Candlestick Patterns Every Trader Must Know

Candlestick patterns are one of the most reliable ways to read market sentiment. They tell you not only what the price did but also what buyers and sellers were thinking.

The Basics of Candlesticks

Each candlestick consists of a body and wicks or shadows. The body shows the open and close levels, while the wicks indicate the highest and lowest prices of that period.

The Most Important Bullish Patterns

Hammer

The hammer has a small body at the top and a long wick below. This indicates a rejection of lower prices and a possible reversal upwards.

Bullish Engulfing

In this case, a green candle completely engulfs the previous red candle. This is a strong buy signal, especially after a downtrend.

Morning Star

A three-candle pattern consisting of a red candle, a small indecisive candle, and a green candle. This is one of the strongest reversal patterns.

The Most Important Bearish Patterns

Shooting Star

The opposite of the hammer. A small body at the bottom with a long wick above. This indicates a rejection of higher prices.

Bearish Engulfing

A red candle that engulfs the previous green candle. A strong sell signal after an uptrend.

Evening Star

The opposite of the morning star. A bearish reversal pattern consisting of three candles.

How to Use These Patterns

Patterns are most reliable when they appear at significant support or resistance levels. Always combine them with other indicators for the best results.