Understanding Candlestick Patterns

Anatomy of a candlestick

Each candlestick summarises price movement during one period — one minute, five minutes, one day. It contains four data points:

• Open — the first price of the period
• High — the highest price reached
• Low — the lowest price reached
• Close — the last price of the period

The thick part is the real body (open to close). The thin lines are the wicks or shadows (to the high and low). A body is typically coloured green when the close is above the open and red when it is below.

What the shape tells you

A candle is a record of a contest between buyers and sellers:

• A long body with small wicks shows one side was in control for most of the period.
• Long upper wicks show that higher prices were rejected before the close.
• Long lower wicks show that lower prices were rejected.
• A tiny body shows indecision — neither side won clearly.

Common single-candle patterns

Doji

Open and close are nearly equal. It signals indecision. On its own a doji says very little; after a long trend it may suggest momentum is fading.

Hammer and shooting star

A hammer has a small body near the top and a long lower wick — sellers pushed price down but buyers recovered it. A shooting star is the mirror image near the bottom of a candle range with a long upper wick.

Marubozu

A full body with almost no wicks. It indicates strong one-directional pressure during that period.

Common multi-candle patterns

Bullish and bearish engulfing

The second candle's body completely covers the first candle's body in the opposite direction. It shows a shift in short-term control.

Morning star and evening star

A three-candle sequence: a strong candle, a small indecision candle, then a strong candle in the opposite direction.

Why context beats pattern recognition

Pattern names make charts feel predictable, but research on candlestick patterns shows mixed and often weak predictive power, especially on very short timeframes where random noise dominates. Improve your reading by asking:

1. 01Where did the pattern form? At a tested support or resistance area, or in the middle of nowhere?
2. 02What is the higher-timeframe trend?
3. 03Is volatility unusually high or low?
4. 04Would you still take the idea if the pattern were slightly different?

Practice suggestion

Open a historical chart, hide the right side, and write down what you expect after each pattern before revealing the next candles. Record the results honestly in a trading journal. You will quickly learn how often patterns fail — which is the most valuable lesson of all.

Explore more in our Candlestick Patterns guide.

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