Candlestick Patterns
Complete Trading Guide
Master the art of reading Japanese candlesticks — from their 300-year history to every essential pattern used by professional traders. Learn the psychology behind every formation.
Understanding Candlesticks
Before learning individual patterns, master the fundamentals — the history and anatomy of every candlestick.
The Origin of Candlesticks
A 300+ Year Trading Legacy
Munehisa Homma — The God of Markets
Japanese rice trader born in the early 1700s, widely credited as the pioneer of candlestick charting
Made the equivalent of over $10 billion in today's dollars through rice trading
He understood basic supply and demand, but also identified that emotion played a key role in price
His work tracking market emotion became the foundation of modern candlestick analysis
He was so respected that he was promoted to Samurai status
Historical Timeline
Rice trading established in Japan — rice became more important than hard currency
Munehisa Homma develops candlestick charting to track price action and market emotion
Cross-pollination of banks worldwide introduces candlesticks to Western traders
Steve Nison publishes the first Western paper on candlestick patterns in Futures magazine
Candlesticks are the standard template most professional analysts and traders use worldwide
Why Candlesticks Are Essential
Visual representation of market open, high, low, and close — giving a complete picture at a glance
Flexible — can be combined with moving averages, Fibonacci, Dow Theory, Elliot Wave, and more
Reveal market psychology — fear, greed, and hope become visible through candlestick formations
Provide more information than bar charts with added clarity and additional trading signals
Used by banks, hedge funds, and professional traders who move billions in the markets daily
Candlestick Anatomy
Understanding the Building Blocks
Visual Anatomy Guide
What Makes a Candlestick
The filled part between open and close price — represents the trading session's net movement
The thin line above the body — shows the session high (how far buyers pushed)
The thin line below the body — shows the session low (how far sellers pushed)
Where the price started at the beginning of the time period
Where the price ended at the close of the time period
Bullish vs Bearish
Bullish Candlestick
Close is ABOVE the open — the market rose during this session. Buyers dominated.
Bearish Candlestick
Close is BELOW the open — the market fell during this session. Sellers dominated.
Body Sizes & Their Meaning
Strong buying or selling pressure — one side has clear control of the market
Little buying or selling activity — indecision between buyers and sellers
Open and close are the same — complete equality and indecision
Shadow Types & Signals
Buyers pushed high but sellers drove it back down — rejection from above
Sellers pushed low but buyers drove it back up — rejection from below
Trading stayed near the open and close — strong conviction in that direction
Perfect Marubozu — extreme momentum with no opposition at all
Hammer
A bullish reversal pattern that forms at the bottom of a downtrend. It has a small body at the top with a long lower shadow (at least 2x the body).
Inverted Hammer
A bullish reversal pattern forming at downtrend bottoms. Has a small body at the bottom with a long upper shadow.
Shooting Star
A bearish reversal pattern at the top of an uptrend. Has a small body at the bottom with a long upper shadow.
Hanging Man
Looks identical to a hammer but appears at the top of an uptrend. Signals potential bearish reversal.
Doji
Open and close are virtually equal, creating a cross or plus sign. Signals market indecision and potential reversal.
Dragonfly Doji
A doji with a long lower shadow and no upper shadow. Open, high, and close are at the same level. Strong bullish reversal at support.
Gravestone Doji
A doji with a long upper shadow and no lower shadow. Open, low, and close are at the same level. Strong bearish reversal at resistance.
Spinning Top
Small body with upper and lower shadows of similar length. Shows indecision between buyers and sellers.
Marubozu
A candle with no shadows - only a body. Open equals low (bullish) or high (bearish), close equals the opposite.
Bullish Engulfing
A two-candle pattern where a large bullish candle completely engulfs the previous bearish candle. Strong reversal signal.
Bearish Engulfing
A large bearish candle completely engulfs the previous bullish candle. Strong bearish reversal signal at uptrend tops.
Piercing Pattern
A two-candle bullish reversal pattern. The second candle opens below the first's low and closes above the midpoint of the first candle.
Dark Cloud Cover
Opposite of piercing pattern. Second candle opens above first's high and closes below its midpoint.
Tweezer Tops
Two or more candles with matching highs at a resistance level. First is bullish, second is bearish.
Tweezer Bottoms
Two or more candles with matching lows at a support level. First is bearish, second is bullish.
Bullish Harami
A small bullish candle is contained within the body of the previous large bearish candle. Indicates potential reversal.
Bearish Harami
A small bearish candle is contained within the body of the previous large bullish candle. Indicates potential reversal.
Morning Star
A three-candle pattern signaling the end of a downtrend. Consists of a large bearish candle, a small-bodied candle, and a large bullish candle.
Evening Star
A three-candle bearish reversal pattern. Large bullish candle, small-bodied candle (gap up), then large bearish candle.
Three White Soldiers
Three consecutive long bullish candles with small or no shadows. Each opens within the previous candle's body and closes higher.
Three Black Crows
Three consecutive long bearish candles, each opening within the previous body and closing lower. Strong bearish signal.
Morning Doji Star
Similar to Morning Star but middle candle is a Doji. Even stronger reversal signal due to extreme indecision in middle.
Evening Doji Star
Similar to Evening Star but middle candle is a Doji. Even stronger bearish reversal signal.
Three Inside Up
Bullish Harami followed by a bullish confirmation candle that closes above the first candle's open.
Three Inside Down
Bearish Harami followed by a bearish confirmation candle that closes below the first candle's open.
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