As for quantity, there are currently 42 recognized candlestick patterns. All of which can be further broken into simple and complex patterns. The falling window candlestick pattern indicates a continuation of the downtrend. The rising window candlestick pattern indicates a continuation of the uptrend. And the last candlestick is also a healthy bullish candlestick confirming the previous two candles by closing above them. As the above chart image shows, the ongoing trend was a downtrend; at the bottom of the downtrend, a hammer candlestick appears, and then the trend changes from down to up.

star pattern

Typically, we like to use bearish candlestick patterns to sell stocks. The reason for this is that they give us a very definable area of risk with a set reward. For example, you will see in a moment the 8 bearish candlestick patterns that we describe below. Each one provides a trigger for your entry and allows you to set your maximum risk above the pattern. Bearish candlestick patterns are either a single or combination of candlesticks that usually point to lower price movements in a stock. They typically tell us an exhaustion story — where bulls are giving up and bears are taking over.


It indicates that the buyers/bulls are pushing prices higher than the point where buyers face extreme pressure and feel exhausted. The pattern is formed when the open, low, and closing prices are close to each other and have a long upper shadow. In this candlestick pattern, a long shadow indicates a more negative candle.


Samantha Silberstein is a Certified Planner, FINRA Series 7 and 63 licensed holder, State of California life, accident, and health insurance licensed agent, and CFA. She spends her days working with hundreds of employees from non-profit and higher education organizations on their personal financial plans. The other thing to remember is that you don’t need to know all these patterns. You only need a handful of your favorites that you can master to make profitable trades.

For the rest of the trading session, buyers and sellers are equally strong and don’t manage to move the market any significant distance. The market closes around where it opened, and neither buyers nor sellers managed to win the fight. The foreign exchange market, also known as the forex market, is the world’s most traded financial market. We’re committed to ensuring our clients have the best education, tools, platforms, and accounts to navigate this market and trade forex.

  • The matching low candlestick pattern is a 2-bar bullish reversal pattern.
  • The last candle in the pattern reveals the renewed buying interest and usually sets the beginning of a bullish reversal trend.
  • You have access to new information and may make better decisions out of it.
  • Candlesticks with a long upper and lower shadow show that both buyers and sellers made advances, but neither could end the period with a firm advantage.
  • The High wave candlestick pattern mostly gets formed near the support or resistance level, where bulls and bears try to push the price in their own direction.

It requires a lot of analysis, planning, and careful execution. Different investors use different methods and techniques to predict the movement of shares and invest accordingly. The bearish counterpart of a Morning Star pattern is an Evening Star. It appears at the top of a revival and is formed by three candles. The first candlestick here is larger, while the second candlestick is smaller. Big White Candle Has an unusually long white body with a wide range between high and low of the day.

Dark Cloud Cover Candlestick Pattern: The Ultimate Guide

Before acting on the pattern, traders typically wait for the second candle to close, and then take action on the following candle. Actions include selling a long position once a bearish engulfing pattern occurs, or potentially entering a short position. The second is another sizeable bearish candle that gapped down. The third candlestick is a bullish candle that closes that last gap created.

hammer candlestick pattern

Both candlesticks are strong bullish candles, with the second candle bursting out higher and creating a gap between the first candle. The first candlestick of this pattern is a large bullish candle, and the second is a small bearish candle that forms within the previous candles open and close. The inverted hammer pattern is a bullish reversal candlestick pattern. The first candlestick of the harami pattern is a large bearish candlestick with a large body and little to no wicks on either end.

Piercing Line Candlestick Pattern: Full Guide

Watching a pattern form can be time consuming and irritating. If you recognize a pattern and receive confirmation, then you have a basis for taking a trade. Let the market do its thing, and you will eventually get a high-probability candlestick signal.

The first is a bearish candle, and the 2nd is a bullish candle that opens a gap down but closes at the level of the previous bearish candle. The on-neck pattern occurs in a downtrend and shows that bulls are getting powerful enough and can change the trend from down to up. The Piercing pattern is a bullish reversal candlestick pattern. The piercing pattern indicates a reversal in an ongoing downtrend, which means when this pattern appears in a continuous downtrend, the trend will change from down to up.

This means if you are observing a one-month chart, you will likely see 20 candlestick patterns. Japanese candlestick charts, however, can also represent intervals longer or shorter than one day. Candlestick patterns are technical trading formations that help visualize the price movement of a liquid asset (stocks, FX, futures, etc.). They are used by traders to time their entry and exit points better. The hammer candlestick pattern is formed of a short body with a long lower wick, and is found at the bottom of a downward trend.

What are Japanese candlestick patterns?

Of course, this interpretation shouldn’t be taken too seriously. It’s extremely hard or impossible to know exactly what a market has been up to. Nonetheless, it’s a really good way to start learning about and analyzing the markets. review: Exchange ticker before investing … – London Loves Business review: Exchange ticker before investing ….

Posted: Mon, 27 Feb 2023 15:15:17 GMT [source]

It should have a long real body and close below the first black candle. Through the above article, How To Trade Blog has introduced two Engulfing candlestick patterns to you. These are signals that traders around the world use very often. Because every time it appears, it gives very high accuracy. Its pattern is closely related to the ‘evening star’ but is believed to be a stronger signal as the middle candle is doji.

A Piercing line candlestick pattern is a two-day bullish candlestick reversal pattern that appears in a downtrend. It signals a potential short term reversal from downwards to upwards. It consists of two major components, a bullish candle of day 2 and a bearish candle… In the example above, the candlesticks are presented in green and red.

📚 The hanging man represents a potential reversal in an uptrend. While selling an asset solely based on a hanging man pattern is a risky proposition, many believe it’s a key piece of evidence that market sentiment is beginning to turn. Candlestick charts are a type of financial chart for tracking the movement of securities. They have their origins in the centuries-old Japanese rice trade and have made their way into modern day price charting. Some investors find them more visually appealing than the standard bar charts and the price actions easier to interpret.

What does the engulfing pattern say about the market?

Traders usually act on the second day with a positive price movement by posting a long trade. The Falling Three candlestick formation is a bearish continuation pattern that indicates interruption, but no reversal of the current trend. The small-bodied candle in the middle indicates the moment when the buyers’ interest is starting to wear off, and when the bears are about to take over. The third candle in the pattern usually opens at prices lower than those of the previous day and closes at levels near the middle of the first day.

If the colour is black or red, it represents a fall in prices and indicates bearish patterns. Patterns exist everywhere, in nature, clothing, architecture, and others. In the stock market as well, candlestick patterns predict price movements, helping the trader understand if it is the phase of a bear market or a bull market.

It is composed of three candles, with the middle candle having a lower high and lower low than the first and third candles. The middle candle is typically a Doji, although it can also be a small real body. This pattern is considered a strong indication of an impending reversal in the stock market. According to the bearish breakaway pattern, the bearish candlesticks close within the gap range. But it should close below the closing price of the first candlestick. That’s why it is advised to wait for the formation of a bearish confirmation candlestick after this pattern.

A engulfing line is the corollary pattern to a bearish engulfing line, and it appears after a downtrend. Also, a double bottom, or tweezers bottom, is the corollary formation that suggests a downtrend may be ending and set to reverse higher. Traditionally, candlesticks are best used on a daily basis, the idea being that each candle captures a full day’s worth of news, data, and price action.

Candlesticks that have a small body—a doji, for example—indicate that the buyers and sellers fought to a draw, leaving the close nearly exactly at the open. The pattern includes a gap in the direction of the current trend, leaving a candle with a small body (spinning top/or doji) all alone at the top or bottom, just like an island. Confirmation comes on the next day’s candle, where a gap lower signals that the prior gap higher was erased and that selling interest has emerged as the dominant market force.


In this sense, Heikin-Ashi could be viewed as an indicator, rather than a true price chart. Knowing the true opening and closing prices of a given time period is important for traders, particularly short-term traders who need to make rapid decisions. The long upper shadow shows that after buyers took prices to a new high, they were forced to retreat as sellers came in and drove prices right back down to close near the open. The Shooting Star is the opposite of the Hammer and is often viewed as one of the best candlestick patterns.