What Is a Candlestick?
A candlestick is a type of price chart element that visually displays the open, high, low, and close prices for a given time period. Developed by Japanese rice traders in the 18th century, candlestick charts became popular in Western trading after Steve Nison introduced them to Western audiences in the 1990s.
Each candlestick tells the story of a battle between buyers and sellers during that time period. Over hundreds of years of observation, traders identified recurring formations — patterns — that appear repeatedly and provide clues about which side is likely to win next.
Important Context: Candlestick patterns work best at clearly-defined support and resistance levels, not in the middle of a trading range. A hammer in the middle of nowhere means little; a hammer at a 52-week support level is significant.
Anatomy: Body, Wicks & Color
Before learning patterns, you need to understand what each part of a candlestick communicates:
Body (wide rectangle)
The range between open and close. A large body = strong directional conviction. A small body = indecision or balance between buyers and sellers.
Upper Wick (thin line above body)
How high price reached before sellers pushed it back down. Long upper wick = sellers are active at those levels; buyers could not sustain the move.
Lower Wick (thin line below body)
How low price fell before buyers pushed it back up. Long lower wick = buyers are active at those levels; sellers could not sustain the move.
Color (green vs red)
Green = close was higher than open (buyers won). Red = close was lower than open (sellers won). Some platforms use white/black instead of green/red.
BULLISH
Upper wick
Lower wick
BEARISH
Upper wick
Lower wick
Bullish Reversal Patterns
These patterns appear at the bottom of a downtrend and signal a potential reversal upward. They are only valid when they form at support levels or after extended selling.
Hammer
Single CandleHigh ReliabilitySetup: Single candle with a small body at the top and a long lower wick (at least 2x the body length). The lower wick shows sellers drove price down aggressively, but buyers completely recovered by close.
Signal: Bullish reversal at the bottom of a downtrend. The long wick shows buyers absorbed all selling and pushed back.
Trade idea: Enter on the next green candle's open. Stop below the hammer's low. Target: prior resistance level.
Bullish Engulfing
2-Candle PatternVery High ReliabilitySetup: A small red candle followed by a large green candle whose body completely engulfs the red candle's body. The larger the green candle relative to the red, the stronger the signal.
Signal: Strong bullish reversal. Buyers overwhelmed sellers so decisively that they wiped out the entire prior session's loss — and then some.
Trade idea: Enter on the close of the engulfing candle or next open. Stop below the low of the engulfing candle.
Morning Star
3-Candle PatternVery High ReliabilitySetup: Three-candle pattern: (1) large red candle, (2) small indecision candle (doji or spinning top) that gaps down, (3) large green candle that closes above the midpoint of the first red candle.
Signal: Reversal from downtrend to uptrend. The middle candle shows sellers losing control; the third candle confirms buyers have taken over.
Trade idea: Enter on the close of the third (green) candle. Stop below the low of the middle candle.
Piercing Line
2-Candle PatternModerate ReliabilitySetup: A red candle followed by a green candle that opens below the prior low but closes above the midpoint of the red candle's body.
Signal: Moderate bullish reversal. Similar to bullish engulfing but weaker — the green candle doesn't fully engulf the red one.
Trade idea: Look for additional confirmation from a third green candle. Stop below the low of the pattern.
Doji (at Support)
Single CandleContext-Dependent ReliabilitySetup: Open and close are nearly identical — tiny or no body with wicks on both sides. Shows a battle between buyers and sellers with no clear winner.
Signal: Indecision. At the bottom of a downtrend, especially at a support level, a doji signals the selling pressure is exhausted and a reversal may follow.
Trade idea: Do not trade a doji alone — wait for the next candle to confirm direction. A green candle after a doji at support = bullish entry.
Inverted Hammer
Single CandleModerate ReliabilitySetup: Small body at the bottom with a long upper wick. Looks like an upside-down hammer. Buyers tried to push price up strongly but sellers pushed it back — yet the fact that buyers pushed at all is notable.
Signal: Potential bullish reversal at a downtrend bottom. Weaker than a hammer — requires confirmation from the next session.
Trade idea: Wait for a green candle to open above the inverted hammer's close before entering. Stop below the candle's low.
Bearish Reversal Patterns
These patterns appear at the top of an uptrend and signal a potential reversal downward. They are only valid when they form at resistance levels or after extended buying.
Shooting Star
Single CandleHigh ReliabilitySetup: Small body at the bottom with a long upper wick (at least 2x body length). Buyers drove price sharply higher during the session, but sellers completely reversed the move by close.
Signal: Bearish reversal at the top of an uptrend. The long upper wick shows buyers failed to sustain the rally — sellers are taking control.
Trade idea: Enter short on the next candle's open below the shooting star's low. Stop above the shooting star's high.
Bearish Engulfing
2-Candle PatternVery High ReliabilitySetup: A small green candle followed by a large red candle whose body completely engulfs the green candle's body. Mirrors the bullish engulfing — but in reverse at a market top.
Signal: Strong bearish reversal. Sellers overwhelmed buyers so decisively that they erased the entire prior session's gain.
Trade idea: Enter short on the close of the engulfing candle. Stop above the high of the engulfing candle.
Evening Star
3-Candle PatternVery High ReliabilitySetup: Three-candle pattern: (1) large green candle, (2) small indecision candle that gaps up, (3) large red candle that closes below the midpoint of the first green candle.
Signal: Reversal from uptrend to downtrend. The bearish mirror of the morning star — one of the most reliable three-candle reversal patterns.
Trade idea: Enter short on the close of the third (red) candle. Stop above the high of the middle candle.
Hanging Man
Single CandleModerate ReliabilitySetup: Looks identical to a hammer — small body at the top, long lower wick — but appears at the top of an uptrend, not the bottom. The long lower wick shows sellers pushed strongly during the session.
Signal: Warning of potential reversal at the top of an uptrend. Requires confirmation from the next candle to act on.
Trade idea: Wait for a red candle to follow before entering short. The hanging man alone is not sufficient signal.
Dark Cloud Cover
2-Candle PatternModerate ReliabilitySetup: A green candle followed by a red candle that opens above the prior high but closes below the midpoint of the green candle's body.
Signal: Moderate bearish reversal. The bearish counterpart to the piercing line — sellers took over mid-session and could not be pushed back.
Trade idea: Look for a third red candle to confirm. Stop above the high of the dark cloud cover candle.
Doji (at Resistance)
Single CandleContext-Dependent ReliabilitySetup: Same doji structure — open and close nearly identical — but appearing at the top of an uptrend at a resistance level.
Signal: Indecision at the top. Buying pressure has stalled. A red candle following a doji at resistance is a short entry signal.
Trade idea: Wait for a red candle after the doji before entering short. Do not short based on the doji alone.
Continuation Patterns
These patterns appear during a trend — not at tops or bottoms — and suggest the existing trend will continue.
Bullish Marubozu
Bullish ContinuationA large green candle with no upper or lower wicks — open is the low, close is the high. Shows buyers were in complete control throughout the entire session. Strong continuation signal in an uptrend.
Bearish Marubozu
Bearish ContinuationA large red candle with no wicks — open is the high, close is the low. Sellers dominated from open to close without interruption. Strong continuation signal in a downtrend.
Three White Soldiers
Bullish ContinuationThree consecutive large green candles, each opening within the prior candle's body and closing near its high. Shows sustained buying pressure over three sessions — highly reliable in an uptrend.
Three Black Crows
Bearish ContinuationThree consecutive large red candles, each opening within the prior candle's body and closing near its low. Mirrors three white soldiers — sustained selling pressure over three sessions.
The Volume Confirmation Rule
The single most important upgrade you can make to candlestick pattern trading is requiring volume confirmation before acting. A beautiful bullish engulfing on microscopic volume frequently fails; the same pattern on 2x+ average volume is dramatically more reliable.
High-Confidence Setup
Pattern forms at a clear support/resistance level
Volume on the signal candle is 1.5x–2x the 20-day average
Pattern confirmed by a follow-through candle in the same direction
Aligns with the larger trend on a higher time frame
Low-Confidence / Skip
Pattern forms in the middle of a trading range
Volume is below average on the signal candle
No confirmation — you're trading based on a single candle alone
Pattern goes against the primary trend on the daily chart
The Trap to Avoid: New traders often memorize patterns and try to trade every one they see. Professionals are far more selective — they might see 20 potential patterns in a day and only act on 1 or 2 that meet all their confirmation criteria.
How to Learn Patterns Fast
Learn 3 patterns first, not 30
Start with hammer, bullish engulfing, and shooting star. Master them completely before adding more. You don't need to know every pattern to trade — you need to know a few patterns well.
Use TradingView's pattern recognition
TradingView has a built-in candlestick pattern indicator that automatically highlights patterns on any chart. Use it to train your eye before relying on your own identification. → TradingView Beginner Guide
Study real historical charts
Open a daily chart of any stock from 2–3 years ago and scroll forward candle by candle. When you see a pattern, pause and predict what happened next — then reveal the answer by scrolling forward.
Paper trade for 30 days first
When you spot a pattern you want to trade, paper trade it instead of using real money. This builds confidence and proves the strategy works before you risk capital. → Webull paper trading (free)
Keep a pattern journal
Every time you act on a pattern, screenshot it. Note the pattern name, context (trend, volume, location), and outcome. After 30 trades, you'll know which patterns work for you personally.
Practice Pattern Recognition on Real Charts
Use a broker with paper trading to identify and test candlestick patterns risk-free before using real money.
Technical Analysis Basics
Move beyond individual candles — learn chart patterns, indicators (RSI, MACD, moving averages), and support & resistance for a complete technical analysis foundation.
Related Guides
How to Read a Stock Chart
Before mastering individual candles, learn the full chart framework: trend lines, time frames, and volume.
Technical Analysis Basics
Candlestick patterns are just the start — add RSI, MACD, and moving averages to your toolkit.
Risk Management Basics
Knowing the pattern is only half the job — knowing where to set your stop and how much to risk is the other half.