15+ Candlestick Patterns: Complete Trading Guide With Strategies

A bullish Marubozu suggests strong buying activity that is seen at the start of an uptrend, while a bearish Marubozu indicates aggressive selling pressure found at the start of a downtrend. The absence of shadows indicates a lack of opposition during the trading session, which suggests that the prevailing market sentiment is likely to continue in the same direction. The shape and structure of the Tweezer Bottom pattern consists of two candlesticks that have similar lows. The first candle is a bearish candle that closes lower and reflects the continuation of the downtrend. The second candle is a bullish candle that opens lower but closes higher above the open of the first candle.

The Morning Star candlestick pattern’s shape and structure are essential because they illustrate the transition from selling pressure to buying interest. Candlestick pattern is a graphical representation used in technical analysis to indicate potential price movements in financial markets. A candlestick consists of a rectangular body, marking opening and closing prices, and two wicks extending above and below the body, marking maximum and minimum prices reached.

Long legged Doji

Indicates intense selling pressure causing price to „jump” lower without trading at intermediate levels. A continuation pattern consisting of a strong downward move followed by a series of smaller candles forming a slight upward channel. Shows a temporary pause in selling before the downtrend resumes, providing clear stop-loss placement. The wicks of a candle provide critical insights about rejected price levels.

Bearish Flag Pattern

The failure rate of the shooting star pattern reaches up to 40-50% in strong bullish trends. The likelihood of false signals increases if the pattern exceeds 30% in a volatile environment. More than one Doji candlesticks in an abandoned baby pattern can also form between bullish and bearish candlestick. Therefore, here’s the best candlestick patterns cheat sheet to help you in your trading journey. The falling window is a bearish continuation pattern where a gap down forms between two consecutive candles.

Conversely, a bearish engulfing pattern in an overbought zone (RSI above 70) can indicate a potential downturn. The bullish engulfing pattern is a two-candle formation that signals a potential reversal from bearish to bullish market sentiment. A strong bullish candlestick is depicted by the third candlestick in the sequence. A Bullish Engulfing candlestick pattern should be present between the first and second chart patterns. After the conclusion of this candlestick pattern, market participants might consider opening a long trade.

How to Trade the Head and Shoulders Pattern

The best way to get comfortable with using candlesticks in your trading is to open a demo account and start practicing applying your knowledge. As soon as you get comfortable enough in reading candlestick charts for trading, you can open a live account and use your experience to improve your trading performance in the long run. Regardless of the complexity, the location of all these candlestick patterns is one of the most important aspects of understanding candlesticks pattern types. It is important to understand how to read candlestick charts and what the different components of a candle are. If you want to learn how to apply candlestick chart analysis to your trading strategy, this article covers all the basics to help you get there.

Short Line Candlestick Pattern

• The lines above and below the body reflect the high and low for the period.
• Currently, there are many different kinds of symmetrical triangles (e.g. ascending triangles, descending triangles, etc.); however, they are all based on the same principle.
• This indicates that a negative shift in market sentiment is coming very quickly.
• The failure rate of the pattern reaches about 30-40% if the market reverses, while the effectiveness improves to 65-75% in confirmed downtrends.
• Bearish belt hold is a trend reversal candlestick pattern that changes bullish price trend into the bearish price trend.

The exact shape Forex all candlestick patterns depends on the relationship between the opening and closing prices, as well as the high and low. It indicates that bullish conditions are about to emerge on the market and that a trend reversal is likely. It is important that the true bodies of the first and third candles do not come into contact with the second candle at any point. Homm’a trading techniques and principles eventually evolved into the candlestick methodology, later used by Japanese technical analysts when the Japanese stock market began in the 1870s.

Bullish Counterattack Line

• It consists of three candlesticks and it will form at the bottom of the price chart.
• The Bearish Engulfing pattern has a success rate of approximately 60-65% when confirmed by subsequent bearish action.
• A stop loss may be set at little higher than the local highs of the sideways corrective movement (Stop zone).
• The first candle should be a long bullish candle, while the second candle is a smaller bearish candle that closes within the body of the first.

The bullish spinning top also shows market indecision with a small body and long shadows on both sides, suggesting that neither buyers nor sellers are in control. The smaller the real body of the candle is, the less importance is given to its color whether it is bullish or bearish. Notice how the marubozu is represented by a long body candlestick that doesn’t contain any shadows. Long-term trading capitalises on macroeconomic trends, fundamental shifts (e.g., interest rates, GDP growth), or multi-year technical patterns. Notice in the image of the reversal pattern that there is a wide body green bar at the top.

This is important because this may determine whether you’ll have a bullish or bearish bias. If the cheat sheet says the pattern should form in a bearish trend, but your chart has the pattern forming in a bullish trend, don’t take the trade. A Broadening Formation is a pattern characterized by diverging trendlines with higher highs and lower lows, indicating increasing volatility.

Three White Soldiers Candlestick Pattern

The previous trend is as likely to continue as it is likely to reverse. That is why it’s one of the few patterns traded during its formation and not after. It looks very much like a triangle directed downwards in the direction of the trend. The main difference between a wedge and a triangle is that a wedge is an independent trend, while a triangle is an ending point of a trend. In conclusion, I’d like to note that all price charts of technical analysis in Forex market are not rigid laws and can be interpreted in different ways.

Upside Tasuki Gap Candlestick Chart Patterns

Traders remain cautious when trading Hammer Candlestick patterns because false signals occur in volatile markets. It is crucial to take the context of the pattern into account when trading Japanese candlesticks. Three white soldiers is a bullish trend reversal candlestick pattern that consists of three bullish candlesticks making higher highs and high lows. These candlesticks form in series with small wicks and shadows representing a massive momentum of sellers. The bearish piercing pattern is a bearish trend reversal candlestick pattern that consists of two opposite color candlesticks with a price gap in between them.

There is also can be an inverse Head and Shoulders chart pattern (green) that looks like Forex candlestick patterns a double bottom pattern, both are reversal chart patterns. If you have identified a reversal chart pattern, and the price is trending, the price is likely to reverse after a clear paradigm emerges. The reversal patterns suggest that the current trend line is going to end. They include double and triple bottom, double and triple top, head and shoulders patterns, inverse wedges, and ascending and descending triangles. Some beginner traders may recognise the bullish setup and enter a buy order at this point. Professional traders, on the other hand, will probably be waiting for the proper confirmation to enter the trade.

That’s why I created Mind Math Money to share insights on trading, technical analysis, and finance. Many professional traders actually look for these pattern failures as trading opportunities in themselves. The Bull Flag is among the most reliable continuation patterns in any market.