Top Candlestick Patterns
Candlestick patterns hint at what price might do next. Here are the most reliable single and multi-candle patterns, and how to use them without treating them as a crystal ball.
Once you can read a single candle, patterns are the next step. A pattern is simply one or more candles arranged in a way that has tended to precede a particular move. They are hints about probability, never certainties, but a few are worth knowing well.
Single-candle patterns
- Doji: open and close nearly equal, signalling indecision and a possible turn.
- Hammer: a small body with a long lower wick, hinting buyers rejected lower prices.
- Shooting star: a small body with a long upper wick, hinting sellers rejected higher prices.
Two-candle patterns
The engulfing pattern is the standout: a candle whose body completely covers the previous candle’s body. A bullish engulfing after a fall, or a bearish engulfing after a rise, is a widely watched reversal signal.
Three-candle patterns
The morning star (a bottoming pattern) and evening star (a topping pattern) use three candles to show momentum fading and then reversing. They are less frequent but tend to be more reliable than single candles.
Using patterns wisely
Patterns work best when they line up with other evidence. A hammer at a known support level, or a bearish engulfing at resistance, is far stronger than the same pattern in the middle of nowhere. Always combine patterns with context and sound risk management.
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This guide is for educational purposes only and is not financial advice. Trading forex and CFDs carries a high level of risk and can result in the loss of all your capital. Most retail investor accounts lose money. Make sure you understand the risks and seek independent advice if needed before trading.