20 Must-Know Candlestick Patterns

Candlestick patterns are an essential tool for traders to analyze price movements and predict potential trends in the stock market. Originating from Japanese rice trading, these patterns provide a visual representation of market sentiment. Understanding candlestick patterns can empower traders to make more informed decisions. Here are 20 key candlestick patterns every trader should know:

1. Doji

A Doji forms when the opening and closing prices are nearly identical, creating a small or non-existent body. It indicates market indecision and often precedes a reversal or continuation of the trend.

2. Gravestone Doji

This pattern has a long upper wick and no lower wick. It signals that buyers were dominant early on but sellers regained control, suggesting a potential bearish reversal.

3. Dragonfly Doji

With a long lower wick and no upper wick, this pattern indicates that sellers dominated early, but buyers pushed the price back up. It suggests a bullish reversal.

4. Hammer

The hammer has a small body and a long lower wick. Found at the bottom of a downtrend, it signals a potential bullish reversal.

5. Inverted Hammer

The inverted hammer has a small body and a long upper wick. It appears at the bottom of a downtrend and suggests a potential bullish reversal.

6. Shooting Star

This pattern resembles the inverted hammer but appears at the top of an uptrend. It signals a potential bearish reversal.

7. Hanging Man

Similar to the hammer, the hanging man appears at the top of an uptrend. It signals a potential bearish reversal.

8. Bullish Engulfing

A bullish engulfing pattern occurs when a small bearish candle is followed by a larger bullish candle that completely engulfs the previous candle’s body. It indicates a strong bullish reversal.

9. Bearish Engulfing

This pattern is the opposite of the bullish engulfing. A small bullish candle is engulfed by a larger bearish candle, signaling a strong bearish reversal.

10. Morning Star

The morning star is a three-candle pattern that appears at the bottom of a downtrend. It consists of a large bearish candle, a small indecisive candle, and a large bullish candle, signaling a bullish reversal.

11. Evening Star

The evening star is the bearish counterpart to the morning star. It appears at the top of an uptrend and consists of a large bullish candle, a small indecisive candle, and a large bearish candle.

12. Piercing Line

This two-candle pattern appears in a downtrend. The first candle is bearish, and the second is a bullish candle that opens below the previous close but closes above the midpoint of the first candle. It signals a bullish reversal.

13. Dark Cloud Cover

The dark cloud cover is a bearish pattern that appears in an uptrend. The first candle is bullish, and the second is a bearish candle that opens above the previous close but closes below the midpoint of the first candle.

14. Three White Soldiers

This pattern consists of three consecutive long bullish candles with small or no wicks, signaling a strong bullish reversal.

15. Three Black Crows

The bearish counterpart to the three white soldiers, this pattern features three consecutive long bearish candles, signaling a strong bearish reversal.

16. Harami

A harami pattern consists of a large candle followed by a smaller candle contained within the body of the first candle. A bullish harami indicates a potential upward reversal, while a bearish harami signals a potential downward reversal.

17. Marubozu

A marubozu candle has no wicks, indicating strong momentum. A bullish marubozu suggests strong buying pressure, while a bearish marubozu indicates strong selling pressure.

18. Spinning Top

This pattern has a small body with long upper and lower wicks. It represents market indecision and often precedes a reversal or continuation of the trend.

19. Bullish Abandoned Baby

This rare three-candle pattern appears in a downtrend. It features a bearish candle, a doji that gaps down, and a bullish candle that gaps up. It signals a strong bullish reversal.

20. Bearish Abandoned Baby

The bearish abandoned baby is the opposite of its bullish counterpart. It appears in an uptrend and signals a strong bearish reversal with a bullish candle, a gapped-up doji, and a bearish candle that gaps down.

Conclusion

Mastering these 20 candlestick patterns can significantly enhance your trading skills. While no pattern guarantees success, understanding their context within the broader market structure increases the probability of making accurate predictions. Combine these patterns with other tools like trendlines, support and resistance levels, and volume analysis for optimal results. If you want to learn Technical Analysis course follow us