16 candlestick patterns every trader should know
Candlestick patterns are valued for their ability to compress open, high, low and close price data into a single visual representation of market sentiment for any given period. This guide covers the 16 most important candlestick patterns, organised by type, with practical guidance on how to trade each one.
How to read a candlestick
Before covering individual patterns, it is worth understanding what a single candlestick shows. Each candle represents price action over a defined period, whether one minute, one hour, one day or one week, and displays four data points:
Component |
What it shows |
Body (filled rectangle) |
The range between the opening and closing price. A green (or white) body means the close was above the open (bullish). A red (or black) body means the close was below the open (bearish). |
Upper shadow (wick) |
The distance between the top of the body and the session high. A long upper wick shows sellers pushed price back down from the high. |
Lower shadow (wick) |
The distance between the bottom of the body and the session low. A long lower wick shows buyers pushed price back up from the low. |
No shadow |
When the open or close equals the session high or low, the shadow on that side is absent. These are known as Marubozu candles. |
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.
Quick fact
Candlestick charts were kept secret by Japanese rice traders for much of the 18th century. The methods were eventually compiled and published by trader Munehisa Homma, whose techniques are believed to have made him one of the wealthiest merchants of his era. They remained largely unknown to Western traders until Steve Nison's 1991 book popularised them globally.
The 16 patterns at a glance
- Single-candle patterns (4): Hammer, Hanging man, Shooting star, Doji
- Two-candle patterns (4): Bullish engulfing, Bearish engulfing, Tweezer top, Tweezer bottom
- Three-candle patterns (5): Morning star, Evening star, Three white soldiers, Three black crows, Inside bar
- 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.
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.
Key Takeaway
Single-candle patterns signal sentiment shifts but should not be traded in isolation. A hammer or shooting star gains conviction when it forms at a clearly defined support or resistance level, is accompanied by above-average volume, and is confirmed by the following candle closing in the expected direction.
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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.
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.
Key Takeaway
Engulfing patterns are among the most reliable two-candle signals because the size differential between the two candles shows a clear, decisive shift in who controls the market. Volume confirmation is particularly important: a bullish or bearish engulfing candle on significantly higher volume than the prior session carries considerably more weight.
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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.
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.
Key Takeaway
The morning and evening star patterns are considered among the most reliable reversal signals in candlestick analysis because they require three sessions of confirmation: a clear trend, a pause, and a decisive reversal. Three white soldiers and three black crows are similarly high-conviction because they show sustained momentum rather than a single session's move.
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.
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.
Key Takeaway
Harami patterns are subtler than engulfing patterns and should generally be treated as warning signals rather than direct entry triggers. The key difference is containment: in a harami, the second candle is smaller and contained within the first. In an engulfing pattern, the second candle is larger and engulfs the first. The engulfing shows decisiveness; the harami shows hesitation.
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.
Pattern |
Type |
Candles |
Trend context |
Signal strength |
Hammer |
Bullish reversal |
1 |
Bottom of downtrend |
Medium (needs confirmation) |
Hanging man |
Bearish reversal |
1 |
Top of uptrend |
Medium (needs confirmation) |
Shooting star |
Bearish reversal |
1 |
Top of uptrend |
Medium (needs confirmation) |
Doji |
Neutral / indecision |
1 |
Top or bottom |
Low alone; high with context |
Bullish engulfing |
Bullish reversal |
2 |
Bottom of downtrend |
High |
Bearish engulfing |
Bearish reversal |
2 |
Top of uptrend |
High |
Tweezer top |
Bearish reversal |
2 |
Top of uptrend |
Medium-High |
Tweezer bottom |
Bullish reversal |
2 |
Bottom of downtrend |
Medium-High |
Morning star |
Bullish reversal |
3 |
Bottom of downtrend |
High |
Evening star |
Bearish reversal |
3 |
Top of uptrend |
High |
Three white soldiers |
Bullish reversal/continuation |
3 |
After downtrend or consolidation |
High |
Three black crows |
Bearish reversal/continuation |
3 |
After uptrend or consolidation |
High |
Inside bar |
Breakout / continuation |
2 |
Any (within trend) |
Medium (breakout direction determines signal) |
Bullish harami |
Bullish reversal (early warning) |
2 |
Bottom of downtrend |
Low-Medium |
Bearish harami |
Bearish reversal (early warning) |
2 |
Top of uptrend |
Low-Medium |
Spinning top |
Neutral / indecision |
1 |
Any |
Low alone; medium in clusters |
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Candlestick patterns FAQs
What is a candlestick pattern?
A candlestick pattern is a formation of one or more candles on a price chart that traders use to identify potential turning points or continuation of a trend. Each candle displays the open, high, low and close price for a given time period, and the relationship between those four data points, both within a single candle and across multiple candles, forms the basis of pattern analysis.
How reliable are candlestick patterns?
Reliability varies significantly by pattern, timeframe and context. Multi-candle patterns (such as the morning star, three white soldiers and engulfing patterns) tend to be more reliable than single-candle patterns. Higher timeframes (daily, weekly) produce fewer false signals than lower timeframes. The most important factor is context: a pattern forming at a key support or resistance level, accompanied by high volume, is significantly more reliable than the same pattern appearing at a random price point.
What is the most reliable candlestick pattern?
There is no single definitive answer, as reliability depends on market conditions and context. However, the bullish and bearish engulfing patterns, the morning and evening star formations, and three white soldiers/three black crows are consistently cited by technical analysts as the highest-probability patterns, particularly on daily timeframes at key levels.
What is a doji candlestick?
A doji forms when the open and close price of a candle are at or very close to the same level, creating a cross or plus-sign shape with little or no body. A doji signals indecision between buyers and sellers during that session. On its own, a doji is not a strong signal, but one that forms after a prolonged trend at a significant price level can indicate exhaustion and a potential reversal. Variations include the gravestone doji (bearish at tops), dragonfly doji (bullish at bottoms) and long-legged doji (extreme indecision).
Can candlestick patterns be used for all markets?
Yes. Candlestick patterns work across any liquid market, including equities, forex, commodities, indices and cryptocurrencies, and on any timeframe. They were originally developed in Japanese rice markets and have proven effective across centuries and markets. Their reliability is generally higher in more liquid markets where price discovery is efficient, and on higher timeframes where individual candles represent more meaningful price action.
Do automated tools replace the need to learn candlestick patterns?
No. Automated pattern recognition tools, available on most modern trading platforms, can scan for formations across multiple markets and timeframes simultaneously. But they identify the pattern, not whether the surrounding context makes it worth trading. Understanding the underlying logic of each pattern, what it says about the balance between buyers and sellers, is essential for evaluating whether a flagged signal is genuinely significant or a false positive.
Important to know
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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