Candlestick patterns are the visual language of price action. They show the battle between buyers and sellers, and when understood correctly, they can offer powerful clues about the future direction of the market.
What Are Candlestick Patterns?
Each candlestick on a chart shows the open, high, low, and close of a trading period. Patterns are formed by one or more candlesticks and can signal reversals, continuations, or indecision.
Top Candlestick Patterns
1. Doji
- Open and close are nearly the same.
- Signals indecision and potential reversal.
- Powerful when it appears after a strong trend.
2. Hammer & Inverted Hammer
- Hammer: Long lower wick, small body.
- Inverted Hammer: Long upper wick.
- Often signals a bullish reversal in a downtrend.
3. Engulfing Pattern
- Bullish Engulfing: Green candle fully covers a previous red candle.
- Bearish Engulfing: Red candle fully covers a previous green candle.
- Indicates a strong reversal when supported by volume.
4. Morning Star & Evening Star
- Morning Star: Three candles indicating a bullish reversal.
- Evening Star: Three candles signaling a bearish reversal.
- Best when appearing at key support or resistance levels.
5. Shooting Star
- Small body, long upper wick.
- Appears at the top of an uptrend.
- Signals bearish reversal, especially with resistance confluence.
6. Spinning Top
- Small body with long wicks both sides.
- Shows indecision.
- Can precede big moves when combined with other factors.
How to Use Them in Trading
- Always combine candlestick patterns with support/resistance zones, trendlines, or moving averages.
- Avoid trading them in isolation.
- Use a position size calculator to manage risk.
Internal Links from FNFOREX:
- The Power of Trend Lines in Chart Analysis
- How to Trade Breakouts Effectively
- The Role of Technical Analysis in Long-Term Trading
- Trading Psychology: Keeping Your Cool
- How to Turn Emotional Setbacks into Motivational Fuel
External Learning Resources:
- Investopedia on Candlestick Charts
- BabyPips Candlestick Cheat Sheet
- TradingView’s Candlestick Tools
- DailyFX Candlestick Patterns
- Forex.com Chart Pattern Guide
Final Words
Candlestick patterns are not magical signals—they are tools to read market sentiment. When combined with proper analysis and risk management, they can boost your trading success.
Ready to take your trading to the next level? Join our FN FOREX EXNESS VIP group for FREE today!
Also, don’t miss: