Introduction: Why Candlestick Patterns Matter
Candlestick patterns are a visual language of price action. By learning to read them, you gain insight into market sentiment and can spot potential reversals or continuations before they happen. Even if you use indicators, understanding candlesticks will make you a better trader.
"The chart tells a story—candlesticks are its words."
Basic Structure of a Candlestick
- Body: The area between open and close price
- Wicks (Shadows): The high and low of the session
- Bullish candle: Close is higher than open (often green or white)
- Bearish candle: Close is lower than open (often red or black)
Top Patterns Every Beginner Should Know
- Hammer: Bullish reversal, small body at top, long lower wick. Appears after a downtrend.
- Shooting Star: Bearish reversal, small body at bottom, long upper wick. Appears after an uptrend.
- Engulfing: A large candle fully engulfs the previous one. Bullish engulfing after a downtrend; bearish engulfing after an uptrend.
- Doji: Open and close are almost equal. Signals indecision—watch for confirmation.
- Morning Star & Evening Star: Three-candle reversal patterns—morning star bullish, evening star bearish.
Table: Pattern, Signal, and Meaning
| Pattern | Type | What It Means |
|---|---|---|
| Hammer | Reversal | Potential bottom, buy signal |
| Shooting Star | Reversal | Potential top, sell signal |
| Engulfing | Reversal | Strong reversal if confirmed |
| Doji | Indecision | Wait for next candle |
How to Use Candlestick Patterns
- Look for patterns at key support/resistance or trendlines
- Wait for confirmation from the next candle or volume
- Combine with your strategy—don’t trade patterns alone
"One candlestick is a clue. A pattern at a key level is a signal."
Common Mistakes
- Trading every pattern in isolation
- Ignoring the trend or context
- Forcing patterns where none exist
Conclusion
Candlestick patterns are a powerful tool for reading price action. Start by learning a few key patterns, watch how they behave at important levels, and always wait for confirmation before acting. With practice, candlesticks will give you an edge in timing your trades.
👉 Print out a cheat sheet of candlestick patterns and keep it by your screen as you practice.
