top

The Bullish Spinning Top is a single candlestick pattern that indicates a potential reversal of a downward trend in a stock or index. It is characterized by a long upper shadow, small real body, and little or no lower shadow.

Bullish Spinning Top

This pattern forms when the open, high, and close prices are very near the upper end of the trading range, showing that buyers were able to push prices higher during the period. However, the long upper shadow indicates that sellers were also able to force prices down from their highs, creating a spinning top appearance. The small real body of the candle suggests a relatively equal balance between buying and selling pressure for the period.

There are a few key things to look for in a Bullish Spinning Top pattern:

  • The real body of the candle is small and near the high of the day’s trading range
  • There is a long upper shadow indicating selling pressure
  • There is little or no lower shadow – prices did not drop much below the open
  • It occurs during a clear downtrend, indicating a potential trend reversal

The psychology behind this pattern is that the strength of the uptrend (indicated by the long upper shadow) shows that buyers have become emboldened and more aggressive bidding up prices. This tips the supply/demand balance in favor of buyers. Even though sellers were able to force prices back down from their highs and create uncertainty (the small real body), the buying pressure was formidable.

A Bullish Spinning Top pattern needs to be confirmed by a strong up day following it to indicate that the momentum has shifted to the upside. This confirmation may take the form of a long green (or white) candle closing well into the top half of that candle’s range. Volume is also important when confirming the validity of this pattern – stronger buying volume on the confirmation day lends more strength to the signal.

Some key advantages of using the Bullish Spinning Top candlestick pattern include:

  • Visual simplicity – The pattern is very easy to identify on a chart
  • Indicates shifting momentum – The pattern foreshadows a potential change from selling to buying pressure
  • Earlier reversal signal – It can precede trend-change confirmation by other indicators
  • Focused indicator – Isolates a single period’s price action to identify momentum shifts

The disadvantages of this pattern are:

  • Requires confirmation – A single Bullish Spinning Top candle does not provide an actionable signal on its own
  • Subject to false signals – If not confirmed, the pattern fails to lead to the expected reversal
  • Context dependent – Needs to be considered in the context of overall technical analysis

3. Bearish Spinning Top

The Bearish Spinning Top is a single candlestick pattern that signals a potential reversal of an upward price trend to a downward trend. It is formed when there is significant selling pressure during the period that drives the price well below the opening level, but buyers are also able to push the price back up to close near the middle of the trading range for the period.

There are a few key characteristics of the Bearish Spinning Top pattern:

  • The real body of the candle is small and centered vertically in the trading range
  • There is a long upper and lower shadow, giving the candle a “spinning top” appearance
  • It occurs during a clear uptrend, signaling a potential trend reversal

The psychology behind this pattern relates to the battle between buyer and seller strength. The long lower shadow represents strong selling pressure driving prices down intraday. However, the ability for prices to recover back up to the mid-range by the close tells us buyers are still willing to buy the dip. The small real body signals there is uncertainty in the market and a potential shift in momentum from upside to downside.

Bearish Spinning Top

Below is a table summarizing the key details of a Bearish Spinning Top candlestick:

Attribute Description
Sentiment Bearish, indicating potential trend reversal
Previous Trend Uptrend
Open/Close Range At or near middle of trading range
Upper/Lower Shadows Long shadows indicating volatility
Real Body Small real body centered vertically

The Bearish Spinning Top pattern needs bearish confirmation on the following trading day, such as a long red candle closing well into the bottom half of its range on heavy volume. Lack of confirmation keeps the uptrend intact.

4. Bullish Harami

The Bullish Harami is a two-candle reversal pattern signaling a potential end of a downtrend. It is characterized by a large red candlestick followed by a small green candlestick contained within the body of the prior red candle.

The anatomy of a Bullish Harami pattern is:

  • Day 1 – A long red candlestick continuing the established downtrend
  • Day 2 – A small green real body that gaps below Day 1’s real body and closes within its range

The psychology behind this pattern relates to a shift in momentum from bearish to bullish. The initial long red candle reflects strong selling pressure. The next day opens lower but buyers quickly step in to fill the gap down and bid prices higher by the close. This creates a small real body and indicates the selling pressure has eased.

Bullish Harami

Below are the key details of a Bullish Harami:

Attribute Description
Sentiment Bullish, signaling potential trend reversal
Previous Trend Downtrend
Position Small real body gapped down within prior body
Color Red then green real bodies

Confirmation of the pattern often comes as a large bullish candle pushing the price to new short-term highs. This validates the transition from selling momentum to buying momentum.

5. Tweezer Bottom

The Tweezer Bottom is a two-candle reversal pattern signaling a potential bottom in a downtrend. It gets its name from the visual pattern formed by matching lows of two adjacent candlesticks, resembling the pinchers of a pair of tweezers.

The anatomy of a Tweezer Bottom pattern is:

  • Day 1 – A red candle continuing the established downtrend
  • Day 2 – A green candle with the same or nearly the same intraday low as Day 1

The psychology behind this pattern relates to sellers becoming exhausted, driving prices down to new lows. This flushes out weak hands. The next period opens around this new low area and buyers aggressively step in around that low, sending prices solidly higher by the close.

Below are the key details for identifying Tweezer Bottom candles:

Attribute Description
Sentiment Bullish reversal pattern
Previous Trend Downtrend
Lows Matching or nearly matching lows
Real Bodies Opposite colors (red then green)

Confirmation comes when bullish momentum pushes the price higher over the next few days or weeks. Lack of upside follow through may lead to pattern failure.

6. Bearish Engulfing

The Bearish Engulfing pattern is a two-candle formation signaling potential reversal of an uptrend to a downtrend. It is characterized by a large red candlestick fully engulfing a preceding smaller green candlestick during an upward price move.

The anatomy of a Bearish Engulfing pattern includes:

  • Day 1 – A green candle continuing the uptrend
  • Day 2 – A large red candle that engulfs the body of Day 1

The psychology behind this pattern relates to momentum shifting from bulls to bears. The first green candle shows sustained buying pressure and upside continuation. The next period opens higher but strong selling pressure drives the price all the way back down below the prior close. This “engulfing” action signifies bearish traders have overwhelmed the bulls.

Bearish Engulfing

Below are the key details of a Bearish Engulfing candle:

Attribute Description
Sentiment Bearish reversal pattern
Previous Trend Uptrend
Position Large red body engulfing small green body
Relationship Body of Day 2 “engulfs” body of Day 1

Ideally, bearish confirmation comes when the pattern leads to heavy selling volume and downward momentum over the next few periods. Lack of downside follow through can lead to failure.

7. Doji

Doji is a single candlestick pattern with a body so small that the open and close prices are virtually equal. The candle looks like a cross, giving very little directional information about the trading session and signaling market indecision.

There are a few key traits of a Doji candlestick:

  • The open and close are at or very near the same price level
  • There may be upper and lower shadows indicating some volatility
  • The skinny body is centered horizontally on the candle
  • It signals uncertainty and tug-of-war between buyers and sellers

The psychology behind the Doji relates to an equal balance of power between bulls and bears for that period. This gridlock between supply and demand usually comes after an established trend and indicates a potential shift in momentum or trend change may be imminent.

Doji

Below are key details for spotting Doji candles:

Attribute Description
Sentiment Neutral or reversal indication
Previous Trend Typically continues a well-defined trend
Open/Close At or very near the same price
Body Very small centered between shadows

Confirmation may come as a breakout in either direction or development of a new trend shortly after the Doji candle. Context is important when interpreting a Doji signal.

8. Gravestone Doji

The Gravestone Doji is a single candlestick pattern signaling a potential reversal of an uptrend to a downtrend. It is formed when the open, low, and close prices are all very near the low of the trading range for the period. It gets its name from the tombstone-like appearance of having a long upper shadow but little or no lower shadow.

The anatomy of a Gravestone Doji includes:

  • Open, low, and close clustered near the bottom of the trading range
  • A long upper shadow indicating buyers pushed prices higher intraday
  • Little or no lower shadow below the long body

The psychology behind this pattern relates to upside momentum failure. While buyers initially bid prices higher as the period opened, bears took control and drove prices sharply lower by the close. This transition from optimism to pessimism signals potential trend reversal.

Gravestone Doji

Below are the key details of a Gravestone Doji:

Attribute Description
Sentiment Bearish reversal indication
Previous Trend Uptrend
Position Long body near low of range
Upper/Lower Shadow Long upper shadow, little or no lower shadow

Confirmation comes when heavy selling volume drives prices significantly lower over subsequent trading periods, validating the indicated shift to downside momentum.

9. Dragonfly Doji

The Dragonfly Doji is a single candlestick pattern signaling a potential reversal of a downtrend to an uptrend. It is formed when the open, high, and close prices are all very near the high of the trading range for the period. It gets its name from the dragonfly-like appearance of having a long lower shadow but little or no upper shadow.

The anatomy of a Dragonfly Doji candlestick includes:

  • Open, high, and close clustered near the top of the trading range
  • A long lower shadow indicating sellers pushed prices lower intraday
  • Little or no upper shadow above the long body

The psychology behind this pattern relates to downside momentum failure. While sellers initially drove prices sharply lower as the period opened, buyers took control and bid prices back up near the high by the close. This transition from pessimism to optimism signals potential trend reversal.

Dragonfly Doji

Below are the key details of a Dragonfly Doji:

Attribute Description
Sentiment Bullish reversal pattern
Previous Trend Downtrend
Position Long body near high of range
Upper/Lower Shadow Little or no upper shadow, long lower shadow

Confirmation comes when strong buying volume drives prices significantly higher over subsequent trading periods, validating the indicated shift to upside momentum.

10. Three Outside Up

The Three Outside Up is a bullish reversal pattern composed of three consecutive candlesticks that marks a potential turning point signaling the end of a downtrend. The pattern gets its name from the fact that each successive candle makes a new high that “steps outside” the high of the previous candle.

The anatomy of a Three Outside Up includes:

  • Day 1 – A long red candle continuing the downtrend
  • Day 2 – A red candle that gaps below Day 1 and rallies to close above the midpoint
  • Day 3 – A long green candle that closes well above the high of Day 1

The psychology behind this pattern relates to bullish momentum accelerating with each successive candle. The first candle shows strong selling pressure. The next candle opens lower but buyers emerge to pare losses. This sets the stage for the third candle which sees enthusiastic buying from the open, driving prices sharply higher and above the prior high.

Three Outside Up

Below are the key details of the Three Outside Up pattern:

Attribute Description
Sentiment Bullish reversal pattern
Previous Trend Downtrend
Relationship Each candle makes a higher high vs previous
Confirmation Strong rally on Day 3

Confirmation comes with sustained upside follow-through over the subsequent days or weeks, showing buying momentum in control.

11. Three Inside Down

The Three Inside Down is a bearish reversal pattern composed of three consecutive candlesticks that marks a potential turning point signaling the end of an uptrend. The pattern gets its name from the fact that each successive candle makes a lower low that “steps inside” the low of the previous candle.

The anatomy of a Three Inside Down includes:

  • Day 1 – A long green candle continuing the uptrend
  • Day 2 – A green candle gapping above Day 1 and selling off to close below the midpoint
  • Day 3 – A long red candle closing well below the low of Day 1

The psychology behind this top reversal pattern relates to bearish momentum accelerating with each successive candle. The first candle shows strong buying pressure. The next candle gaps up but sellers emerge to erase gains. This sets the stage for enthusiastic selling to drive prices sharply lower on Day 3.

Three Inside Down

Below are the key details of the Three Inside Down pattern:

Attribute Description
Sentiment Bearish reversal pattern
Previous Trend Uptrend
Relationship Each candle makes a lower low vs previous
Confirmation Strong sell-off on Day 3

Confirmation comes with sustained downside follow-through over subsequent days or weeks, showing selling momentum in control.

12. Long Legged Doji

The Long Legged Doji is a single candlestick pattern signaling market indecision and potential reversal after a directional move. It gets its name from the very long upper and lower shadows or “wicks” extending out from the body, giving it exceptionally long legs.

The key traits of a Long Legged Doji include:

  • The open and close are at or very near the same price level
  • Very long upper and lower shadows indicate volatility
  • The small body is centered horizontally between the shadows
  • It shows a tug-of-war between buyers and sellers

The psychology behind this pattern relates to an equal balance of power between bulls and bears during the session. It usually forms after an extended trend where momentum is slowing. The long wicks reflect forceful but ultimately unsuccessful attempts by both sides to assert control. This battle leads to stalemate by the close, foreshadowing a potential shift in trend.

Long Legged Doji

Below are the defining characteristics of Long Legged Doji candles:

Attribute Description
Sentiment Neutral, possible trend reversal
Previous Trend Follows an established trend
Open/Close At or very near the same price
Upper/Lower Shadows Very long shadows dominate candle body

Confirmation may come as a breakout in either direction or start of a new trend after the long-legged Doji session. Context around the formation remains important for interpretation.

13. Hanging Man

The Hanging Man is a single candlestick pattern that forms at the end of an uptrend and signals a potential reversal in the market. Its name comes from the fact that it looks like a hanging man with a small body at the top and a long lower shadow underneath.

The key characteristics of a Hanging Man candle are:

  • Forms after an uptrend
  • Long lower shadow indicating sellers pushed the price down intraday
  • Small real body at the top of the trading range
  • Little or no upper shadow protruding from body

The psychology behind this pattern relates to faltering upside momentum. The long lower wick shows sellers were able to drive prices sharply lower during the session, forcing bulls to bid them back up by the close resulting in a small real body. This transition from optimism to pessimism indicates a potential peak or reversal.

Hanging Man

Below are the details traders look for in a Hanging Man:

Attribute Description
Sentiment Bearish reversal indication
Previous Trend Uptrend
Position Small body near top of trading range
Lower Shadow Long lower shadow dominates candle

Ideally the Hanging Man pattern would lead to a decline over the subsequent trading days on bearish confirmation. Lack of downside follow through could lead to a failed signal.

14. Double Candlestick Patterns

Double candlestick patterns are composed of two connected or related candlestick formations that combine to signal potential turning points or trend reversals. These patterns can highlight more complex market dynamics that unfold across two trading sessions.

There are a few key types of double candlestick patterns:

  • Engulfing patterns – A large real body engulfs a smaller opposite colored real body in a directional pattern signaling potential reversals
  • Harami patterns – A small real body nestles within the range of the prior long body, indicating indecision
  • Tweezers – Two candles with matching highs or lows pinch together to signal potential bottoms or tops

The psychology behind double candle patterns relates to shifting momentum and transitioning power between bulls and bears over a pivotal two day period in the market.

Double Candlestick Patterns

Below are some notable examples:

Pattern Description Sentiment
Bullish/Bearish Engulfing Large body engulfs small body Reversal
Bullish/Bearish Harami Small body within large body Reversal
Tweezer Bottom/Top Matching lows/highs Reversal

Confirmation on the third trading day adds greater validity to the predicted reversal signaled by the double candlestick pattern in question.

15. Bullish Kicker

The Bullish Kicker is a two-candle pattern signaling a potential bottom reversal from a downtrend to an uptrend. It is composed of a long red candle extending the decline, followed by a green gap candle opening sharply higher with a strong rally above the previous candle’s range.

The anatomy of a Bullish Kicker includes:

  • Day 1 – A red continuation candle closing on its lows
  • Day 2 – A green candle gapping up above Day 1’s range and closing near its high

The psychology involves a sharp sentiment shift from pessimism to optimism. The initial candle reflects strong bearish conviction driving prices lower. But the next session gaps up sharply as buyers step in aggressively, sending prices higher and indicating bears have lost control.

Bullish Kicker

Below are the key details of a Bullish Kicker:

Attribute Description
Sentiment Bullish reversal pattern
Previous Trend Downtrend
Relationship Gap higher open above prior range
Confirmation Strong rally on Day 2

Bullish confirmation involves upside follow-through over subsequent days or weeks indicating buying momentum. Lack of continuation could lead to failure.

16. Piercing Line

The Piercing Line is a two-candle bottom reversal pattern signaling a potential end of a downward price trend. It is composed of a long red candle in line with the prevailing downtrend, followed by a strong green rally candle that pushes sharply up through the middle of the prior red candle’s body.

The anatomy of a Piercing Line includes:

  • Day 1 – A red candle continuing the established selloff
  • Day 2 – A green candle gaps open lower but rallies to close above the midpoint of Day 1’s body

The psychology involves bearish conviction on Day 1 getting shaken on Day 2. The initial candle shows strong selling pressure driving prices lower. But the next session gaps down only briefly before buyers assert themselves to close over halfway up the previous candle’s range. This shows the potential for bullish momentum to emerge.

Piercing Line

Below are the key details of the Piercing Line pattern:

Attribute Description
Sentiment Bullish reversal pattern
Previous Trend Downtrend
Position Day 2 closes >50% into Day 1’s range
Confirmation Upside follow-through on Day 3

Bullish confirmation involves further upside momentum over subsequent trading days. Lack of continuation could lead to pattern failure.

In summary, the Piercing Line candlestick signals potential exhaustion of the prevailing downtrend. Traders watch for this piercing formation to position for bullish reversals at intermediate-term bottoms.

17. Bearish Kicker

The Bearish Kicker is a two-candle pattern signaling a potential top reversal from an uptrend to a downtrend. It is composed of a long green candle extending the advance, followed by a red gap candle opening sharply lower with a strong sell-off below the previous candle’s range.

The anatomy of a Bearish Kicker includes:

  • Day 1 – A green continuation candle closing on its highs
  • Day 2 – A red candle gapping down below Day 1’s range and closing near its low

The psychology involves a sharp sentiment shift from optimism to pessimism. The initial candle reflects strong bullish conviction driving prices higher. But the next session gaps down aggressively as sellers take control, sending prices sharply lower and indicating bulls have lost control.

Bearish Kicker

Below are the key details of a Bearish Kicker:

Attribute Description
Sentiment Bearish reversal pattern
Previous Trend Uptrend
Relationship Gap lower open below prior range
Confirmation Strong sell-off on Day 2

Bearish confirmation involves downside follow-through over subsequent days or weeks indicating selling momentum. Lack of continuation could lead to failure.

18. Dark Cloud Cover

The Dark Cloud Cover is a two-candle bearish reversal pattern signaling potential exhaustion of an uptrend. It is composed of a green upside candle followed by a red down candle that opens above the prior close but drives sharply lower to close below the midpoint of the first candle’s body.

The anatomy of a Dark Cloud Cover includes:

  • Day 1 – A green candle continuing the uptrend
  • Day 2 – A red candle that gaps higher but closes below the midpoint of Day 1’s range

The psychology involves optimism getting undercut by a burst of pessimism. The first candle shows sustained buying interest and upside continuation. However, the next session gaps up optimistically but is immediately met with intense selling pressure that dominates and sends prices solidly lower by the close.

Dark Cloud Cover

Below are the key details of the Dark Cloud Cover pattern:

Attribute Description
Sentiment Bearish reversal pattern
Previous Trend Uptrend
Position Day 2 closes <50% into Day 1’s range
Confirmation Downside follow-through on Day 3

Bearish confirmation involves heavy selling volume driving prices lower over subsequent trading periods. Lack of downside momentum could lead to failure.

19. Bearish Harami

The Bearish Harami is a two-candle reversal pattern signaling a potential peak and end of an uptrend. It is characterized by a large green candlestick followed by a small red candlestick contained within the body of the prior green candle.

The anatomy of a Bearish Harami pattern is:

  • Day 1 – A long green candle continuing the established uptrend
  • Day 2 – A small red real body that gaps above Day 1’s real body and closes within its range

The psychology behind this pattern relates to a shift in momentum from bullish to bearish. The initial long green candle reflects strong buying pressure. The next day opens higher but sellers quickly step in to fill the gap up and bid prices lower by the close. This creates a small real body and indicates the buying pressure has eased.

Bearish Harami

Below are the key details of a Bearish Harami:

Attribute Description
Sentiment Bearish, signaling potential trend reversal
Previous Trend Uptrend
Position Small real body gapped above within prior body
Color Green then red real bodies

Confirmation of the pattern often comes as a large bearish candle pushing the price to new short-term lows. This validates the transition from buying momentum to selling momentum.

20. Tweezer Top

The Tweezer Top is a two-candle reversal pattern signaling a potential peak in an uptrend. It gets its name from the visual pattern formed by matching highs of two adjacent candlesticks, resembling the pinchers of a pair of tweezers.

The anatomy of a Tweezer Top pattern is:

  • Day 1 – A green candle continuing the established uptrend
  • Day 2 – A red candle with the same or nearly the same intraday high as Day 1

The psychology behind this pattern relates to buyers becoming exhausted, pushing prices up to new highs. This draws in weak hands. The next period opens around this new high area and sellers aggressively step in to send prices solidly lower by the close.

Tweezer Top

Below are the key details for identifying Tweezer Top candles:

Attribute Description
Sentiment Bearish reversal pattern
Previous Trend Uptrend
Highs Matching or nearly matching highs
Real Bodies Opposite colors (green then red)

Confirmation comes when bearish momentum pushes the price lower over the next few days or weeks. Lack of downside follow through may lead to pattern failure.

21. Marubozu

The Marubozu is a single candlestick pattern characterized by a long real body with little to no shadows or wicks. This reflects strong conviction in one direction throughout the entire trading period, either bullish or bearish, indicating potential continuation of the prevailing trend.

There are a few key traits of Marubozu candles:

  • Very long real body capturing most of the trading range
  • Little to no upper or lower shadows protruding
  • Bullish Marubozu closes on high with green body
  • Bearish Marubozu closes on low with red body

The psychology behind this powerful pattern relates to dominance by one side. Bulls are in full control during a green Marubozu candle driving prices higher without letting bears push them down. The opposite is true for the red bearish version where bears enforce relentless selling pressure.

Marubozu

Below are details for identifying Marubozu candles:

Attribute Bullish Bearish
Sentiment Bullish continuation Bearish continuation
Previous Trend Uptrend Downtrend
Close Position On the high On the low
Shadows None or very small None or very small

Marubozu candles act as confirmation of the current trend. They show strong momentum in the prevailing direction which is likely to continue.

22. Triple Candlestick Patterns

Triple candlestick patterns are composed of three connected or related candlestick formations that combine to signal potential turning points or trend reversals. These complex multi-candle patterns reflect more intricate market dynamics that play out over three trading sessions.

There are a few key types of triple candle formations:

  • Outside patterns – Each candle makes a new high or low beyond the previous candle in a directional pattern
  • Inside patterns – Each candle moves countertrend but stays within the range of the prior candle
  • Star patterns – Small real bodies nestled within the previous wide range candlestick

The psychology involves shifting momentum and rotating leadership between bulls and bears over a pivotal three day tug-of-war in the market.

Triple Candlestick Patterns

Below are some notable examples:

Pattern Description Sentiment
Morning/Evening Stars Small body gaps down/up within large body Reversal
Three White/Black Soldiers Three long bullish/bearish bodies Continuation
Three Outside Up/Down Successive higher/lower highs and lows Reversal

Confirmation on the fourth trading day improves the reliability of the indicated reversal or breakout signaled by the triple candlestick pattern.

23. Morning Star Doji

The Morning Star Doji is a three-candle bullish reversal pattern that signals the end of a downtrend. It is made up of:

  1. A long red candlestick that continues the current downtrend. This candle has a wide trading range and closes near the low of the day.
  2. A Doji star. This candle gaps below the close of the previous red candle and has a very narrow trading range. The open and close are very near each other, forming a Doji. This shows indecision in the market after the strong downtrend.
  3. A long green candle that gaps above the middle Doji candle. This candle closes well into the top half of the trading range, confirming that buyers have overpowered sellers and the downtrend is reversing to an uptrend.

To qualify as a Morning Star Doji pattern, the middle Doji candle must gap below the long red candle. This gap emphasizes the shock in sentiment from bearish to uncertain. The third green candle then confirms the uptrend with a strong close above the Doji’s midpoint.

The key significance of the Morning Star Doji pattern comes from the distinct trend reversal it signals. After a strong downtrend, the market gaps down but is unable to continue the bearish momentum. The Doji’s narrow range shows uncertainty over the next direction. Then buyers take over during the third candle and drive the price higher, kicking off a new uptrend.

Morning Star Doji

Traders will enter long positions when the third candle closes above the Doji’s midpoint. Stops are placed below the low of the Doji candle. Profit targets can be set at previous resistance levels or using other analysis techniques.

The Morning Star Doji pattern tends to be most reliable when it occurs after a prolonged downtrend or at support levels. The long red candle emphasizes strong bearishness, while the Doji and green candle show this sentiment quickly reversing. Pay attention to any increase in volume on the green confirmation candle for added confidence.

24. Bullish Abandoned Baby

The Bullish Abandoned Baby is a three-candle bullish reversal pattern signaling the end of a downtrend. It is composed of:

  1. A long red candle continuing the downtrend. This candle has a wide range and closes near the low.
  2. A Doji candle that gaps below the previous candle. The open and close are at the same level, showing indecision.
  3. A long green candle that gaps above the Doji. This candle closes well into the upper half, confirming buyers have taken over.

To qualify as a Bullish Abandoned Baby, the middle Doji must gap below the first red candle, emphasizing the shock sentiment shift. The green candle then gaps up from the Doji, showing a strong resumption of buying pressure.

Bullish Abandoned Baby

Key details

Candle Significance
Red candle Continues downtrend
Doji Gaps down, signals indecision after downtrend
Green candle Gaps up from Doji, confirms uptrend

The significance of this pattern comes from the distinct trend reversal it signals. After a downtrend, sellers are suddenly unable to push the price lower. The Doji gap emphasizes the uncertainty over the next direction. Then buyers take over and drive the price higher, kicking off a new uptrend.

Traders will go long when the green candle closes well above the Doji’s midpoint. Stops are placed below the Doji’s low to limit risk. Profit targets can be set using previous resistance levels or other analysis techniques.

The Bullish Abandoned Baby tends to be most reliable after a prolonged downtrend or at support levels. The long red candle shows strong bearishness, quickly reversing with the Doji and green candle gaps. Pay attention to any increase in volume for added confidence.

25. Morning Star

The Morning Star is a three-candle bullish reversal pattern signaling the end of a downtrend. It consists of:

  1. A long red candle continuing the sell-off. This candle has a wide range and closes near the low.
  2. A small-bodied candle that gaps below the first candle’s close. This shows indecision after the downtrend.
  3. A long green candle that closes well above the midpoint of the second candle. This confirms buyers have taken control.

To qualify as a Morning Star, the second candle must gap between the first candle’s close and midpoint. This emphasizes the shift from bearish to uncertain sentiment. The third candle then signals the uptrend resumption with its strong close.

Morning Star

Here are the key details:

Candle Details Significance
1 Long red candle
Continues downtrend
Strong bearishness
2 Small-bodied candle
Gaps below first candle’s close
Shows indecision after downtrend
3 Long green candle
Closes above midpoint of second candle
Confirms uptrend resumption

The significance of this pattern comes from the distinct trend reversal signaled. After a downtrend, sellers suddenly fail to push prices lower. The small gap on the second candle shows uncertainty over the next direction. Then the third candle shows buyers taking control and driving the price higher in a new uptrend.

Traders will enter long positions when the green candle closes well above the midpoint of the second candle. Stops are placed below the low of the second candle to limit risk. Profit targets can be set using previous resistance levels or other analysis techniques.

The Morning Star tends to be most reliable after a prolonged downtrend or at support levels. The long red candle shows strong bearishness, quickly reversing with the next two candles. Pay attention to an increase in volume for confidence.

26. Evening Star Doji

The Evening Star Doji is a three-candle bearish reversal pattern signaling the end of an uptrend. It consists of:

  1. A long green candle continuing the uptrend. This candle has a wide range and closes near the high.
  2. A Doji candle that gaps above the previous candle’s close. The open and close are at the same level, showing indecision after the uptrend.
  3. A long red candle that closes well into the lower half of the Doji candle’s range. This confirms sellers have taken control from buyers.

To qualify as an Evening Star Doji, the middle Doji must gap between the first candle’s close and midpoint. This gap emphasizes the sudden shift from bullish to uncertain sentiment. The third red candle then signals the downtrend resumption with its bearish close.

Evening Star Doji

Key Details

Candle Details Significance
1 Long green candle
Continues uptrend
Strong bullishness
2 Doji gaps above first candle
Open/close at same level
Signals indecision after uptrend
3 Long red candle
Closes below Doji midpoint
Confirms downtrend resumption

The significance of this pattern comes from the distinct trend reversal signaled. After an uptrend, buyers suddenly fail to push prices higher. The Doji gap signals uncertainty over the next direction. Then sellers take over in the third candle, driving the price lower in a fresh downtrend.

Traders will enter short positions when the red candle closes below the Doji’s midpoint. Stops are placed above the Doji’s high to limit risk. Profit targets can be set using previous support levels or other analysis techniques.

The Evening Star Doji tends to be most reliable after a prolonged uptrend or at resistance levels. The long green candle shows strong bullishness, quickly reversing with the next two candles. Pay attention to volume for added confidence.

27. Evening Star

The Evening Star is a three-candle bearish reversal pattern that signals the end of an uptrend. It consists of:

  1. A long green candle continuing the uptrend. This candle has a wide range and closes near the high of the day.
  2. A small-bodied candle that gaps above the first candle’s close. This shows indecision after the strong uptrend.
  3. A long red candle that closes well below the midpoint of the second candle’s range. This confirms that sellers have taken control from buyers.

To qualify as an Evening Star, the second candle must gap between the first candle’s close and midpoint. This gap emphasizes the shift from bullish sentiment to uncertainty. The third candle then signals the downtrend resumption with its bearish close.

Evening Star

Here are the key details of each candle:

Candle Details Significance
1 Long green candle
Continues uptrend
Strong bullishness
2 Small-bodied candle
Gaps above first candle
Signals indecision after uptrend
3 Long red candle
Closes below midpoint of second candle
Confirms downtrend resumption

The significance of this pattern comes from the distinct trend reversal it signals. After an uptrend, buyers suddenly fail to push the price higher. The small gap on the second candle shows uncertainty over the next move. Sellers then take control on the third red candle, driving the price lower in a fresh downtrend.

Traders will look to enter short positions when the red candle closes below the midpoint of the second candle’s range. Stops are placed above the high of the second candle to limit risk. Profit targets can be set using previous support levels or other analysis techniques.

28. Three White Soldiers

The Three White Soldiers pattern is a bullish candlestick pattern that signals a potential reversal of a downtrend. It consists of three consecutive long green (or white) candles with consecutively higher closes.

Here are the key details of each candle:

Candle Details Significance
1 Long green candle closing near high Buyers starting to take control
2 Long green candle closing above first candle Buyers gaining momentum
3 Long green candle closing well above midpoint of second candle Buyers in full control, uptrend likely

The significance of this pattern comes from the consistent increase in buying pressure across the three candles, suggesting the downtrend is decisively reversing into an new uptrend. Each candle closes higher indicating the bulls are in control.

Three White Soldiers

When identifying this pattern, traders want to see consecutively higher closes and little to no overlap between the candle bodies. The third candle closing strongly above the midpoint of the second candle confirms the uptrend.

To trade this pattern, traders will go long when the third candle closes near its high. Stops are placed below the low of the second candle. Profit targets can be set based on potential resistance levels, previous swing highs, or using other analysis techniques.

The Three White Soldiers tends to be most reliable after a prolonged downtrend or near support levels. It signals sellers are exhausted and buyers have taken full control to reverse the market direction higher. Pay attention to any surge in volume across the three candles for added confidence.

29. Three Black Crows

The Three Black Crows pattern is a bearish candlestick pattern signaling a potential trend reversal after an uptrend. It consists of three consecutive long red candles with consecutively lower closes.

Here are the key details of each candle:

Candle Details Significance
1 Long red candle closing near low Sellers starting to take control
2 Long red candle closing below first candle Sellers gaining momentum
3 Long red candle closing well below midpoint of second candle Sellers in full control, downtrend likely

The significance of this pattern comes from the consistent increase in selling pressure across the three candles, suggesting the uptrend is decisively reversing into a fresh downtrend. Each candle closes lower indicating the bears are in control.

Three Black Crows

When identifying this pattern, traders want to see consecutively lower closes and little to no overlap between the candle bodies. The third candle closing strongly below the midpoint of the second candle confirms the downtrend.

To trade this pattern, traders will look to go short when the third candle closes near its low. Stops are placed above the high of the second candle. Profit targets can be set based on potential support levels, previous swing lows, or using other analysis techniques.

The Three Black Crows pattern tends to be most reliable after a prolonged uptrend or near resistance levels. It signals buyers are exhausted and sellers have taken full control to reverse the market direction lower. Pay attention to any increase in volume for confidence.

30. Shooting Star

The Shooting Star is a single-candle pattern that signals potential trend reversal after an uptrend. It has the following structure:

  1. The candle has a long upper shadow. This means there was buying pressure that pushed the price higher intraday before sellers stepped in.
  2. The candle has a small real body near the low of the day. The close is well below the intraday high.
  3. There is little or no lower shadow. This indicates buyers were not able to provide much support by the close.

The significance of this pattern comes from how it signals potential exhaustion of upside momentum. The long upper shadow represents intraday buying pressure getting rejected. By the close, sellers have taken control and driven the price down near the low.

Shooting Star

To qualify as a Shooting Star, the candle body must be near the low of the day, showing the strong rejection of intraday bullishness. There should also be little or no lower shadow, indicating buyers were unable to provide much support into the close.

When identifying this pattern, traders will look for previous candles showing a strong uptrend. The Shooting Star signals this upside momentum may be ending as sellers gain control by the close.

To trade this pattern, traders can look to enter short positions on a breakdown below the Shooting Star’s low. Stops are placed above the high of the candle and profit targets set based on potential support levels or using other analysis techniques.

31. Bearish Abandoned Baby

The Bearish Abandoned Baby is a three-candle bearish reversal pattern signaling the end of an uptrend. It consists of:

  1. A long green candle continuing the uptrend. This candle has a wide range and closes near the high of the day.
  2. A Doji candle that gaps below the previous candle’s low. The open and close are at the same level, showing indecision after the uptrend.
  3. A long red candle that gaps below the Doji candle and closes well into the lower half of the Doji’s range. This confirms sellers have taken control from buyers.

To qualify as a Bearish Abandoned Baby, the middle Doji must gap below the first green candle’s low, emphasizing the shock shift in sentiment. The third red candle gaps away from the Doji, showing strong resumption of selling momentum.

Bearish Abandoned Baby

Here are the key details:

Candle Details Significance
1 Long green candle
Continues uptrend
Strong bullishness
2 Doji gaps below first candle
Signals indecision
Uncertainty after uptrend
3 Long red candle
Closes below Doji midpoint
Confirms downtrend resumption

The significance of this pattern comes from the distinct trend reversal signaled. After an uptrend, buyers suddenly fail to sustain momentum. The Doji gaps down showing uncertainty over the next direction. Sellers then take control and drive the price lower in a fresh downtrend.

Traders will look to enter short positions on a close of the third red candle below the Doji’s midpoint. Initial stops are placed above the Doji’s high to limit risk. Profit targets can be set using previous support levels or other analysis techniques.

The Bearish Abandoned Baby tends to be most reliable after a prolonged uptrend or at resistance levels. The long green candle shows strong bullishness, quickly reversing with the next two gapping candles. Pay attention to volume surges for confidence.

32. Rising Three Methods

The Rising Three Methods pattern is a bullish continuation pattern that extends an established uptrend. It is composed of the following:

  1. A long green candle continuing the uptrend. This candle has a wide range and closes near the highs.
  2. The next candle gaps up from the previous close and opens higher. However, it is a red bearish candle that closes lower, around the midpoint of the first candle.
  3. The third candle gaps above the body of the second candle and closes near the highs, resuming the uptrend. This is a long green bullish candle.

The significance of this pattern comes from the bullish continuation it signals after a minor pullback. The initial candle shows strong buying pressure. The second candle gaps up but fails to hold the higher levels as some profit-taking hits. Finally, the third candle gaps away from the second candle lows and continues pushing the uptrend with conviction.

Rising Three Methods

Traders will look to enter long positions on a break above the high of the third candle. Initial stops are placed below the low of the second candle which marks the pullback support level. Further upside profit targets can be determined based on previous resistance levels, Fibonacci extensions, or other analysis techniques.

The Rising Three Methods pattern tends to be most reliable in a strong uptrend when long green candles are controlling the trend. Pay attention to any increase in volume on the third bullish candle for added confidence that buyers have regained control from the minor pullback.

33. Falling Three Methods

The Falling Three Methods pattern is a bearish continuation pattern that extends an established downtrend. It consists of the following candles:

  1. A long red candle continuing the downtrend. This candle has a wide range and closes near the low of the day.
  2. The next candle gaps down from the previous candle’s close and opens lower. However, it is a green bullish candle that closes higher, around the midpoint of the first candle’s range.
  3. The third candle gaps below the body of the second candle and closes near the lows, resuming the downtrend with conviction. This is a long red bearish candle.

The significance of this pattern comes from the bearish continuation it signals after a minor bounce up. The first candle shows strong selling momentum. The second candle gaps down but fails to push the lows much lower as some short-term buying comes in. Finally, the third candle gaps away from the second candle’s high point and continues driving the downtrend lower with conviction.

Falling Three Methods

Traders will look to enter short positions on a breakdown below the low of the third candle. Initial stops are placed above the high of the second candle which marks the bounce resistance level. Further downside profit targets can be set based on previous support levels, Fibonacci extensions, or other analysis techniques.

The Falling Three Methods pattern tends to be most reliable in a strong downtrend when long red candles are controlling the move down. Pay attention to any increase in volume on the third bearish candle for added confidence that sellers have regained control from the minor bounce.

34. Three Outside Down

The Three Outside Down pattern is a bearish reversal candlestick pattern that signals the potential end of an uptrend. It is composed of the following:

  1. The first candle is a long green candle that continues the uptrend. It has a wide range and closes near the highs.
  2. The second candle gaps slightly above the close of the first candle on the open. However, it is a red bearish candle that closes well into the bottom half of the first candle’s range.
  3. The third candle gaps below the close of the second candle and closes near the low of the day. This is a long red bearish candle, continuing the selloff.

The significance of this pattern comes from the distinct trend reversal signaled. After an uptrend, buyers gap the price up further but are unable to sustain momentum. Sellers take control leading to the bearish close of the second candle. The third candle gaps down further, confirming the emerging downtrend.

Three Outside Down

Traders will look to enter short positions on a close of the third candle near the lows. Initial stops are placed above the high of the second candle which marks the new resistance level. Further downside profit targets can be set using previous support levels, Fibonacci extensions, or other analysis techniques.

The Three Outside Down pattern tends to be most reliable after an extended uptrend or long green candle. It signals buyers are losing control while sellers have emerged, resulting in a trend reversal lower. Pay attention to any increase in volume for added confidence.

35. Three Inside Up

The Three Inside Up pattern is a bullish reversal candlestick pattern signaling the potential end of a downtrend. It consists of the following sequence:

  1. The first candle is a long red candle that continues the downtrend. It has a wide range and closes near the low of the day.
  2. The second candle gaps slightly below the close of the first candle on the open. However, it is a green bullish candle that closes well into the top half of the first candle’s range.
  3. The third candle gaps above the close of the second candle and closes near the highs, continuing the buying momentum. This is a long green bullish candle.

The significance of this pattern comes from the distinct shift in market sentiment and trend reversal signaled. After a downtrend, sellers gap prices lower but are unable to sustain momentum. Buyers emerge leading to the bullish close of the second candle. The third candle confirms the emerging uptrend with a strong bullish close.

Three Inside Up

Traders will look to enter long positions on a close of the third candle near the highs. Initial stops are placed below the low of the second candle which marks the new support level. Further upside targets can be determined by previous resistance levels, Fibonacci extensions, or other analysis techniques.

The Three Inside Up pattern tends to be most reliable after an extended downtrend or long red candle move. It signals sellers are losing control as buyers have emerged to reverse the trend higher. Pay attention to any increase in buying volume for added confidence.

36. Tri-Star

The Tri-Star pattern is a rare three-candle pattern signaling indecision and a potential trend reversal. It is composed of:

  1. A long-bodied candle that continues the current trend direction. It has a wide trading range and closes near the highs or lows.
  2. The next candle gaps away from the close of the previous candle in the direction opposing the trend. However, it is a Doji candle, meaning the open and close are very near each other after the gap. This shows indecision in the market.
  3. The third candle gaps in the opposite direction, back inside the range of the first candle. It closes back near the close of the first candle, showing a return to the original trend direction.

The significance of this pattern comes from the distinct shifts in sentiment. After a trending move, the market gaps sharply against the trend before returning within the range of the initial candle. This shows hesitation to reverse the trend despite short-term counter-momentum.

Tri-Star

Traders will wait for a breakout of the range of the first candle to confirm the next directional move. Volume should surge on the breakout for added confidence. Stops are placed on the opposite side of the breakout based on the gaps created.

The Tri-Star pattern represents significant indecision after a trend and can mark major reversals. However, false breaks are common so it is often safer to wait for confirmation before trading a reversal. Pay attention to volume spikes signaling the next trend.

37. Single Candlestick Patterns

Single candlestick patterns are those that are composed of one individual candle, rather than multiple candles forming a pattern together. These single candle patterns can often signal reversals or continuations on their own based on their shape and position within the current market structure.

Single Candlestick Patterns

Some of the most common and reliable single candlestick patterns include:

  • Hammer – A hammer candle has a long lower wick and small real body at the top of the candle range. It signals a potential bottom reversal after a downtrend.
  • Hanging Man – A hanging man candle looks like an upside down hammer, with a long upper wick and small real body at the bottom of the range. It signals a potential top reversal after an uptrend.
  • Doji – A doji candle’s open and close are at the same level, so it has almost no real body. It signals indecision and potential reversal after trend moves.
  • Spinning Top – A spinning top candle has a small real body centered between long upper/lower wicks. Like dojis, it reflects uncertainty about the current trend direction.

The significance of single candle patterns comes from their ability to mark key turning points on their own, without needing confirmation from additional candles in a sequence. However, due to their simplicity, single candle patterns can be prone to false signals so additional confirmation is recommended.

38. Hammer

The Hammer candlestick is a bullish reversal pattern formed by a single candle, signaling potential bottoming of a downtrend. It has the following structure:

  1. The lower shadow is at least twice the length of the real body. This shows buyers drove prices higher intraday before sellers pushed it back down.
  2. The real body is at the very top of the trading range. The close is near the high for the period.
  3. It has little or no upper shadow. Prices failed to trade much higher than the close.

The significance of this pattern comes from how it signals potential exhaustion of the downtrend. The long lower shadow represents buyers overpowering sellers intraday to push prices higher. The buying pressure continues into the close with minimal upper shadow.

Hammer

For a valid Hammer, focus on candles closing near the top of the range after a prolonged decline or downtrend. The large lower shadow shows buyers aggressively stepping in, taking control from sellers.

To trade this pattern, traders will buy a break above the closing price, suggesting upside continuation of the buying pressure. Initial stops are placed below the low of the Hammer candle. Further upside targets can be determined based on potential resistance levels, previous swing highs, or using other analysis techniques.

39. Inverted Hammer

The Inverted Hammer candlestick is a bearish reversal pattern formed by a single candle, signaling potential topping of an uptrend. It has the following structure:

  1. The upper shadow is at least twice the length of the real body. This shows sellers drove prices lower intraday before buyers pushed it back up.
  2. The real body is at the very bottom of the trading range. The close is near the low for the period.
  3. It has little or no lower shadow. Prices failed to trade much lower than the close.

The significance of this pattern comes from how it signals potential exhaustion of upside momentum. The long upper shadow represents aggressive selling pressure intraday that gets bought up by period end. The buyers regain control at the close with minimal lower shadow.

Inverted Hammer

For a valid Inverted Hammer, focus on candles closing near the bottom of the range after a sustained advance or uptrend. The large upper shadow reflects strong overhead supply, bears taking control temporarily from the bulls.

To trade this pattern, traders will sell a break below the closing price, suggesting downside continuation as selling pressure resumes. Initial stops are placed above the high of the Inverted Hammer candle. Further downside targets can be determined based on potential support levels, previous swing lows, or using other analysis techniques.

How to read candlestick patterns?

Step 1: Understand the anatomy of a candlestick

A candlestick has 3 main components – the body, upper wick, and lower wick. The body represents the open and close prices, while the wicks show the high and low prices. The color of the body tells if the closing price is higher or lower than the opening price.

Step 2: Know the types of candlesticks

There are bullish and bearish candlesticks.

  • Bullish candlesticks have white/green bodies and indicate buying pressure. Some examples are long white candles, hammer, inverted hammer, bullish engulfing etc.
  • Bearish candlesticks have black/red bodies and indicate selling pressure. Some examples are long black candles, shooting star, hanging man, bearish engulfing etc.

Step 3: Understand single and multiple candlestick patterns

  • Single candlesticks like long candles, doji, hammer etc. give reversal signals.
  • Multiple candlestick patterns like tweezer tops/bottoms, morning/evening stars, three white soldiers etc. confirm reversals.

Step 4: Identify support and resistance levels

Look for candlestick patterns at support and resistance levels for reliable trade signals. Candlestick patterns become stronger when they occur at swing points.

Step 5: Combine with other analysis techniques

Use candlestick patterns with trend lines, indicators etc. for better trade analysis. Candlestick patterns combined with volume analysis also give strong trading signals.

With practice, candlestick patterns will become easy to recognize and interpret. Always confirm signals with other techniques before taking trades.

What is the most powerful Type of Candlestick Pattern?

There are many types of candlestick patterns that traders look for, but some patterns tend to be more powerful and reliable than others. Here are some of the most powerful candlestick pattern types:

Reversal Patterns Reversal patterns indicate that a trend is likely to reverse upon completion of the pattern. Some powerful reversal candlestick patterns include:

  • Morning and Evening Star patterns
  • Bullish and Bearish Engulfing patterns
  • Tweezer Tops and Bottoms
  • Hammer and Hanging Man

These reversal patterns often lead to strong moves in the opposite direction once the pattern completes.

Continuation Patterns While reversal patterns signal potential trend changes, continuation patterns indicate that the current trend is likely to continue. Some examples are:

  • Rising and Falling Three Methods
  • Separating Lines
  • Mat Hold
  • Three Line Strike

These patterns confirm that market participants are still buying or selling in the direction of the prevailing trend.

Gap Patterns Gap patterns like Breakaway and Exhaustion gaps signal sudden and powerful moves. These gaps stand out on the chart and are hard to miss.

The most potent candlestick patterns have certain common traits – they stand out visually, indicate strong buying or selling pressure, lead to explosive breakouts and have a high probability of follow through.

What Type of Candlestick Pattern is the best?

There is no one “best” type of candlestick pattern that is guaranteed to provide accurate signals in all market conditions. However, through extensive backtesting and analysis, some candlestick patterns do tend to perform better than others. Here are some of the best candlestick pattern types:

1. Engulfing patterns

The bullish and bearish engulfing patterns are considered among the more reliable reversal patterns. They signal strong buying or selling momentum that results in a trend reversal. These patterns have clear visual signals on the chart that are easy to spot.

2. Morning and evening star patterns

These three-candle reversal patterns also provide clear visual signals of potential trend reversals at support and resistance levels. The morning star is particularly robust with its ability to mark market bottoms.

3. Tweezers

Tweezer tops and bottoms have a high probability of reversing the existing trend. Their effectiveness comes from the pinpoint precision with which they identify potential turning points.

While the above patterns are considered among the best, traders should employ robust confirmation strategies of combining candlestick signals with indicators, volume analysis and other techniques. This improves the odds of trading success. The efficacy of patterns is also determined by the broader market environment and other factors.

What Type of Candlestick Pattern is the Most Profitable?

Determining the most profitable candlestick pattern is not straightforward, as profitability depends on various factors. However, through backtesting and analysis, some patterns emerge as having higher profit potential in certain market conditions:

1. Bullish Abandoned Baby

The bullish abandoned baby pattern tends to lead to explosive upside breakouts. It signals panic capitulation that quickly transitions to buying frenzy. Capturing these volatile moves can result in outsized profits.

2. Three White Soldiers

This three-candle pattern indicates strong buying momentum that leads to sustained uptrends. Riding the upside momentum early as the pattern completes has historically yielded large potential gains.

3. Bearish Dark Cloud Cover

The bearish dark cloud cover rapidly reverses uptrends on heavy selling volume. Shorting as soon as the pattern completes allows traders to benefit from sharp downward moves.

However, as with any candlestick patterns, strict confirmation rules, stop losses, and risk management are key. Combining candlestick signals with other analysis techniques improves profitability. Timing entries and exits properly around events like earnings can also amplify gains. No pattern works perfectly in all situations.

Which Type of Candlestick Pattern is the Strongest?

Determining the “strongest” candlestick pattern is highly subjective as the efficacy of patterns depends on many factors. However, some types of candlestick patterns tend to produce more reliable signals:

1. Engulfing patterns

Both bullish and bearish engulfing patterns are considered quite robust as they signal powerful reversals through complete engulfing of the previous candle’s range. The large real bodies of engulfing candles showcase strong conviction behind the buying or selling.

2. Gaps

Breakaway and exhaustion gaps lead to explosive moves as they represent panic sentiment. Trading in the direction of these sudden and volatile gaps can lead to outsized gains. The long upper and lower shadows indicate strong emotions driving price action.

3. Harami pattern

The harami, which means “pregnant” in Japanese, is aptly named as it shows slowing momentum that precedes a reversal just as pregnancy leads to birth. This pattern is unique as both the initial and reversal moves are captured cleanly.

Of course, no candlestick pattern works perfectly all of the time. Using strict confirmation rules, combining with other analysis techniques, solid risk management – all improve the probability of success in trading these candlestick patterns. Specific market contexts also impact relative strength.

Are the Types Candlestick Patterns accurate?

Candlestick patterns have been used for centuries and continue to be a valuable part of technical analysis. However, their accuracy has often been debated. Here is an objective assessment:

The accuracy of candlestick patterns depends on several key factors:

  • Underlying market conditions – Patterns tend to be more reliable when they form at support/resistance levels or signal reversals against the prevailing trend. Patterns have lower accuracy in choppy or range-bound markets.
  • Time frames – Intraday patterns are less accurate than daily/weekly patterns due to noise and volatility influencing shorter-term price action.
  • Combining with other signals – Using candlestick patterns in conjunction with indicators, volume, etc. improves accuracy significantly compared to just relying on standalone patterns.
  • Individual pattern robustness – While no pattern is 100% accurate, some specific candlestick signals like engulfing patterns and doji tend to be more precise compared to rarer exotic patterns.

Overall, the most seasoned technical analysts report an accuracy of around 65-70% for quality candlestick signals under optimal conditions. With proper confirmation, prudent risk management and combining patterns across time frames, traders can improve profitable outcomes when trading candlestick patterns.

Are Candlestick Patterns reliable?

Candlestick patterns have been used for centuries to analyze price charts and identify trading opportunities. When used properly, candlestick patterns can provide reliable trading signals. Here is an assessment of the reliability:

At key support/resistance levels – Candlestick signals become more reliable when they occur at key support or resistance levels. This indicates more conviction behind the buying/selling.

In the direction of the trend – Continuation patterns which signal that the trend will persist, tend to be more reliable compared to counter-trend reversal signals.

With multiple confirmations – Candlestick signals are more reliable when confirmed with other indicators or analysis techniques like volume, chart patterns, momentum oscillators etc.

In certain market conditions – Volatile and trending markets provide more clarity compared to range-bound markets. Patterns tend to perform better when volatility expands after periods of contraction.

On higher time frames – The probability of reliability improves when candle signals form on daily, weekly or monthly charts as opposed to short-term intraday charts.

With risk management – Using stop losses and disciplined position sizing allows traders to rely on candlestick patterns more reliably without taking excessive risk on any single trade.

So in summary, with the right approach, analysis and risk management – candlestick patterns can indeed provide reliable trading opportunities for seasoned technical traders in stock, commodity and currency markets. The historical track record and continued usage over centuries supports their efficacy.

Author: Dominic Walsh
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I am a highly regarded trader, author & coach with over 16 years of experience trading financial markets. Today I am recognized by many as a forex strategy developer. After starting blogging in 2014, I became one of the world's most widely followed forex trading coaches, with a monthly readership of more than 40,000 traders! Make sure to follow me on social media: Instagram | Facebook | Linkedin | Youtube| Twitter | Pinterest | Medium | Quora | Reddit | Telegram Channel

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