It’s no secret that candlestick patterns are powerful indicators signalling major price movements in forex trading.

They form a very powerful aspect of technical analysis and tend to produce accurate results if mastered.

Whether it’s a continuation or a reversal signal, these series of patterns can easily give you a heads up what might be coming soon.

The beauty of candlestick formations is that anyone can use them.

They are perfect for all levels of experience and can be used on any timeframe.

It’s important to also note that these patterns can provide confluence with other trading strategies, price action signals, or technical indicators.

When combined, it can make a powerful strategy.

The goal of this guide is to be the last destination you’ll need when it comes to learning the candlestick pattern basics.

After reading this, you will be able to accurately identify these candlesticks in the markets correctly and able to know whether the market is giving you a bullish, bearish, or a continuation signal to enter and bank some pips.

Not only that, but you’ll also understand exactly why these patterns occur in terms of orders and momentum changes – understanding this factor can help build a bigger picture of your trading ideas!

So, let’s go through the major candlestick charts and how to use them as effectively as possible.

Before we dive into each pattern, let’s go through some of the basics and build up a foundation – making life and learning easier as we progress, shall we?

Let’s start with:

What Are Candlestick Patterns & Why Do We Use Them?

To make things clear – candlestick charts, Japanese candlestick patterns, Japanese chart patterns, and similar terms are all the same.

Candlestick patterns are specific formations that indicate whether a move is going to continue or reverse.

Which allows traders to place trades based on their meanings.

These patterns are formed based on what the market is doing at the previous trading session.

Due to the design of the Japanese candlestick patterns, they show a high, open, close, low with the difference between the open and close filled in with a body.

This is to make that particular trading session easier to interpret.

As you can see above, they are pretty easy to read and at a single glance can give you all the price information you need to make a trading decision.

Each trading session can be different, but the core reason why the Japanese candlestick is a popular choice for traders is because of this:

It’s easy to see whether the buyers or sellers won, and by how much.

This gives you an idea of where the momentum lies.

You won’t get this from a Line Chart.

We use candlesticks to give us an idea of where the market goes, but our unique method of entering trades – execution method – utilizes candlesticks to help avoid false signals and generate optimal entries.

You can read about that here: How To Execute Trades Properly (opens in a new tab, so you can come back here).

Now you have a better understanding of what candlestick chart patterns are and why we use them.

There a few common questions asked that will certainly help with your knowledge going forward.

One of the most common questions beginners like to ask about candlestick charts is:

How many candlestick patterns are there?

Roughly speaking there are over 100 candlestick formations recognised.

There are so many different combinations available.

There are single, double, triple, and quadruple types of candlestick formations + more that aren’t as well known.

However, today we will show you 21 of the best candlestick patterns to learn and begin with.

Hammer

Bullish / Bearish Engulfing

Piercing line

Morning doji star

Three white soldiers

Shooting star

Evening doji star

Three black crows

Dragonfly Doji

Gravestone Doji

Tweezer top/bottom

Falling three methods

Rising three methods

Three line strike

Three black crows

Bullish/Bearish Harami

Bullish/Bearish Hikkake

This will be enough candlestick patterns for your trading career, if you master all 21 then you will be navigating the markets with ease.

Do candlestick patterns work?

Candlestick chart patterns do work.

By using the price action from the market these unique patterns will generate signals that can indicate whether the market will reverse or continue.

These patterns become even more powerful when you use other market signals for confluence, such as support and resistance levels.

However, like all trading strategies and signals, they do still fail from time to time and nothing works 100% of the time.

The more you practice with them, the better you’ll be.

You’ll also pick up some quirks yourself by knowing which candlestick formations will work better in which situations, but this comes from hours and hours of experience.

Right, now the questions are out the way – let’s turn up the heat and get involved with…

Candlestick Patterns: The Definitive Guide

In this guide, we will break up the patterns into different sections to make things a touch easier to comprehend.

These sections will be set in place to when and where you would find the patterns in the market place and what they indicate.

We’ll also elaborate on what the candlesticks mean in terms of buying/selling pressure.

This will give you a clearer understanding of how the markets are going and will allow you to swiftly determine these patterns more accurately.

With that said, let’s get stuck in starting with:

Bullish candlestick patterns

Bullish candlestick patterns generate opportunities to highlight when the market will turn bullish/provide you with a potential buying opportunity.

It’s great to know these patterns as you can find high probability trading ideas that occur when the market is about to go upwards.

Let’s get started with the first bullish candlestick:

The Hammer Pattern

The hammer pattern is part of a duo that is probably one of the most taught and looked at candlestick formations on the internet.

The reason behind this is because it’s a really easy pattern to spot and is equally as easy to trade.

The hammer pattern can be found at the bottom of a trend.

They usually give a signal when the downtrend has become exhausted – no more sellers in the market – and the buyers can come in and bring the price higher.

That is exactly what the hammer pattern portrays in the background (selling pressure dropping and buyers getting involved).

This can be seen because for a hammer pattern to form, the price must be taken much lower from open, creating a lower low but during the trading session, the buyers take advantage of the weakness and bring the price back up.

Thus giving a hammer sort of shape.

So once you see one of these candlesticks, you know that the momentum could be changing shortly.

The hammer pattern is a 1-bar pattern, which means that it can appear at any time and give an indication that the markets may shift.

You can clearly see one of these patterns by its long lower shadow as you can see in the image below.

Take note, the colour of the candlestick does not matter.

However, the longer the wick (the black line), the bigger the buying pressure, thus the higher chance of a larger movement over the next few trading sessions.

Quick Action Summary of The Hammer:

Where is it usually found: At the end of a downtrend

Number of candlesticks to complete pattern: 1

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Green (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The current sellers have been exhausted and buyers have driven the price higher – thus more buyers in the market = higher prices.

Next up we have:

The Bullish Engulfing Pattern

In the hammer pattern, we saw what happened when the sellers weakened, and then the buyers jumped in to raise the price higher, with the bullish engulfing pattern the buyers are in control virtually the entire session.

This gives you a strong indicator that the move upwards should have momentum behind it.

Also, these are simple to spot in the markets too.

They are usually large candlestick bodies that have short high and low wicks, but a large body between the open and close price.

Furthermore, this pattern is called engulfing because it takes over the previous candlestick’s close and high positions.

This pattern can be found at the end of a trend and demonstrates a drastic shift in bulls in the market.

When a bullish engulfing pattern is confirmed, this is usually a strong signal to take advantage of the change in the market.

Take a look at the bullish engulfing pattern below:

As you can see it is easy to identify, but the close of the latest candlestick must close higher than the previous open. Ideally, you want it to close higher than the high, to fully – consume – the previous candlestick.

The engulfing candlestick pattern can generate fantastic opportunities when timed right.

Quick Action Summary of The Bullish Engulfing Pattern:

Where is it usually found: At the end of a downtrend, but can appear at any point.

Number of candlesticks to complete pattern: 2

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Green (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The current sellers have been non-existent and buyers have driven the price higher than the previous candlesticks high and open – thus more buyers in the market = higher prices.

This brings us to:

The Piercing Line Pattern

This is another 2-candlestick pattern that generates a reversal signal

The name is given because of the signal candlestick pierces at least 50% of the previous day’s candlestick.

Unlike a bullish engulfing bar which consumes the previous candlestick, you would want to see that sellers tried to drag price further down before the buyers overpowered them.

Normally, you would want the bullish candlestick to gap down, but in forex – as it’s a 24-hour market there are very little gaps created, in fact, you will only find them (sometimes) on a daily/weekly charts.

So the next best thing is to monitor that the bullish candlestick moves down slightly before piercing the 50% level.

Imagine pulling back a slingshot – you need to pull back to create a thrust forward motion. This is the same idea.

Again, this pattern is seen towards the end of a downtrend thus revealing a potential reversal imminent.

Let’s take a quick look at the pattern:

As you can see here how it is slightly different from the engulfing bar – but both provide the same signal.

However, the piercing line candlestick pattern is considered slightly weaker as the bullish close price rarely closes higher than the bearish open price.

It does, therefore, identify a change in momentum, which can prime you for a reversal trade.

Quick Action Summary of The Piercing Line Pattern:

Where is it usually found: At the end of a downtrend but can appear at any point – this reduces its effectiveness.

Number of candlesticks to complete pattern: 2

What type of signal is generated: Reversal

Strength of signal: Weak, can be used to provide validation and prime for a future trade

Final Candlestick Colour: Green (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The current sellers have attempted to take the price lower but the buyers have driven the price higher than the previous candlesticks mid-point.

Thus more buyers in the market = higher prices.

Another bullish candlestick pattern on the list is:

The Tweezer Bottom Pattern

The Tweezer Bottom candlestick pattern is a great reversal signal that traders take advantage of.

These are formed when the price has been rejected twice over two trading sessions.

Ideally, the previous lows are equal, but the bearish candlestick’s open is the same as the bullish candlestick’s close.

This forms two lower wicks at a similar length, hence the name “tweezer”.

It is important to note that this is a two-candlestick pattern and appear at the end of a downtrend.

What the tweezer bottom candlestick pattern tells you as a trade is that the sellers were unable to take price lower than a certain point over two trading sessions, but the buyers were able to come on and change the momentum.

Thus enabling you to look for buying opportunities.

Here is what a tweezer bottom candlestick pattern looks like:

As you can see, they are quite easy to identify – but they are not as common as hammers and engulfing patterns.

Quick Action Summary of The Tweezer Bottom Pattern:

Where is it usually found: Normally, at the end of a downtrend but may appear at any point – this does, however, reduces its effectiveness.

Number of candlesticks to complete pattern: 2

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Green (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The current sellers have attempted to take the price lower to the same place twice over two sessions but the buyers had emerged twice and driven the price higher.

This shows momentum in favour of the bulls.

The Morning Doji Star Pattern

This is a 3-candlestick pattern that can easily be overlooked but gives a lot of information based on the shift in power between buyers and sellers.

If you look at it this way, it tells the story of how the momentum changes.

It goes from sellers being dominant to neither buyers or sellers being dominant then shows the buyers as dominant – giving you the flow of momentum.

What this also tells us is that the bulls were able to essentially suffocate the sellers in a downtrend out of the market over two periods, thus giving a valid bullish signal.

Because of the visual transition from bears to bulls quite clearly, this is quite a strong indicator – and when spotted should be taken into considering.

Remember, compared to many of the other candlestick chart formations – this requires 3-candlesticks, which means 3 different trading sessions to generate this formation.

Check out the 3-bar formation below:

As you can see, it kind of combines 3 of the previous candlestick formations (hammer, piercing line, and engulfing).

The core candlestick here is the star doji in the middle (highlighted) – it must be in a small cross shape for the pattern to be valid.

So when you master them, you can easily transition between candlestick formations.

Quick Action Summary of The Morning Doji Star Pattern:

Where is it usually found: At the end of a downtrend.

Number of candlesticks to complete pattern: 3

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Green (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The downtrend pressure is being released into a neutral state and then the buyers take control afterwards.

Let’s take a look at the next formation to add to your toolbox:

The Bullish Harami Pattern

The simplified name of this pattern is an insider bar, which exactly describes this 2-candlestick pattern perfectly.

This candlestick pattern appears quite frequently and can be found during a trend, which means it can happen as a continuation pattern too – but they have a much higher chance of success when they are seen at the bottom of a downtrend.

The bullish harami is caused when enough buyers enter the market but are not able to bring the price higher than the previous candlesticks open price.

The bullish harami pattern is kept within the previous candlesticks high, open, close, and low range.

This is significant because it dictates that the sellers couldn’t continue their moves lower – whilst the buyers were able to enter, but lacked to buying power to take it higher.

This candlestick pattern is more of a setup candlestick, that primes you to be aware of a bullish reversal (or bullish continuation) – so spotting these can make entering and re-entering trades a breeze.

In the example above, you can see that the trigger candle (first green candlestick in the red box) is completely within the previous red candlestick, which easily identifies as a valid trading signal.

Quick Action Summary of The Bullish Harami Pattern:

Where is it usually found: At the end of a downtrend or during a bullish trend as a continuation pattern.

Number of candlesticks to complete pattern: 2

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Green (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The pressure from the sellers have succumbed to the bulls entering the markets, but the bulls are not quite strong enough to take price higher.

With that said, the bullish harami works well with other market confluences, such as supply and demand levels.

The Bullish Three-Line Strike Pattern

Not a common candlestick pattern, but it is one of the best.

It’s the only reason for unpopularity is that it doesn’t appear too frequently, thus people lose their interest in hunting for it.

But like Lady Mary Currie once said:

“All good things come to those who wait.”

And if you find a Three-Line Strike candlestick pattern, you should be excited.

This pattern consists of three bearish candlesticks and a large bullish candlestick, the first three bearish candlesticks are creating lower lows and then the final candlestick close higher than first candlestick pattern.

It’s very simple, but the three-line strike is one of the best reversal indicators.

This is because we see a surge of buying power entering the market that was able to change the direction of the market by driving the price higher and consuming all previous 3 candles.

You can see a three-line strike in action below:

As you can see, you may have to wait for 4-candlesticks to confirm a reversal but when you find it, it sure does change trading direction – quite violently too!

Quick Action Summary of Three-Line Strike Pattern:

Where is it usually found: At the end of a downtrend.

Number of candlesticks to complete pattern: 4

What type of signal is generated: Reversal

Strength of signal: Very Strong

Final Candlestick Colour: Green (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The sellers are continually in control for three trading sessions by reaching lower lows as the markets continue to fall.

Then, almost out of the blue, buyers enter the arena and obliterate the sellers by taking control and taking price higher than the open price three trading sessions ago.

The next candlestick is unique because it’s from an indecisive candlestick, but can be used for a bullish signal:

The Dragonfly Doji Pattern

A dragonfly doji is a type of indecision candle that can form at the bottom of a downtrend.

These are very similar to the Hammer pattern discussed earlier, however, the only difference is that there is no candle body on the chart.

The open price is the same as the close price.

What this means is that during the trading sessions the bears managed to pull the price down lower, generating a session low, then it aggressively moves back up caused by a rush of bulls.

However, the balance of power between the bulls and bears is equal – thus creating a dragonfly doji.

As you can see, compared to other candlesticks the dragonfly doji is unique by not having a candlestick body – but reacts the same as you would trade a hammer.

Quick Action Summary of Dragonfly Doji Pattern:

Where is it usually found: At the end of a downtrend.

Number of candlesticks to complete pattern: 1

What type of signal is generated: Reversal

Strength of signal: Medium

Final Candlestick Colour: Black – but can also be shown as green/red.

What it means in terms of buyers/sellers momentum: The buyers have been able to enter the market and overpower the sellers, therefore switching momentum – but the close price is the same as the open price – so you would have to wait for further confirmation of a reversal.

Next Japanese candlestick pattern is:

The Rising Three Method Pattern

This pattern is commonly found in a bullish uptrend and is a continuation pattern.

This particular pattern is also 5 candlesticks long.

What we look for is a large bullish candlestick followed swiftly by 3 smaller candlesticks that trade slightly lower and close between the large bullish candlestick’s high and low range.

The final candlestick is a large bull candle that closes above the first bull candlestick’s close.

This is caused when buyers in the markets require a little rest before taking the market higher.

What this tells us is that in the current uptrend, the sellers that are taking the price lower are weak and will be easily overpowered when the buyers re-enter.

A lot to take in there, but this image below will help explain:

As you can see, it’s a promising pattern – especially for getting into trends that you have missed the start of.

Quick Action Summary of Rising Three Method Pattern:

Where is it usually found: At during an uptrend.

Number of candlesticks to complete pattern: 5

What type of signal is generated: Continuation

Strength of signal: Strong

Final Candlestick Colour: Green.

What it means in terms of buyers/sellers momentum: Buyers still in control of the price and momentum in the current uptrend, sellers try to re-enter but are too weak, and thus a larger upward move is generated after the buyers regain their momentum and take price higher.

Up next is the:

The Bullish Hikkake Pattern

This candlestick pattern is one of our favourites.

It’s essentially a fake breakout pattern for a Harami pattern.

The set up is quite advanced compared to the other candlestick charts, but it does provide a great set up for a buy trade.

This is a 3-5 candlestick formation that we can take advantage of.

It begins with a normal bullish Harami, then the next candlestick must produce a lower high and a lower low.

This is the 3-bar set up.

Now within the next two trading periods, you want to see a bullish candlestick rise and close above Harami’s high price.

This will give you confirmation that the Hikkake has formed and that a strong move to continue the uptrend may occur.

Let’s break it down in the image below:

As you can see in the image above, it looks a little bit more complicated than the other patterns, but once you’ve seen it a few times – it’s as easy as a,b,c…

Quick Action Summary of Bullish Hikkake Pattern:

Where is it usually found: At the end of the downtrend.

Number of candlesticks to complete pattern: 3-5

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Green.

What it means in terms of buyers/sellers momentum: There is a fake breakout from the harami pattern and a pause by the sellers which allows the buyers to take control and quickly bring the price higher.

Next up is our final bullish candlestick:

The Three White Soldiers Pattern

Certain candlestick formations in the markets require extra detail and attention, and the Three White Soldiers pattern is one of them.

The reason is that they have a particular set up that makes them work, anything else makes them fail.

In addition to that, at a glance – this pattern just looks like 3 candlesticks going upwards.

Fear not, as we will show you the true pattern to look out for.

This pattern identifies a reversal of the current uptrend and is caused by a huge rush of buyers entering a market at a certain level/price.

The three white soldiers pattern forms after a large push downwards by the sellers (this is key).

If you see three bullish candles in a row, but don’t follow a previous bearish surge – then they are exactly three bullish candles and not the pattern we look out for.

Next, the first bar in the three white soldiers pattern must close at between 50-60% of the previous bearish candlestick.

The second candlestick must close higher than the bearish candlestick.

Whilst the last candlestick must continue further up that is a similar size to the middle candlestick, but must open (or create a small high) at the bearish candlestick close.

On top of this rule, each candlestick must be creating new higher highs and closing near these highs too.

Let’s show an example:

Let’s break it down in the image below:

As the image above shows a great example of the Three White Soldiers candlestick pattern – these rules are important, otherwise, you’re just trading into three random bullish candlesticks.

Quick Action Summary of The Three White Soldiers Pattern:

Where is it usually found: At the end of a downtrend and after a large, volatile push.

Number of candlesticks to complete pattern: 3

What type of signal is generated: Reversal

Strength of signal: V. Strong

Final Candlestick Colour: Green (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The current sellers have quickly pushed prices lower too aggressively and lost power/hit a series of buy orders. The buyers take advantage of and take the price higher.

This is also a combination of profit-taking from large moves.

That about wraps up the bullish candlestick patterns section.

We’ve only included what we believe to be the best, but there are far more candlesticks you can find that also indicate bullish reversal patterns whilst trading forex.

Moving forward, now you know what reversals make things go up – it’s time to look at the opposite side of the market:

Bearish Candlestick Patterns

In this section, we will cover some of the easiest to recognise and learn candlestick formations, that are proven to change the markets from an uptrend to the start of a downtrend.

By learning this section, you will be able to instantly analyse what’s in front of you and ready to adapt to the situation accordingly.

Without further ado – let’s get started with the first bearish candlestick pattern:

The Shooting Star Pattern

The beauty of reversal patterns is that they have a counter-pattern, which is the same setup but goes the other direction and flipped on its head.

In this case, a shooting start is the same as a hammer – but upside down, so in this case, we are looking for the market to reverse.

This 1-bar pattern is generated when the buyers had tried to take price much higher, but failed and the sellers entered the market aggressively.

Pushing price back down to near the open price, and thus generating a long upper shadow.

As you can see from the image above, the bulls failed to keep power and the bears managed to take control of the price and move it lower.

These patterns tend to be at the end of an uptrend – and commonly formed around support/resistance levels or supply and demand zones.

Quick Action Summary of Shooting Star Pattern:

Where is it usually found: At the end of an uptrend.

Number of candlesticks to complete pattern: 1

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Red (Or whatever you choose for bearish) but can also be green too.

What it means in terms of buyers/sellers momentum: The buyers were overpowered and lost control to the sellers. The momentum now shifts in favour of the sellers.

Next up is another old friend of ours:

The Bearish Engulfing Pattern

Just like the shooting star, the engulfing pattern can go both ways – so it makes is much easier to learn!

Just like the bullish engulfing pattern, this is a 2-bar pattern that occurs when the tide changes every quickly and suddenly from buyers in control to sellers taking over.

You want to make sure that the bearish engulfing pattern closes below the previous candlesticks open price.

Naturally, this pattern indicates that the markets want to move downwards and breakaway from the previous uptrend.

These are great candlestick patterns to watch out.

Quick Action Summary of The Bearish Engulfing Pattern:

Where is it usually found: At the end of an uptrend, but can appear at any point.

Number of candlesticks to complete pattern: 2

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Red (Or whatever you choose for bearish)

What it means in terms of buyers/sellers momentum: The current buyers have weakened due to the uptrend and sellers have driven the price lower than the previous candlesticks low and open – thus more sellers in the market = lower prices.

Next up, you had tweezer bottoms – now you have:

The Tweezer Tops Pattern

The Tweezer Tops candlestick pattern is a strong reversal indicator that easy to spot.

These are formed when the price has been rejected twice over two trading sessions – ideally, the previous highs are equal, but the bullish candlestick’s open is the same as the bearish candlestick’s close.

This forms two higher wicks at a similar length, this is very important.

What the tweezer top formation tells you as a forex trader is that the buyers were unable to take the price higher than a specific price over two trading sessions, but the sellers were able to enter and change the momentum.

Thus enabling you to look for selling opportunities.

Here is what a tweezer top looks like:

As you can see they are easy to identify.

Quick Action Summary of The Tweezer Top Pattern:

Where is it usually found: At the end of an uptrend but can appear at any point – this reduces its effectiveness.

Number of candlesticks to complete pattern: 2

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Red (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The current buyers have tried to take the price higher to the same price twice over two sessions but the sellers had emerged twice and driven the price lower.

This shows momentum in favour of the bears.

Next up, we’ll discuss one of the most mistaught patterns in history:

The Three Black Crows Pattern

Now this pattern is powerful IF you recognise it properly.

Many people teach this by generalising the rules a bit, which isn’t great because you’ll have a hit or miss pattern. Not what you want.

The three black crows pattern forms after a large push upwards by the buyers (this is key).

If you see three bearish candles in a row, but don’t follow a previous bullish surge – then they are exactly three bearish candles and not the pattern we look out for.

Don’t worry, an image to help visualise this will follow soon.

Next, the first bar in the three black crows pattern must close at between 50-60% of the previous bullish candlestick.

The second candlestick must close lower than the bullish candlestick.

Whilst the last candlestick must continue further down that is a similar size to the middle candlestick.

It must open (or create a small high) at the bullish candlestick close.

On top of this rule, each candlestick must be creating new lower lows and closing near these lows too.

Let’s show an example:

As the image above shows a great example of the Three Black Crows candlestick pattern – these rules are important, otherwise, you’re just trading into three random bearish candlesticks.

Quick Action Summary of The Three Black Crows Pattern:

Where is it usually found: At the end of an uptrend and after a large, volatile push.

Number of candlesticks to complete pattern: 3

What type of signal is generated: Reversal

Strength of signal: V. Strong

Final Candlestick Colour: Red (Or whatever you choose for bearish)

What it means in terms of buyers/sellers momentum: The current buyers have quickly pushed prices higher too aggressively and lost power/hit a series of sell orders.

The sellers take advantage of and take the price lower.

This is also a combination of profit-taking from large moves.

Next up on the pattern list is:

The Evening Doji Star Pattern

The opposite of uptrend is downtrend and the opposite of Morning Star is the Evening Star.

This pattern is the same but appears at the end of an uptrend with the same, easy to identify the pattern.

The key thing that remains is the middle candlestick must be small vs. the candlesticks on either side.

Ideally around 10% of the ranges, but with Evening Star patterns, less is more.

What this pattern tells you as a trader is that after the market has been pushed higher for a while by the bulls, they have started to show signs of exhaustion (first two candlesticks) and the bears have been able to come in and take the price lower.

These types of patterns may occur a lot more frequently in lower timeframes – so be cautious when identifying them.

Quick Action Summary of The Evening Star Pattern:

Where is it usually found: At the end of an uptrend and after a large.

Number of candlesticks to complete pattern: 3

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Red (Or whatever you choose for bearish)

What it means in terms of buyers/sellers momentum: Buyers have been exhausted by continuing the uptrend for some time.

The first sign of bears entering the market is the second candlestick barely going higher or lower.

Which is then followed by a bearish candlestick confirming that sellers have the momentum and a potential reversal is imminent.

This brings us to:

The Bearish Harami Pattern

This is opposite to its bullish 2-candlestick pattern counterpart.

This candlestick formation is caused after sellers enter the market and outmuscle the buyers but are not strong enough to close the price lower to confirm the momentum change.

The bearish harami pattern is kept within the previous candlesticks high, open, close, and low range.

This is significant because it dictates that the buyers couldn’t continue their moves higher – whilst the sellers were able to enter but lacked to selling power to take it lower.

This candlestick pattern is more of a warning candlestick, that primes you to be aware of a bearish reversal (or bearish continuation) – so when these appear, it should give you an immediate focal point.

Quick Action Summary of The Bearish Harami Pattern:

Where is it usually found: At the end of an uptrend or during a bearish trend as a continuation pattern.

Number of candlesticks to complete pattern: 2

What type of signal is generated: Reversal/Continuation

Strength of signal: Strong

Final Candlestick Colour: Red (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The pressure from the buyers have been exhausted to the bears entering the markets, but the bears are not quite strong enough to take price lower yet.

The next bar pattern is:

The Gravestone Doji Pattern

The doji family has amusing names, but they are very to the point.

The gravestone doji is no joke either – if these are spotted at the top of an uptrend, it usually means that the trend is dead!

This gives you a great opportunity to take a reverse position.

The gravestone doji is formed when the bulls try to extend the uptrend higher but fall short and quickly meet a barrier of sellers.

This creates the long wicks to look out for similar to the Shooting Star pattern.

With the uptrend meeting a wall of unmovable sell orders, the price tumbles down towards the open price. If the price closes at the same level as the open, then we have a gravestone doji!

Such a simple pattern and easy to learn.

Yet it can produce some great results.

Quick Action Summary of Gravestone Doji Pattern:

Where is it usually found: At the end of an uptrend.

Number of candlesticks to complete pattern: 1

What type of signal is generated: Reversal

Strength of signal: Medium

Final Candlestick Colour: Black – but can also be shown as green/red.

What it means in terms of buyers/sellers momentum: The sellers have been able to enter the market and outmuscle the buyers, therefore transferring momentum – but the close price is the same as the open price.

So you would have to wait for further confirmation of a bearish reversal.

Moving on to the next candlestick that can cause a bearish move is:

The Bearish Three-Line Strike Pattern

The Three-Line Strike candlestick pattern family are powerful reversal patterns – so you should certainly learn these.

This pattern consists of three bullish candlesticks and a large bearish candlestick.

The first three bullish candlesticks are creating higher highs and the final candlestick closes lower than first candlestick pattern.

This happens in the markets because we see a rush of selling power entering the market that was able to manipulate the direction of the market by driving the price lower and consuming all previous 3 candles.

You can see a bearish three-line strike in action below:

In the image above, the simplicity of the pattern should not be overlooked – as you can capture some strong pips from this.

Quick Action Summary of Bearish Three-Line Strike Pattern:

Where is it usually found: At the end of an uptrend.

Number of candlesticks to complete pattern: 4

What type of signal is generated: Reversal

Strength of signal: Very Strong

Final Candlestick Colour: Red (Or whatever you choose for bullish)

What it means in terms of buyers/sellers momentum: The buyers are continually in control for three trading sessions by reaching higher highs as the markets continue to rise.

Then a surge of sellers enter the markets and dominate the buyers by taking control and taking price lower than the open price three trading sessions ago.

Moving on to:

The Bearish Hikkake Pattern

This is an advanced setup and combines several single/double patterns to create a stronger candlestick pattern.

This is a 3-5 candlestick formation that offers protection and an entry point.

It begins with a normal bearish Harami, then the next candlestick must produce a lower low and a higher high. This is the 3-bar set up.

Now within the next two trading periods, you want to see a bearish candlestick fall and close below Harami’s low price.

This will give you confirmation that the bearish Hikkake has formed and that a strong move to continue the downtrend may occur.

This may appear more complicated at first, but after some time reviewing it – you’ll notice them and able to take action (and potentially profit) in no time!

Plus it builds on the foundations created via engulfing and harami patterns!

Quick Action Summary of Bearish Hikkake Pattern:

Where is it usually found: At the end of the uptrend.

Number of candlesticks to complete pattern: 3-5

What type of signal is generated: Reversal

Strength of signal: Strong

Final Candlestick Colour: Red.

What it means in terms of buyers/sellers momentum: There is a fake breakout from the harami pattern and a pause by the buyers which allows the sellers to take control and quickly bring the price lower.

The Next Step…

Now you know 21 of the best candlestick patterns available.

If you feel a little dazed and exhausted from all of that information, then that’s a good sign.

Cogs are turning in your brain, making connections to get the wheel turning!

However, learning all 21 patterns and trying to apply them at once, is a bit of a rookie mistake.

Instead, it might be a good idea to grab a couple of patterns and hone in on them before broadening your toolset.

But, with that being said.

We know what you’re thinking:

Which candlestick pattern is most reliable?

This is the million-dollar question.

Below is the list of the candlestick formations (from above) in an order that we believe to be best for trading.

Please note that this is not advice.

You may find greater success with other patterns instead, so it’s a great idea to learn them all.

The answers below will be for both bullish and bearish patterns (unless stated).

The Three-Line Strike Pattern Three Black Crows/ Three White Soldiers Engulfing Bar Hikkake Patter Rising/Falling Three Method Morning/Evening Doji Star Hammer/Shooting Star Harami Pattern Dragonfly/Gravestone Doji

The list is not definitive, but from our experience – we’ve seen less false signals with the Three-Line Strike patterns than we have with Dragonfly/Gravestone Dojis.

Either way, give them all a review and learn each one – as each one presents a strong signal of an opportunity arising in the markets.

BONUS: Think like a Forex Trader & Market Maker To Profit.

Throughout this article, we have highlighted when buyers and sellers enter a market at the end of a reversal.

We have given the rationale and reasoning of the pattern, but not yet why the price moves in certain ways.

It is where you need to understand why events/patterns occur and try to understand what is taken place.

For example, bullish reversals at the end of a downtrend – you could explain if it’s a powerful move by simply gauging how big this price movement is.

If it’s a large downtrend and price is showing a potential reversal, you can think about two things here:

1 – Those forex traders who were in the downtrend could be taking profit (therefore looking for BUYERS to close them out).

2 – The market could be at a psychological level that has previously been a support or supply zone in the past, and therefore there could still be pending orders waiting below that level to trade back up.

This thought process will help you understand why markets move in certain ways, the patterns indicate a story is happening.

Now you can investigate and piece the story together to build a case for taking the trade.

This may take a while to do to start with, but once you’re a master with these patterns – it’ll be second nature – all you have to do is look left and get the complete story in seconds.

The opposite of this is true for bearish reversals.

Just remember, it is NOT the pattern that is dictating the move – it is the TRADERS/INSTITUTIONS/PARTICIPANTS.

Candlestick Patterns Cheat Sheet

Like learning any new skill it is important to get to grips with it and practice as much as possible.

That is why we have included this candlestick patterns cheat sheet for you to use as a reference about which way the markets may go if you identify a chart pattern!

This is a great resource if you want to view just the patterns, what they look like and which direction they indicate the market will move towards.

(You can grab this cheat sheet for free, by clicking here: Get Cheat Sheet)

Wrapping Up The Definitive Guide

You’ve made it to the end of The Definitive Guide To Candlestick Patterns.

Congratulations

We’ve collected the candlestick formations that have a blend of frequently appearing in the markets & having a success rate.

Bear in mind that there are over 100 different candlestick charts, but some are ideally set up for trading stocks.

This is because they contain gaps in price, which is common in the stock market due to these markets opening and closing at certain times each trading day.

Whereas trading forex is 24 hours a day for 5 days a week.

If you want to master this aspect of technical analysis, it’s advised to keep reading around the subject.