Candlestick Patterns Cheat Sheet
Candlestick patterns are the language of the market. Each candle tells a story about the battle between buyers and sellers. Learn to read them and you will see the market differently. But here is the thing most courses will not tell you: candlestick patterns alone are not enough. Context matters more than the pattern itself.
Single Candle Patterns
The Doji
Open and close are at the same (or nearly the same) price. It looks like a cross or plus sign. The market went up, went down, but ended where it started. Neither buyers nor sellers won.
How to Trade It
A doji at the top of an uptrend suggests indecision — the trend might be exhausting. A doji at a key support level after a downtrend can signal a reversal. But never trade a doji in isolation. Wait for confirmation — the next candle needs to confirm the direction.
The Hammer
Small body at the top, long lower wick (at least 2x the body), little or no upper wick. It says: sellers pushed the price down hard during the session, but buyers fought back and closed near the high.
How to Trade It
A hammer at the bottom of a downtrend, especially at a support level, is one of the most reliable reversal signals. Enter long on the break above the hammer's high. Stop loss below the hammer's low. If it forms in the middle of nowhere with no context, ignore it.
The Shooting Star
The opposite of a hammer. Small body at the bottom, long upper wick. Buyers pushed up but sellers slammed the door shut. Bearish signal at the top of an uptrend.
The Marubozu
A candle with no wicks — the open IS the low and the close IS the high (bullish), or vice versa. Pure dominance by one side. When you see a bullish marubozu breaking through resistance, that is genuine buying pressure with conviction.
Two-Candle Patterns
Bullish Engulfing
A small red candle followed by a larger green candle that completely "engulfs" it. The green candle's body covers the entire range of the red candle. This shows a decisive shift from sellers to buyers.
Practical Example
You spot a bullish engulfing pattern on the daily chart of Rolls Royce at a known support level of 450p. The red candle closed at 448p. The next day opens at 445p and closes at 460p, completely engulfing the previous candle. You enter long at 461p (break above the engulfing candle high) with a stop at 443p (below the pattern low). Target: 480p. Risk: 18p. Reward: 19p. R:R just over 1:1 — you might want a wider target or tighter stop.
Bearish Engulfing
The mirror image. A small green candle followed by a large red candle that swallows it. At the top of an uptrend, this is a warning shot. Sellers have arrived in force.
Tweezer Tops and Bottoms
Two candles with matching highs (tweezer top) or matching lows (tweezer bottom). The market tested a level twice and was rejected both times. Double rejection = stronger signal than a single candle.
Three-Candle Patterns
Morning Star
Three candles: (1) large red candle, (2) small candle (any colour) that gaps down, (3) large green candle that closes above the midpoint of candle 1. The story: strong selling, then indecision, then strong buying. The tide has turned.
Evening Star
The bearish mirror. Large green, small candle, large red. Found at tops. The party is over.
Three White Soldiers / Three Black Crows
Three consecutive strong candles in the same direction, each closing near its high (soldiers) or low (crows). This is momentum confirmation. When you see three white soldiers breaking above resistance with increasing volume, that is a train you want to be on.
The Rules That Actually Matter
- •Context over pattern — a hammer at support is meaningful. A hammer in the middle of a range is noise. Always ask: where did this form?
- •Higher timeframes are more reliable — a daily engulfing pattern is far more significant than one on a 5-minute chart. The more time in each candle, the more meaningful the signal.
- •Volume confirms — a bullish engulfing on high volume is much stronger than one on low volume. Volume shows conviction.
- •Wait for confirmation — do not jump in the moment you spot a pattern. Wait for the next candle to confirm the move. Patience pays.
Real Talk
You do not need to memorise 50 candlestick patterns. Master five or six — the hammer, engulfing, doji, morning/evening star, and the pin bar. Use them as one tool among many, not as your entire strategy.
Risk Warning
Candlestick patterns are not guaranteed signals. Trading financial instruments carries a high level of risk. This content is for educational purposes only and does not constitute financial advice.