Candlestick Trading Guide: Patterns, Strategies & Examples
Candlestick Basics
A candlestick is a visual representation of price movement during a specific time period (minute, hour, day, etc.). It consists of:
- Open: The price at which the candle started.
- Close: The price at which the candle ended.
- High: The maximum price during that period.
- Low: The minimum price during that period.
The combination of these four points forms a candle body and wicks/shadows.
- Bullish Candle: Close > Open → Usually Green. Indicates buying pressure and positive market sentiment.
- Bearish Candle: Close < Open → Usually Red. Indicates selling pressure and negative market sentiment.
Tip: A single candle shows market sentiment but not the full trend. Combine it with support/resistance, trendlines, or volume for effective trading decisions.
Single Candlestick Patterns
- Bullish Marubozu: Long green candle, no or very small wicks. Buyers dominate. Entry: above candle high, Stop-loss: below candle low, Target: nearest resistance.
- Bearish Marubozu: Long red candle, no or very small wicks. Sellers dominate. Entry: below candle low, Stop-loss: above candle high, Target: nearest support.
- Hammer: Small body, long lower wick after downtrend. Potential bullish reversal. Entry: above candle high, Stop-loss: candle low, Target: resistance above.
- Hanging Man: Small body, long lower wick at uptrend top. Potential bearish reversal. Entry: below candle low, Stop-loss: candle high.
- Inverted Hammer: Small body, long upper wick at downtrend bottom. Bullish reversal possible. Entry: above candle high, Stop-loss: candle low.
- Shooting Star: Small body, long upper wick at uptrend top. Bearish reversal likely. Entry: below candle low, Stop-loss: candle high.
- Doji: Open ≈ Close, small/no body. Market indecision. Types: Standard, Long-legged, Dragonfly (Bullish), Gravestone (Bearish). Entry: long if breakout above high at support, short if breakout below low at resistance.
Hammer Candlestick Pattern – Detailed Explanation
The Hammer candlestick pattern is one of the most reliable bullish reversal signals used in price action trading. It usually appears after a downtrend or near a strong support level and signals that selling pressure is weakening while buyers are stepping in.
Hammer Candle Structure
- Small real body located near the top of the candle range
- Long lower wick (at least 2–3 times the size of the body)
- Very small or no upper wick
- Can be green or red (green hammer is slightly stronger)
A hammer’s power lies in its lower wick, which represents rejection of lower prices.
Hammer Candle Psychology
During the formation of a hammer candle, sellers initially push the price sharply lower. However, strong buying interest emerges near support levels, absorbing all selling pressure. By the end of the session, buyers manage to push the price back near the opening or higher.
- Sellers attempt a breakdown
- Buyers absorb selling pressure
- Sellers get trapped
- Market rejects lower prices
Where Hammer Works Best
- After a clear downtrend
- Near strong support or demand zones
- At trendline or horizontal support
- Near VWAP or moving average support
Important:
A hammer formed in the middle of a range or without support has low reliability.
Hammer Trading Rules
- Entry: Buy only when price breaks above the hammer candle high
- Stop-Loss: Place stop-loss below the hammer candle low
- Target: Nearest resistance level or a minimum 1:2 risk–reward ratio
- Confirmation: Higher volume increases the success rate
Common Mistakes
- Buying immediately after hammer close without confirmation
- Ignoring overall trend direction
- Trading hammer in sideways markets
- Placing stop-loss above the candle low
Hanging Man Candlestick Pattern – Detailed Explanation
The Hanging Man candlestick pattern is a bearish reversal signal that appears after an uptrend or near a strong resistance zone. Although it looks similar to a hammer candle, its location at the top of an uptrend completely changes its meaning.
Hanging Man Candle Structure
- Small real body near the top of the candle range
- Long lower wick (at least 2–3 times the body size)
- Very small or no upper wick
- Can be green or red (red hanging man is slightly stronger)
Same shape as a hammer, but appears after an uptrend, making it bearish.
Hanging Man Candle Psychology
During an uptrend, buyers initially control the market. In a hanging man formation, sellers suddenly push the price sharply lower during the session. Although buyers manage to recover the price by close, the long lower wick shows that selling pressure has entered the market.
- Uptrend looks strong initially
- Sellers push price sharply lower
- Buyers recover price but lose strength
- Warning signal of trend exhaustion
Where Hanging Man Works Best
- After a strong or extended uptrend
- Near major resistance levels
- At supply zones or trendline resistance
- Near upper Bollinger Band or VWAP resistance
Important:
A hanging man must be confirmed by the next candle closing lower.
Hanging Man Trading Rules
- Entry: Sell only when price breaks below the hanging man candle low
- Stop-Loss: Place stop-loss above the hanging man candle high
- Target: Nearest support level or a minimum 1:2 risk–reward ratio
- Confirmation: Higher volume on breakdown increases reliability
Common Mistakes
- Shorting immediately after hanging man close
- Ignoring the overall trend strength
- Trading hanging man in sideways markets
- Confusing hammer with hanging man
Inverted Hammer Candlestick Pattern – Detailed Explanation
The Inverted Hammer candlestick pattern is a bullish reversal signal that appears after a downtrend or near a strong support zone. It indicates a possible shift in market sentiment from sellers to buyers.
Inverted Hammer Candle Structure
- Small real body located near the bottom of the candle
- Long upper wick (at least 2–3 times the body size)
- Very small or no lower wick
- Can be green or red (green is slightly stronger)
The inverted hammer shows buyer strength, but confirmation is required.
Inverted Hammer Candle Psychology
During a downtrend, sellers initially control the market. In an inverted hammer, buyers attempt to push the price higher during the session, forming a long upper wick. Although sellers push the price back near the open by the close, the attempt by buyers signals weakening selling pressure.
- Downtrend is active
- Buyers attempt a strong upward push
- Sellers fail to continue dominance
- First warning sign of trend reversal
Where Inverted Hammer Works Best
- After a clear downtrend
- Near strong support or demand zones
- At lower Bollinger Band
- After high volume selling exhaustion
Important:
An inverted hammer requires confirmation from the next bullish candle.
Inverted Hammer Trading Rules
- Entry: Buy only when price breaks above the inverted hammer candle high
- Stop-Loss: Place stop-loss below the candle low
- Target: Nearest resistance or minimum 1:2 risk–reward
- Confirmation: Higher volume on breakout improves accuracy
Common Mistakes
- Buying without confirmation candle
- Trading inverted hammer in sideways markets
- Ignoring trend context
- Confusing shooting star with inverted hammer
Shooting Star Candlestick Pattern – Detailed Explanation
The Shooting Star candlestick pattern is a bearish reversal signal that appears after an uptrend or near a strong resistance zone. It warns traders that buying momentum is weakening and sellers may take control.
Shooting Star Candle Structure
- Small real body near the lower end of the candle
- Long upper wick (at least 2–3 times the body size)
- Very small or no lower wick
- Can be red or green (red is slightly stronger)
The shooting star shows rejection of higher prices.
Shooting Star Candle Psychology
In an uptrend, buyers initially push the price strongly higher, forming a long upper wick. However, sellers step in aggressively and push the price back down near the opening level. This failure to sustain higher prices indicates buyer exhaustion and seller dominance.
- Uptrend is active
- Buyers attempt breakout to new highs
- Sellers reject higher prices
- Momentum shifts from buyers to sellers
Where Shooting Star Works Best
- After a strong uptrend
- Near resistance or supply zones
- At upper Bollinger Band
- Near previous swing highs
Important:
A shooting star requires confirmation from the next bearish candle.
Shooting Star Trading Rules
- Entry: Sell only when price breaks below the shooting star candle low
- Stop-Loss: Place stop-loss above the candle high
- Target: Nearest support or minimum 1:2 risk–reward
- Confirmation: Higher volume on breakdown increases reliability
Common Mistakes
- Selling without confirmation candle
- Trading shooting star in sideways markets
- Ignoring resistance levels
- Confusing inverted hammer with shooting star
Doji Candlestick Pattern – Detailed Explanation
The Doji candlestick pattern is a powerful signal of market indecision. It forms when the opening and closing prices are nearly equal, resulting in a very small or nonexistent real body. Dojis indicate that neither buyers nor sellers have control, and a potential trend reversal or continuation may follow depending on the context.
Doji Candle Structure
- Open ≈ Close, creating a very small or no real body
- Can have upper and lower wicks of varying lengths
- Shape is neutral, so context (trend/support/resistance) is critical
Doji Types & Meaning
- Standard Doji: Balanced wicks, shows general indecision
- Long-Legged Doji: Long upper and lower shadows, high volatility and uncertainty
- Dragonfly Doji: Long lower wick, bullish reversal if appears after downtrend
- Gravestone Doji: Long upper wick, bearish reversal if appears after uptrend
Doji Candle Psychology
A Doji represents a tug-of-war between buyers and sellers. In the session:
- Prices may move significantly higher or lower
- Neither side can maintain control
- Market closes near the opening price
- Indecision suggests a possible reversal or trend pause
Where Doji Works Best
- At the top of an uptrend (Gravestone Doji) or bottom of a downtrend (Dragonfly Doji)
- Near key support or resistance levels
- At pivot points, trendlines, or demand/supply zones
- Combined with other confirmation signals such as volume or subsequent candle direction
Important:
A single Doji does not confirm a trend reversal. Always wait for confirmation from the next candle.
Bullish Marubozu Candlestick Pattern – Detailed Explanation
The Bullish Marubozu is a powerful candlestick pattern that shows strong buyer dominance. It has a long green body with little or no wicks, indicating that buyers were in control from the opening to the closing price. This is one of the strongest bullish signals in candlestick trading.
Bullish Marubozu Candle Structure
- Long green real body
- Little or no upper wick (some may have a tiny upper wick)
- Little or no lower wick (sometimes called “open at low, close at high”)
- Represents full control of buyers
A bullish Marubozu signals that buyers pushed the price steadily higher throughout the session.
Bullish Marubozu Candle Psychology
From the open to close, buyers dominate the market. Sellers fail to push the price lower, and strong buying interest drives prices to new highs. The pattern represents:
- Strong buyer confidence
- Potential continuation of an uptrend
- Breakout of resistance levels
- High momentum that often attracts follow-up buying
Where Bullish Marubozu Works Best
- After a downtrend or at a key support level
- During breakouts above resistance zones
- Near pivot points, trendlines, or VWAP support
- In high volume sessions for higher reliability
Important:
Marubozu in a low-volume environment may not be reliable. Always check overall market trend.
Bullish Marubozu Trading Rules
- Entry: Buy above the Marubozu candle high
- Stop-Loss: Place below the candle low
- Target: Nearest resistance or minimum 1:2 risk–reward ratio
- Confirmation: Higher volume increases the reliability of the pattern
Common Mistakes
- Buying Marubozu in sideways or low-volume markets
- Ignoring trend context
- Placing stop-loss too close without considering volatility
- Assuming all Marubozus guarantee continuation—confirmation is key
Doji Trading Rules
- Entry: Trade in the direction of the breakout after Doji confirmation
- Stop-Loss: Place below/above the Doji wick depending on trade direction
- Target: Nearest support/resistance or minimum 1:2 risk–reward ratio
- Volume Confirmation: High volume increases reliability of the signal
Common Mistakes
- Trading a Doji without considering trend or context
- Assuming reversal without confirmation
- Ignoring support and resistance levels
- Entering too early without observing next candle
Bearish Marubozu Candlestick Pattern – Detailed Explanation
The Bearish Marubozu is a strong candlestick pattern indicating dominant selling pressure. It has a long red body with little or no wicks, showing that sellers were in control from the opening to the closing price. This is one of the clearest bearish signals in candlestick trading.
Bearish Marubozu Candle Structure
- Long red real body
- Little or no upper wick
- Little or no lower wick (sometimes called “open at high, close at low”)
- Represents full control of sellers
A bearish Marubozu indicates sellers pushed the price consistently lower throughout the session.
Bearish Marubozu Candle Psychology
From the open to close, sellers dominate the market. Buyers fail to push prices higher, and aggressive selling drives prices down. The pattern represents:
- Strong seller dominance
- Potential continuation of a downtrend
- Breakdown of support levels
- High momentum that often attracts follow-up selling
Where Bearish Marubozu Works Best
- After an uptrend or near key resistance levels
- During breakdowns below support zones
- Near trendlines, pivot points, or VWAP resistance
- In high volume sessions for higher reliability
Important:
Bearish Marubozu in low-volume environments may be less reliable. Always check overall trend context.
Bearish Marubozu Trading Rules
- Entry: Sell below the Marubozu candle low
- Stop-Loss: Place above the candle high
- Target: Nearest support or minimum 1:2 risk–reward ratio
- Confirmation: Higher volume and follow-up bearish candle increase reliability
Common Mistakes
- Selling Marubozu in sideways or low-volume markets
- Ignoring overall trend direction
- Placing stop-loss too tight without considering volatility
- Assuming all Marubozus guarantee continuation—confirmation is key
Two-Candlestick Patterns
- Bullish Engulfing: Small red → Large green candle engulfing previous red body. Strong bullish reversal. Entry above second candle high, Stop-loss below support.
- Bearish Engulfing: Small green → Large red candle engulfing previous green. Strong bearish reversal. Entry below second candle low, Stop-loss above resistance.
- Bullish Harami: Large red → Small green inside previous body. Potential bullish reversal. Entry above small candle high, Stop-loss below support.
- Bearish Harami: Large green → Small red inside previous body. Potential bearish reversal. Entry below small candle low, Stop-loss above resistance.
- Piercing Line: Red → Green, second candle closes above 50% of previous red. Bullish reversal. Entry above second candle high at support.
- Dark Cloud Cover: Green → Red, second candle closes below 50% of previous green. Bearish reversal. Entry below second candle low at resistance.
Bullish Engulfing Candlestick Pattern – Detailed Explanation
The Bullish Engulfing pattern is a strong bullish reversal signal that appears after a downtrend. It consists of a small red candle followed by a larger green candle that completely engulfs the previous red candle’s body. This indicates a shift in market sentiment from sellers to buyers.
Bullish Engulfing Candle Structure
- First candle: Small red (bearish) candle
- Second candle: Large green (bullish) candle that fully engulfs the first candle’s body
- Lower wick of the second candle can extend slightly below the first candle’s low
The large green candle shows buyers overtaking sellers completely, signaling a potential trend reversal.
Psychology Behind Bullish Engulfing
- Downtrend is active
- Sellers are losing control
- Buyers push price above previous candle’s high
- Strong bullish momentum signals trend reversal
Where Bullish Engulfing Works Best
- At the bottom of a downtrend
- Near strong support levels or demand zones
- After extended selling sessions
- Near trendline support or moving averages (like 50 EMA or VWAP)
Important:
Confirmation from the next candle or high volume increases reliability.
Trading Rules for Bullish Engulfing
- Entry: Buy above the high of the second (green) candle
- Stop-Loss: Below the low of the second candle
- Target: Nearest resistance or minimum 1:2 risk–reward ratio
- Confirmation: Higher volume on the green candle strengthens the signal
Common Mistakes
- Trading without confirmation or in sideways markets
- Ignoring support/resistance levels
- Assuming all engulfing patterns guarantee trend reversal
- Placing stop-loss too close
Bearish Engulfing Candlestick Pattern – Detailed Explanation
The Bearish Engulfing pattern is a strong bearish reversal signal that appears after an uptrend. It consists of a small green candle followed by a larger red candle that completely engulfs the previous green candle’s body. This indicates a shift in market sentiment from buyers to sellers.
Bearish Engulfing Candle Structure
- First candle: Small green (bullish) candle
- Second candle: Large red (bearish) candle that fully engulfs the first candle’s body
- Upper wick of the second candle can extend slightly above the first candle’s high
The large red candle shows sellers overtaking buyers completely, signaling a potential trend reversal.
Psychology Behind Bearish Engulfing
- Uptrend is active
- Buyers lose control
- Sellers push price below the previous candle’s low
- Strong bearish momentum signals trend reversal
Where Bearish Engulfing Works Best
- At the top of an uptrend
- Near strong resistance levels or supply zones
- After extended buying sessions
- Near trendline resistance or moving averages (like 50 EMA or VWAP)
Important:
Confirmation from the next candle or high volume increases reliability.
Trading Rules for Bearish Engulfing
- Entry: Sell below the low of the second (red) candle
- Stop-Loss: Above the high of the second candle
- Target: Nearest support or minimum 1:2 risk–reward ratio
- Confirmation: Higher volume on the red candle strengthens the signal
Common Mistakes
- Selling without confirmation or in sideways markets
- Ignoring resistance/support levels
- Assuming all engulfing patterns guarantee trend reversal
- Placing stop-loss too tight
Bullish Harami Candlestick Pattern – Detailed Explanation
The Bullish Harami is a potential bullish reversal signal that appears after a downtrend. It consists of a large red (bearish) candle followed by a smaller green (bullish) candle that is completely contained within the body of the first candle. This pattern shows that selling pressure is weakening and buyers may be gaining control.
Bullish Harami Candle Structure
- First candle: Large red (bearish) candle
- Second candle: Small green (bullish) candle completely within the previous red candle’s body
- The smaller candle may have wicks, but must be fully contained within the prior candle’s body
The small green candle signals that sellers are losing momentum and buyers are starting to step in.
Psychology Behind Bullish Harami
- Downtrend is active
- Sellers push price lower initially (first large red candle)
- Buyers regain control slightly, forming the smaller green candle
- Indicates weakening selling pressure and potential reversal
Where Bullish Harami Works Best
- After a sustained downtrend
- Near strong support levels or demand zones
- At trendline or moving average support (like 50 EMA or VWAP)
- In high volume sessions for higher reliability
Important:
A single Bullish Harami does not confirm a reversal. Wait for the next bullish candle for confirmation.
Trading Rules for Bullish Harami
- Entry: Buy above the high of the second (small green) candle
- Stop-Loss: Place below the low of the second candle
- Target: Nearest resistance or minimum 1:2 risk–reward ratio
- Confirmation: Higher volume on the second candle increases reliability
Common Mistakes
- Buying without confirmation from the next candle
- Trading in sideways markets
- Ignoring support or trend context
- Placing stop-loss too tight without considering volatility
Bearish Harami Candlestick Pattern – Detailed Explanation
The Bearish Harami is a potential bearish reversal signal that appears after an uptrend. It consists of a large green (bullish) candle followed by a smaller red (bearish) candle that is completely contained within the body of the first candle. This pattern indicates that buying momentum is weakening and sellers may take control.
Bearish Harami Candle Structure
- First candle: Large green (bullish) candle
- Second candle: Small red (bearish) candle completely within the previous green candle’s body
- The smaller candle may have wicks, but must be fully contained within the prior candle’s body
The small red candle signals that buyers are losing strength and sellers may start to dominate.
Psychology Behind Bearish Harami
- Uptrend is active
- Buyers push price higher initially (first large green candle)
- Sellers regain control slightly, forming the smaller red candle
- Indicates weakening buying pressure and potential reversal
Where Bearish Harami Works Best
- After a sustained uptrend
- Near strong resistance levels or supply zones
- At trendline or moving average resistance (like 50 EMA or VWAP)
- High volume enhances reliability
Important:
A single Bearish Harami does not confirm a reversal. Wait for the next bearish candle for confirmation.
Trading Rules for Bearish Harami
- Entry: Sell below the low of the second (small red) candle
- Stop-Loss: Place above the high of the second candle
- Target: Nearest support or minimum 1:2 risk–reward ratio
- Confirmation: Higher volume on the second candle increases reliability
Common Mistakes
- Selling without confirmation from the next candle
- Trading in sideways or low-volume markets
- Ignoring resistance or trend context
- Placing stop-loss too tight without considering volatility
Piercing Line Candlestick Pattern – Detailed Explanation
The Piercing Line is a bullish reversal pattern that appears after a downtrend. It consists of a long red (bearish) candle followed by a green (bullish) candle that opens below the previous candle’s low but closes above the midpoint of the red candle. This shows a strong shift in sentiment from sellers to buyers.
Piercing Line Candle Structure
- First candle: Long red (bearish) candle
- Second candle: Green (bullish) candle that opens below the red candle’s low
- The green candle closes above 50% of the first candle’s real body
- Represents partial engulfing, signaling bullish momentum
The pattern shows buyers stepping in aggressively, piercing through the prior candle’s midpoint.
Psychology Behind Piercing Line
- Downtrend is active
- Sellers push price lower initially (first red candle)
- Buyers regain control, pushing price above the 50% midpoint of the red candle
- Indicates increasing buying pressure and possible trend reversal
Where Piercing Line Works Best
- After a clear downtrend
- Near strong support or demand zones
- At trendline support or moving averages (like 50 EMA or VWAP)
- High volume increases reliability
Important:
Confirmation is required from the next bullish candle for a reliable trade setup.
Trading Rules for Piercing Line
- Entry: Buy above the high of the second (green) candle
- Stop-Loss: Place below the low of the second candle
- Target: Nearest resistance or minimum 1:2 risk–reward ratio
- Confirmation: Higher volume on the second candle strengthens the signal
Common Mistakes
- Buying without confirmation from the next candle
- Ignoring trend and support levels
- Assuming all piercing lines guarantee reversal
- Placing stop-loss too tight
Dark Cloud Cover Candlestick Pattern – Detailed Explanation
The Dark Cloud Cover is a bearish reversal pattern that appears after an uptrend. It consists of a long green (bullish) candle followed by a red (bearish) candle that opens above the previous candle’s high but closes below the midpoint of the green candle. This pattern signals that sellers are taking control and a potential reversal may occur.
Dark Cloud Cover Candle Structure
- First candle: Long green (bullish) candle
- Second candle: Red (bearish) candle that opens above the green candle’s high
- The red candle closes below 50% of the first candle’s real body
- Represents partial engulfing, signaling strong selling pressure
The pattern shows sellers stepping in aggressively, pushing the price below the midpoint of the prior candle.
Psychology Behind Dark Cloud Cover
- Uptrend is active
- Buyers push price higher initially (first green candle)
- Sellers regain control, forcing the price below the 50% midpoint of the green candle
- Indicates increasing selling pressure and a potential trend reversal
Where Dark Cloud Cover Works Best
- After a clear uptrend
- Near strong resistance or supply zones
- At trendline resistance or moving averages (like 50 EMA or VWAP)
- High volume enhances reliability
Important:
Confirmation is required from the next bearish candle for a reliable trade setup.
Trading Rules for Dark Cloud Cover
- Entry: Sell below the low of the second (red) candle
- Stop-Loss: Place above the high of the second candle
- Target: Nearest support or minimum 1:2 risk–reward ratio
- Confirmation: Higher volume on the second candle strengthens the signal
Common Mistakes
- Selling without confirmation from the next candle
- Ignoring trend and resistance levels
- Assuming all Dark Cloud Cover patterns guarantee reversal
- Placing stop-loss too tight
Three-Candlestick Patterns
- Morning Star: Red → Doji → Green. Bullish reversal after downtrend. Entry above last candle high, Stop-loss below support.
- Evening Star: Green → Doji → Red. Bearish reversal after uptrend. Entry below last candle low, Stop-loss above resistance.
- Three White Soldiers: Three consecutive long green candles, each opens above previous close. Strong bullish trend. Entry above third candle high, Stop-loss below support.
- Three Black Crows: Three consecutive long red candles, each opens below previous close. Strong bearish trend. Entry below third candle low, Stop-loss above resistance.
Morning Star Candlestick Pattern – Detailed Explanation
The Morning Star is a bullish reversal pattern that appears after a downtrend. It consists of three candles: a long red (bearish) candle, a small-bodied candle (Doji or small green/red), and a long green (bullish) candle. This pattern signals that selling pressure is diminishing and buyers are gaining control.
Morning Star Candle Structure
- First candle: Long red (bearish) candle indicating strong selling pressure
- Second candle: Small-bodied candle (red, green, or Doji) showing indecision
- Third candle: Long green (bullish) candle closing above the midpoint of the first red candle
The pattern indicates a shift in market sentiment from bearish to bullish, signaling a potential reversal.
Psychology Behind Morning Star
- Downtrend is active with strong selling pressure initially
- The second candle shows indecision, with buyers starting to enter
- The third candle demonstrates buyers taking control, pushing price higher
- Market sentiment shifts from negative to positive
Where Morning Star Works Best
- After a clear downtrend
- Near strong support levels or demand zones
- At trendline or moving average support (like 50 EMA or VWAP)
- High volume on the third candle increases reliability
Important:
The third candle’s confirmation is critical. Without it, the pattern may fail.
Trading Rules for Morning Star
- Entry: Buy above the high of the third (green) candle
- Stop-Loss: Place below the low of the second candle (small-bodied)
- Target: Nearest resistance or minimum 1:2 risk–reward ratio
- Confirmation: Higher volume on the third candle strengthens the signal
Common Mistakes
- Entering before the third candle closes
- Trading in sideways markets
- Ignoring support or trend context
- Not considering volume or momentum confirmation
Evening Star Candlestick Pattern – Detailed Explanation
The Evening Star is a bearish reversal pattern that appears after an uptrend. It consists of three candles: a long green (bullish) candle, a small-bodied candle (Doji or small red/green), and a long red (bearish) candle. This pattern signals that buying pressure is diminishing and sellers are taking control.
Evening Star Candle Structure
- First candle: Long green (bullish) candle indicating strong buying pressure
- Second candle: Small-bodied candle (red, green, or Doji) showing indecision
- Third candle: Long red (bearish) candle closing below the midpoint of the first green candle
The pattern indicates a shift in market sentiment from bullish to bearish, signaling a potential trend reversal.
Psychology Behind Evening Star
- Uptrend is active with strong buying pressure initially
- The second candle shows indecision, with buyers weakening
- The third candle demonstrates sellers taking control, pushing price lower
- Market sentiment shifts from positive to negative
Where Evening Star Works Best
- After a clear uptrend
- Near strong resistance levels or supply zones
- At trendline or moving average resistance (like 50 EMA or VWAP)
- High volume on the third candle increases reliability
Important:
The third candle’s confirmation is critical. Without it, the pattern may fail.
Trading Rules for Evening Star
- Entry: Sell below the low of the third (red) candle
- Stop-Loss: Place above the high of the second candle (small-bodied)
- Target: Nearest support or minimum 1:2 risk–reward ratio
- Confirmation: Higher volume on the third candle strengthens the signal
Common Mistakes
- Selling before the third candle closes
- Trading in sideways markets
- Ignoring resistance or trend context
- Not considering volume or momentum confirmation
Three White Soldiers Candlestick Pattern – Detailed Explanation
The Three White Soldiers is a strong bullish pattern that signals the continuation of an uptrend. It consists of three consecutive long green (bullish) candles, each opening within the previous candle’s body and closing progressively higher. This pattern demonstrates sustained buying pressure and strong market optimism.
Three White Soldiers Candle Structure
- Three consecutive long green (bullish) candles
- Each candle opens within the previous candle’s body
- Each candle closes higher than the previous candle’s close
- Wicks are short, indicating consistent bullish momentum
The pattern reflects strong and continuous buying pressure, confirming the uptrend.
Psychology Behind Three White Soldiers
- Buyers dominate the market consistently over three sessions
- Each candle opens slightly above or within the previous candle, showing steady confidence
- Minimal selling pressure as wicks are short
- Signals strong bullish sentiment and trend continuation
Where Three White Soldiers Works Best
- After a downtrend as a strong reversal signal
- During an ongoing uptrend for trend confirmation
- Near support levels or demand zones
- High volume on all three candles increases reliability
Important:
Avoid trading this pattern in overextended markets without checking resistance levels or momentum indicators.
Trading Rules for Three White Soldiers
- Entry: Buy above the high of the third candle
- Stop-Loss: Place below the low of the first candle
- Target: Nearest resistance or based on risk–reward ratio (minimum 1:2)
- Confirmation: Higher volume across all three candles strengthens the trend signal
Common Mistakes
- Trading in low-volume or sideways markets
- Ignoring resistance levels or trend context
- Assuming the pattern guarantees endless bullish continuation
- Placing stop-loss too close without considering volatility
Three Black Crows Candlestick Pattern – Detailed Explanation
The Three Black Crows is a strong bearish pattern that signals the continuation of a downtrend. It consists of three consecutive long red (bearish) candles, each opening within the previous candle’s body and closing progressively lower. This pattern demonstrates sustained selling pressure and strong market pessimism.
Three Black Crows Candle Structure
- Three consecutive long red (bearish) candles
- Each candle opens within the previous candle’s body
- Each candle closes lower than the previous candle’s close
- Wicks are short, indicating minimal buying pressure
The pattern reflects strong and continuous selling pressure, confirming the downtrend.
Psychology Behind Three Black Crows
- Sellers dominate the market consistently over three sessions
- Each candle opens slightly below or within the previous candle, showing steady confidence in selling
- Minimal buying pressure as wicks are short
- Signals strong bearish sentiment and trend continuation
Where Three Black Crows Works Best
- After an uptrend as a strong reversal signal
- During an ongoing downtrend for trend confirmation
- Near resistance levels or supply zones
- High volume on all three candles increases reliability
Important:
Avoid trading this pattern in low-volume or sideways markets, as it may give false signals.
Trading Rules for Three Black Crows
- Entry: Sell below the low of the third candle
- Stop-Loss: Place above the high of the first candle
- Target: Nearest support or based on risk–reward ratio (minimum 1:2)
- Confirmation: Higher volume across all three candles strengthens the trend signal
Common Mistakes
- Selling in low-volume or sideways markets
- Ignoring support levels or trend context
- Assuming the pattern guarantees endless bearish continuation
- Placing stop-loss too tight without considering volatility
Candlestick Pattern Summary Table
| Pattern | Type | Indication | Entry | Stop-Loss | Target |
|---|---|---|---|---|---|
| Hammer | Bullish | Potential bullish reversal after downtrend | Above candle high | Candle low | Nearest resistance |
| Hanging Man | Bearish | Potential bearish reversal after uptrend | Below candle low | Candle high | Nearest support |
| Inverted Hammer | Bullish | Potential bullish reversal at downtrend bottom | Above candle high | Candle low | Resistance above |
| Shooting Star | Bearish | Potential bearish reversal at uptrend top | Below candle low | Candle high | Nearest support |
| Doji | Neutral | Market indecision | Breakout above high / below low | Support/Resistance | Next key level |
| Bullish Marubozu | Bullish | Strong buying pressure, bullish trend | Above candle high | Below candle low | Nearest resistance |
| Bearish Marubozu | Bearish | Strong selling pressure, bearish trend | Below candle low | Above candle high | Nearest support |
| Bullish Engulfing | Bullish | Strong bullish reversal | Above second candle high | Below support | Nearest resistance |
| Bearish Engulfing | Bearish | Strong bearish reversal | Below second candle low | Above resistance | Nearest support |
| Bullish Harami | Bullish | Potential bullish reversal | Above small candle high | Below support | Nearest resistance |
| Bearish Harami | Bearish | Potential bearish reversal | Below small candle low | Above resistance | Nearest support |
| Piercing Line | Bullish | Reversal after downtrend | Above second candle high | Support | Resistance above |
| Dark Cloud Cover | Bearish | Reversal after uptrend | Below second candle low | Resistance | Support below |
| Morning Star | Bullish | Bullish reversal after downtrend | Above third candle high | Below second candle low | Resistance above |
| Evening Star | Bearish | Bearish reversal after uptrend | Below third candle low | Above second candle high | Support below |
| Three White Soldiers | Bullish | Strong bullish trend | Above third candle high | Below first candle low | Resistance above |
| Three Black Crows | Bearish | Strong bearish trend | Below third candle low | Above first candle high | Support below |
Important Notes for Trading Candlestick Patterns
- Never trade solely on candle patterns. Always combine with support & resistance levels, trendlines, and volume analysis.
- Entry Strategy: Above breakout for bullish setups, below breakout for bearish setups.
- Stop-Loss: Place below candle low for long trades, above candle high for short trades.
- Target: Nearest resistance for long trades, nearest support for short trades.
- Risk Management: Avoid trading during extreme news or low-volume periods. Never risk more than 1–2% of trading capital per trade.
Disclaimer: Candlestick trading involves market risk. This content is for educational purposes only and should not be considered financial advice. Consult a professional before trading.
