16 candlestick patterns every trader should know

What is a candlestick?

A candlestick is a way of displaying information about an asset’s price movement. Candlestick charts are one of the most popular components of technical analysis, enabling traders to interpret price information quickly and from just a few price bars.

This article focuses on a daily chart, wherein each candlestick details a single day’s trading. It has three basic features:

• The body, which represents the open-to-close range
• The wick, or shadow, that indicates the intra-day high and low
• The colour, which reveals the direction of market movement – a green (or white) body indicates a price increase, while a red (or black) body shows a price decrease

Find out more about the basics of what a candlestick is.

Over time, individual candlesticks form patterns that traders can use to recognise major support and resistance levels. There are a great many candlestick patterns that indicate an opportunity within a market – some provide insight into the balance between buying and selling pressures, while others identify continuation patterns or market indecision.

Before you start trading, it’s important to familiarise yourself with the basics of candlestick patterns and how they can inform your decisions.

Candlestick patterns are most reliable when used alongside other forms of technical analysis. Patterns that form at key support or resistance levels, coincide with high volume, or are confirmed by trading indicators carry significantly more weight than the same pattern appearing mid-trend without supporting context.

The 16 patterns at a glance

1. Single-candle patterns (4): Hammer, Hanging man, Shooting star, Doji
2. Two-candle patterns (4): Bullish engulfing, Bearish engulfing, Tweezer top, Tweezer bottom
3. Three-candle patterns (5): Morning star, Evening star, Three white soldiers, Three black crows, Inside bar
4. Continuation / other patterns (3): Bullish harami, Bearish harami, Spinning top

Single-candle patterns

Single-candle patterns provide the most immediate read on market sentiment but generally require confirmation from the following candle before acting on them. The position of the pattern within the broader trend is critical.

1. Hammer (Bullish reversal)
2. Hanging man (Bearish reversal)
3. Shooting star (Bearish reversal)
4. Doji (Neutral / indecision)

Hammer (Bullish reversal)

• Appearance: small body at the top of the candle with a lower shadow at least twice the length of the body. Little or no upper shadow.
• What it means: sellers pushed price significantly lower during the session, but buyers regained control and closed near the open. The long lower wick represents rejected selling pressure.
• How to trade: wait for confirmation from the next candle closing higher. Use alongside support levels and volume for higher probability. A stop can be placed below the low of the hammer.
• Note: colour of the body is less important than position and wick length. A green-bodied hammer is slightly more bullish than a red-bodied one.

Hanging man (Bearish reversal)

• Appearance: identical to the hammer in structure (small body, long lower wick) but appears after a sustained uptrend rather than a downtrend.
• What it means: despite buyers maintaining control for most of the trend, sellers were able to push price significantly lower during the session. Although buyers recovered by the close, the wick signals growing bearish pressure.
• How to trade: requires confirmation from the next candle closing lower. The pattern is more significant when it appears at a resistance level or after a prolonged advance. A stop above the high of the hanging man is common.

Shooting star (Bearish reversal)

• Appearance: small body at the bottom of the candle with a long upper shadow at least twice the body length. Little or no lower shadow. The mirror image of the hammer.
• What it means: buyers pushed price sharply higher during the session but sellers took control and closed the candle near the open, rejecting the advance.
• How to trade: look for this pattern at resistance levels or following a strong upward move. A bearish confirmation candle on the next session strengthens the signal. Stop placed above the high of the shooting star.
• Distinction from inverted hammer: the shooting star appears after an uptrend (bearish); an inverted hammer appears after a downtrend (bullish reversal signal).

Doji (Neutral / indecision)

• Appearance: open and close are at or very close to the same price, resulting in a cross or plus-sign shape. The body is essentially a horizontal line.
• What it means: neither buyers nor sellers gained the upper hand during the session. The doji signals indecision and potential exhaustion of the prevailing trend.
• Variations: Gravestone doji (long upper wick, no lower - bearish at tops), Dragonfly doji (long lower wick, no upper - bullish at bottoms), Long-legged doji (long wicks both sides - extreme indecision).
• How to trade: context is everything. A doji after a prolonged uptrend is more significant than one mid-trend. Used alongside moving averages or volume, the pattern can identify high-probability turning points.

Two-candle patterns

Two-candle patterns involve a clear relationship between consecutive candles, typically showing an initial move followed by a reversal or confirmation in the opposite direction.

1. Bullish engulfing (Bullish reversal)
2. Bearish engulfing (Bearish reversal)
3. Tweezer top (Bearish reversal)
4. Tweezer bottom (Bullish reversal)

Bullish engulfing (Bullish reversal)

• Appearance: a small bearish (red) candle is followed by a larger bullish (green) candle whose body completely engulfs the body of the first.
• What it means: sellers were initially in control but buyers overwhelmed them with enough force to close above the prior candle's open. The engulfing signals a decisive shift in control.
• How to trade: most reliable at key support levels, especially after a sustained downtrend. Volume on the bullish candle should ideally exceed the prior candle's volume. Entry on close of the engulfing candle or open of the following session.

Bearish engulfing (Bearish reversal)

• Appearance: a small bullish (green) candle is followed by a larger bearish (red) candle whose body completely engulfs the body of the first.
• What it means: the mirror image of the bullish engulfing. Buyers initially held control but sellers stepped in with sufficient force to close below the prior candle's open.
• How to trade: most reliable at key resistance levels after a sustained uptrend. A high-volume bearish engulfing candle is a stronger signal than one on low volume. Stop placed above the high of the bearish engulfing candle.

Tweezer top (Bearish reversal)

• Appearance: two consecutive candles with matching or near-identical highs. The first is bullish, the second is bearish. The shared high represents a level buyers could not sustain.
• What it means: bulls pushed price to a high on the first candle, but bears matched that high exactly on the second session and closed lower. The rejection of the same high on consecutive sessions signals strong resistance at that level.

Tweezer bottom (Bullish reversal)

• Appearance: two consecutive candles with matching or near-identical lows. The first is bearish, the second is bullish.
• What it means: the mirror image of the tweezer top. Bears drove price to a low on the first session, but buyers defended that exact level on the second, closing higher. Matching lows signal strong support.
• How to trade: most effective when the matched low aligns with a prior support zone. A higher-volume bullish second candle adds conviction.

Three-candle patterns

Three-candle patterns provide stronger signals than single or two-candle formations because they show a more developed shift in market sentiment across multiple sessions.

1. Morning star (Bullish reversal)
2. Evening star (Bearish reversal)
3. Three white soldiers (Bullish reversal)
4. Three black crows (Bearish reversal)
5. Inside bar (Bullish or bearish continuation / breakout signal)

Morning star (Bullish reversal)

• Appearance: three candles. First: a large bearish candle continuing the downtrend. Second: a small-bodied candle (can be bullish or bearish) that gaps down from the first, forming the 'star'. Third: a large bullish candle that closes well into the body of the first candle.
• What it means: the large bearish first candle represents the prevailing downtrend. The star in the middle shows indecision and slowing momentum. The large bullish third candle confirms that bulls have taken control.
• How to trade: the third candle should close at least halfway into the first candle's body for the pattern to be considered valid. Most reliable when the star candle is a doji (known as the Morning Doji Star). Volume typically expands on the third candle.

Evening star (Bearish reversal)

• Appearance: the mirror image of the morning star. First: a large bullish candle. Second: a small-bodied star candle that gaps up. Third: a large bearish candle that closes well into the body of the first.
• What it means: the bullish trend peaks, momentum stalls with the star candle, and sellers take decisive control on the third session.
• How to trade: most reliable when the third candle closes more than halfway into the first. The Evening Doji Star variant (where the middle candle is a doji) is considered the stronger signal. A high-volume third candle adds conviction.

Three white soldiers (Bullish reversal)

• Appearance: three consecutive large bullish (green) candles, each closing progressively higher, each opening within the body of the previous candle.
• What it means: sustained, orderly buying pressure across three sessions. The pattern shows bulls are firmly in control and building on each session's gains without excessive retracement.
• How to trade: look for this pattern after a period of selling or consolidation. Candles should have small or no upper wicks, meaning buyers held their gains close to the session high. Candles with large upper wicks (showing sellers pushing back near the close) are a weaker version of the pattern.
• Caution: if the candles are very large, the pattern may signal exhaustion rather than continuation, particularly if it forms after an already extended move.

Three black crows (Bearish reversal)

• Appearance: three consecutive large bearish (red) candles, each closing progressively lower, each opening within the body of the previous candle.
• What it means: the mirror image of three white soldiers. Sustained selling pressure across three sessions, with bears retaining control throughout each session.
• How to trade: look for this at the top of a strong uptrend, especially near a resistance zone. Small or no lower wicks are the ideal version, meaning sellers held control to the session close. A high-volume third candle is particularly bearish.
• Caution: like three white soldiers, if candles are very large after an extended move, the pattern may indicate oversold conditions rather than further continuation.

Inside bar (Bullish or bearish continuation / breakout signal)

• Appearance: the second candle is completely contained within the range (high to low) of the first candle, known as the 'mother bar'. The inside bar does not need to be within the body, only within the full range including wicks.
• What it means: the market is consolidating and coiling within the prior candle's range. Neither buyers nor sellers have pushed beyond the established boundaries. The eventual breakout beyond the mother bar's high or low signals the next directional move.
• How to trade: traders typically place a buy stop above the mother bar's high and a sell stop below its low, entering whichever side breaks first. More reliable when the mother bar is a strong directional candle and the pattern forms on a daily chart or above.

Additional patterns

The following patterns are single or two-candle formations that do not fit neatly into reversal or continuation categories, but appear frequently on charts and are widely referenced by traders.

1. Bullish harami (Bullish reversal)
2. Bearish harami (Bearish reversal)
3. Spinning top (Neutral / indecision)

Bullish harami (Bullish reversal)

• Appearance: a large bearish candle is followed by a small bullish candle whose body is entirely within the body of the first. 'Harami' means pregnant in Japanese, describing the visual of the smaller candle sitting inside the larger one.
• What it means: the large bearish candle shows selling pressure, but the small bullish candle shows that selling has slowed and buyers are beginning to take control. The pattern signals a potential slowdown in the downtrend rather than an immediate reversal.
• How to trade: less decisive than an engulfing pattern. Best used as an early warning to watch for further bullish confirmation on subsequent candles rather than as a direct entry signal.

Bearish harami (Bearish reversal)

• Appearance: a large bullish candle is followed by a small bearish candle whose body sits entirely within the body of the first.
• What it means: buying pressure is waning. The small bearish candle contained within the prior large bullish candle suggests bulls are losing momentum, though sellers have not yet taken decisive control.
• How to trade: as with the bullish harami, this is better used as an alert to monitor for confirmation rather than as an immediate entry trigger. A bearish follow-through on the next session strengthens the case significantly.

Spinning top (Neutral / indecision)

• Appearance: a small body centred between roughly equal upper and lower wicks. The colour of the body is less significant than its size relative to the wicks.
• What it means: buyers and sellers fought for control during the session but neither prevailed decisively. The small body shows the session ended close to where it started despite significant movement in both directions.
• How to trade: a single spinning top is not a tradeable signal in isolation. However, a cluster of spinning tops after a directional move suggests the trend is losing momentum. Used alongside volume analysis and other indicators, spinning tops can help identify zones of exhaustion.

How to use candlestick patterns alongside other tools

Candlestick patterns are most effective when used as part of a broader technical framework rather than in isolation. The most widely used complementary tools include:

• Support and resistance levels: patterns that form exactly at a prior support or resistance level are significantly more reliable than those appearing mid-range. The level provides the reason to expect a reaction; the candlestick provides the timing signal.
• Moving averages: a hammer forming at the 200-day moving average carries far more weight than one at an arbitrary price level. Exponential moving averages (EMAs) in particular are widely used as dynamic support and resistance levels to contextualise candlestick signals.
• Volume: high volume on a reversal candle shows conviction. A bullish engulfing on twice the average daily volume is a much stronger signal than one on below-average volume.
• Oscillators (RSI, MACD, Stochastics):  a reversal candle that forms when an oscillator is in oversold or overbought territory adds a momentum dimension to the pattern signal.
• Trend context:  a hammer in a downtrend is a reversal signal. A hammer in an uptrend is largely meaningless. Always identify the prevailing trend before applying a pattern's interpretation.

Modern trading platforms, including ours, increasingly incorporate automated candlestick pattern recognition tools that scan for formations across multiple timeframes and markets simultaneously. These tools do not remove the need for judgment, but they can help traders avoid missing patterns across a wide watchlist. Understanding the patterns themselves remains essential, since algorithmic tools that flag patterns without context still require the trader to assess whether the broader setup justifies acting on the signal.

Identifying a candlestick pattern is only half the work. Knowing where to exit if the trade moves against you is equally important, and should be decided before you open the position rather than after. 

A stop-loss order automatically closes your trade at a predefined price, limiting the damage from a pattern that fails to follow through. A take-profit order does the same on the upside, locking in a gain when the market reaches your target. Used together, they define your risk-to-reward ratio before any capital is at risk. 

Our guide to stop-loss and take-profit orders covers how to set them effectively across different market conditions.

Candlestick pattern reference table

Use the following table to quickly identify which pattern you’re looking at on your trading charts.

Candlestick patterns FAQs

Practise reading candlestick patterns

The best way to learn to read candlestick patterns is to practise entering and exiting trades from the signals they give. You can develop your skills by opening an IG demo account, or if you feel confident enough to start trading, you can open a live account today.

When using any candlestick pattern, it is important to remember that although they are great for quickly predicting trends, they should be used alongside other forms of technical analysis to confirm the overall trend. You can learn more about candlesticks and technical analysis with IG Academy’s online courses.

Six bullish candlestick patterns

Bullish patterns may form after a market downtrend, and signal a reversal of price movement. They are an indicator for traders to consider opening a long position to profit from any upward trajectory.

Hammer

The hammer candlestick pattern is formed of a short body with a long lower wick, and is found at the bottom of a downward trend.

A hammer shows that although there were selling pressures during the day, ultimately a strong buying pressure drove the price back up. The colour of the body can vary, but green hammers indicate a stronger bull market than red hammers.

Six bearish candlestick patterns

Bearish candlestick patterns usually form after an uptrend, and signal a point of resistance. Heavy pessimism about the market price often causes traders to close their long positions, and open a short position to take advantage of the falling price.

Hanging man

The hanging man is the bearish equivalent of a hammer; it has the same shape but forms at the end of an uptrend.

It indicates that there was a significant sell-off during the day, but that buyers were able to push the price up again. The large sell-off is often seen as an indication that the bulls are losing control of the market.

Four continuation candlestick patterns

If a candlestick pattern doesn’t indicate a change in market direction, it is what is known as a continuation pattern. These can help traders to identify a period of rest in the market, when there is market indecision or neutral price movement.

Doji

When a market’s open and close are almost at the same price point, the candlestick resembles a cross or plus sign – traders should look out for a short to non-existent body, with wicks of varying length.

This doji’s pattern conveys a struggle between buyers and sellers that results in no net gain for either side. Alone a doji is neutral signal, but it can be found in reversal patterns such as the bullish morning star and bearish evening star.

Spinning top

The spinning top candlestick pattern has a short body centred between shadows of equal length. The pattern indicates indecision in the market, resulting in no meaningful change in price: the bulls sent the price higher, while the bears pushed it low again. Spinning tops are often interpreted as a period of consolidation, or rest, following a significant uptrend or downtrend.

On its own the spinning top is a relatively benign signal, but it can be interpreted as a sign of things to come as it signifies that the current market pressure is losing control.

Falling three methods

Three-method formation patterns are used to predict the continuation of a current trend, be it bearish or bullish.

The bearish pattern is called the ‘falling three methods’. It is formed of a long red body, followed by three small green bodies, and another red body – the green candles are all contained within the range of the bearish bodies. It shows traders that the bulls do not have enough strength to reverse the trend.

Rising three methods

The opposite is true for the bullish pattern, called the ‘rising three methods’ candlestick pattern. It is comprised of three short red candles sandwiched within the range of two long green candles. The pattern shows traders that, despite some selling pressure, buyers are retaining control of the market.

Practise using candlesticks to gauge price movements with our demo account. Or, if you feel confident enough to start trading, you can open a live account.