Candlestick patterns are specific formations of one or more candlesticks that signal potential price direction changes. They originated from Japanese rice traders in the 18th century.
Single Candle Patterns
| Pattern | Signal | Description |
|---|---|---|
| Hammer | Bullish reversal | Small body, long lower shadow |
| Shooting Star | Bearish reversal | Small body, long upper shadow |
| Doji | Indecision | Open approximately equals Close |
| Marubozu | Strong momentum | No shadows |
Double Candle Patterns
| Pattern | Signal | Description |
|---|---|---|
| Bullish Engulfing | Bullish | Green candle covers previous red |
| Bearish Engulfing | Bearish | Red candle covers previous green |
| Tweezer Bottom | Bullish | Two candles with same low |
| Tweezer Top | Bearish | Two candles with same high |
Triple Candle Patterns
| Pattern | Signal | Description |
|---|---|---|
| Morning Star | Bullish | 3-candle reversal at bottom |
| Evening Star | Bearish | 3-candle reversal at top |
| Three White Soldiers | Bullish | 3 consecutive green candles |
| Three Black Crows | Bearish | 3 consecutive red candles |
Key Points
- Context matters — patterns at key levels are more reliable
- Higher timeframes produce stronger signals
- Combine with volume for confirmation
- No single pattern is 100% reliable