CANDLESTICK

CHART PATTERNS
ALL ABOUT CANDLES
Table Of Contents

How to Read Candlestick charts?

35 Types of Candlestick Patterns:

1. Hammer:
2. Piercing Pattern:
3. Bullish Engulfing:
4. The Morning Star:
5. Three White Soldiers:
6. White Marubozu:
7. Three Inside Up:
8. Bullish Harami:
9. Tweezer Bottom:
10. Inverted Hammer:
11. Three Outside Up:
12. On-Neck Pattern:
13. Bullish Counterattack-
Bearish Candlestick Pattern:
14. Hanging man:
15. Dark cloud cover:
16. Bearish Engulfing:
17. The Evening Star:
18. Three Black Crows:
19. Black Marubozu:
20. Three Inside Down:
21. Bearish Harami:
22. Shooting Star:
23. Tweezer Top:
24. Three Outside Down:
25. Bearish Counterattack-
Continuation Candlestick Patterns:
26. Doji:
27. Spinning Top:
28. Falling Three Methods:
29. Rising Three Methods:
30. Upside Tasuki Gap:
31. Downside Tasuki Gap:
32. Mat-Hold-
How to Read Candlestick charts?

Candlestick charts were originated in Japan over

100 years before the West had developed the bar
charts and point-and-figure charts. In the 1700s, a
Japanese man known as Homma discovered that as
there was a link between price and the supply and
demand of rice, the markets also were strongly
influenced by the emotions of traders.
A daily candlestick charts shows the security’s open,
high, low, and close price for the day. The
candlestick’s wide or rectangle part is called the
“real body” which shows the link between opening
and closing prices.
This real body shows the price range between the
open and close of that day’s trading.
When the real body is filled, black or red then it
means that the close is lower than the open and is
known as the bearish candle. It shows that the prices
opened, the bears pushed the prices down and
closed lower than the opening price.
If the real body is empty, white or green then it
means that the close was higher than the open
known as the bullish candle. It shows that the prices
opened, the bulls pushed the prices up and closed
higher than the opening price.
The thin vertical lines above and below the real body
is knowns as the wicks or shadows which represents
the high and low prices of the trading session.
The upper shadow shows the high price and lower
shadow shows the low prices reached during the
trading session.

highest price highest price

closing price OPENING price

OPENING price OPENING price

LOWEST price LOWEST price

Before we jump into learning about different

candlestick charts, there are few assumptions which
need to be kept in mind that are specific to the
candlestick charts.
1. Strength is represented by a bullish or green
candle and weakness by a bearish or red candle.
One should ensure that whenever they are
buying it is a green candle day and whenever
they are selling, ensure that it’s a red candle day.
2. The textbook definition of a patterns states
certain criteria, but one should state that there
could be minor variations to the pattern
depending on certain market conditions.
3. One should look for a prior trend. If you are
looking at a bullish reversal pattern, then the
prior trend should be bearish and if you are
looking for a bearish reversal pattern then the
prior trend should be bullish.
1. Hammer

Hammer is a single candlestick pattern that is

formed at the end of a downtrend and signals bullish
reversal.
The real body of this candle is small and is located at
the top with a lower shadow which should be more
than twice the real body. This candlestick chart
pattern has no or little upper shadow.
The psychology behind this candle formation is that
the prices opened and sellers pushed down the
prices.
Suddenly the buyers came into the market and
pushed the prices up and closed the trading session
more than the opening price.

Hammer Candlestick
Pattern

Real Body

Long Lower
Shadow
This resulted in the formation of bullish pattern and
signifies that buyers are back in the market and
downtrend may end.
Traders can enter a long position if next day a
bullish candle is formed and can place a stop-loss at
the low of Hammer.

Below is an example of Hammer candlestick pattern:

Hammer Candlestick
Pattern
 2. Piercing Pattern

Piercing pattern is multiple candlestick chart pattern

that is formed after a downtrend indicating a bullish
reversal.
It is formed by two candles, the first candle being a
bearish candle which indicates the continuation of
the downtrend.
The second candle is a bullish candle which opens
gap down but closes more than 50% of the real body
of the previous candle which shows that the bulls are
back in the market and a bullish reversal is going to
take place.

Piercing Pattern

Closing Should Be
More than 50% of
the previous
candlestick
Traders can enter a long position if the next day a
bullish candle is formed and can place a stop-loss at
the low of the second candle.

Below is an example of a Piercing Candlestick

Pattern:
 3. Bullish Engulfing

Bullish Engulfing is a multiple candlestick chart

pattern that is formed after a downtrend indicating
a bullish reversal.
It is formed by two candles, the second candlestick
engulfing the first candlestick. The first candle is a
bearish candle that indicates the continuation of the
downtrend.
The second candlestick is a long bullish candle that
completely engulfs the first candle and shows that
the bulls are back in the market.

Bullish Engulfing Pattern

the second candle

engulfing the first
candle
Traders can enter a long position if next day a
bullish candle is formed and can place a stop-loss at
the low of the second candle.

Below is an example of Bullish Engulfing Candlestick

Pattern:
 4. The Morning Star

The Morning Star is multiple candlestick charts

pattern which is formed after a downtrend
indicating bullish reversal.
It is made of 3 candlesticks, first being a bearish
candle, second a Doji and the third being a bullish
candle.
The first candle shows the continuation of the
downtrend, the second candle being a doji indicates
indecision in the market, and the third bullish candle
shows that the bulls are back in the market and
reversal is going to take place.
The second candle should be completely out of the
real bodies of the first and third candles.

Morning Star
Pattern
Traders can enter a long position if the next day a
bullish candle is formed and can place a stop-loss at
the low of the second candle.

Below is an example of Morning Star Candlestick

Charts Pattern:
 5. Three White Soldiers

The Three White Soldiers is a multiple candlestick

pattern that is formed after a downtrend indicating
a bullish reversal.
These candlestick charts are made of three long
bullish bodies which do not have long shadows and
are open within the real body of the previous candle
in the pattern.
 6.Marubozu

The White Marubozu is a single candlestick pattern

that is formed after a downtrend indicating a bullish
reversal.
This candlestick has a long bullish body with no
upper or lower shadows which shows that the bulls
are exerting buying pressure and the markets may
turn bullish.

Marubozu Candlestick
Pattern

At the formation of this candle, the sellers should be

caution and close their shorting position
 7. Three Inside Up

The Three Inside Up is multiple candlestick pattern

which is formed after a downtrend indicating bullish
reversal.
It consists of three candlesticks, the first being a long
bearish candle, the second candlestick being a small
bullish candle which should be in the range the first
candlestick.
The third candlestick should be a long bullish
candlestick confirming the bullish reversal.

Three Inside Up Pattern

The relationship of the first and second candlestick
should be of the bullish harami candlestick pattern.
Traders can take a long position after the completion
of this candlestick pattern.
 8. Bullish Harami

The Bullish Harami is multiple candlestick chart

pattern which is formed after a downtrend
indicating bullish reversal.
It consists of two candlestick charts, the first
candlestick being a tall bearish candle and second
being a small bullish candle which should be in the
range of the first candlestick.
The first bearish candle shows the continuation of
the bearish trend and the second candle shows that
the bulls are back in the market.

Bullish Harami
Candlestick Pattern

Traders can take a long position after the completion

of this candlestick pattern.
 9. Tweezer Bottom

The Tweezer Bottom candlestick pattern is a bullish

reversal candlestick pattern that is formed at the
end of the downtrend.
It consists of two candlesticks, the first one being
bearish and the second one being bullish candlestick.
Both the candlesticks make almost or the same
low.When the Tweezer Bottom candlestick pattern is
formed the prior trend is a downtrend.

Tweezer Bottom
Candlestick Pattern

Same Low
A bearish tweezer candlestick is formed which looks
like the continuation of the ongoing downtrend. On
the next day, the second day’s bullish candle’s low
indicates a support level.
The bottom-most candles with almost the same low
indicate the strength of the support and also signal
that the downtrend may get reversed to form an
uptrend. Due to this the bulls step into action and
move the price upwards.
This bullish reversal is confirmed the next day when
the bullish candle is formed.
 10. Inverted Hammer

An Inverted Hammer is formed at the end of the

downtrend and gives a bullish reversal signal.
In this candlestick, the real body is located at the end
and there is a long upper shadow. It is the inverse of
the Hammer Candlestick pattern.
This pattern is formed when the opening and closing
prices are near to each other and the upper shadow
should be more than twice the real body.

Inverted Hammer Candlestick

Pattern
 11. Three Outside Up

The Three Outside Up is multiple candlestick pattern

which is formed after a downtrend indicating bullish
reversal.
It consists of three candlesticks, the first being a
short bearish candle, the second candlestick being a
large bullish candle which should cover the first
candlestick.
The third candlestick should be a long bullish
candlestick confirming the bullish reversal.
The relationship of the first and second candlestick
chart should be of the Bullish Engulfing candlestick
pattern.
Traders can take a long position after the completion
of this candlestick pattern.
 12. On-Neck Pattern

The on neck pattern occurs after a downtrend when

a long real bodied bearish candle is followed by a
smaller real bodied bullish candle which gaps down
on the open but then closes near the prior candle’s
close.
The pattern is called a neckline because the two
closing prices are the same or almost the same
across the two candles, forming a horizontal
neckline.

Up Trends

Down Trends
 13. Bullish Counterattack

The bullish counterattack pattern is a bullish reversal

pattern that predicts the upcoming reversal of the
current downtrend in the market. This candlestick
pattern is a two-bar pattern that appears during a
downtrend in the market. A pattern needs to meet
the following conditions to be a bullish counterattack
pattern.
There must be a strong downtrend in the market
for the formation of the bullish counterattack
pattern.
The first candle must be a long black candle with
a real body.
The second candle must also be a long (ideally,
equal in size to the first candle) but a white
candle with a real body. The second candle must
close near the close of the first candle.
 Bullish Counterattack
Candlestick Pattern

Day 1

Down Trends

Up Trends

Close/Open Gap

Day 2
 Bearish
14. Hanging man Candlestick
Pattern

Hanging Man is a single candlestick pattern which is

formed at the end of an uptrend and signals bearish
reversal.
The real body of this candle is small and is located at
the top with a lower shadow which should be more
than the twice of the real body. This candlestick
pattern has no or little upper shadow.
The psychology behind this candle formation is that
the prices opened and seller pushed down the prices.
Suddenly the buyers came into the market and
pushed the prices up but were unsuccessful in doing
so as the prices closed below the opening price.

Down Trends

Up Trends

Hanging man Candlestick

Pattern
This resulted in the formation of bearish pattern and
signifies that seller are back in the market and
uptrend may end.
Traders can enter a short position if next day a
bearish candle is formed and can place a stop-loss at
the high of Hanging Man.

Below is an example of Hanging Man Candlestick

Pattern:
 15. Dark cloud cover

Dark Cloud Cover is multiple candlestick pattern

which is formed after the uptrend indicating bearish
reversal.
It is formed by two candles, the first candle being a
bullish candle which indicates the continuation of the
uptrend.
The second candle is a bearish candle which opens
gap up but closes more than 50% of the real body of
the previous candle which shows that the bears are
back in the market and bearish reversal is going to
take place.

Down Trends

the close must be

more than 50%
Up Trends
Traders can enter a short position if the next day a
bearish candle is formed and can place a stop-loss at
the high of the second candle.
Below is an example of a Dark Cloud candlestick
pattern:
 16. Bearish Engulfing

Bearish Engulfing is a multiple candlestick pattern

that is formed after an uptrend indicating a bearish
reversal.
It is formed by two candles, the second candlestick
engulfing the first candlestick. The first candle being
a bullish candle indicates the continuation of the
uptrend.
The second candlestick chart is a long bearish candle
that completely engulfs the first candle and shows
that the bears are back in the market.

Bearish Engulfing Pattern

Down Trends

the second candle

engulfing the first
candle

Up Trends
Traders can enter a short position if next day a
bearish candle is formed and can place a stop-loss at
the high of the second candle.
 17. The Evening Star

The Evening Star is multiple candlestick pattern

which is formed after the uptrend indicating bearish
reversal.
It is made of 3 candlesticks, first being a bullish
candle, second a doji and third being a bearish
candle.
The first candle shows the continuation of the
uptrend, the second candle being a doji indicates
indecision in the market, and the third bearish
candle shows that the bears are back in the market
and reversal is going to take place.
The second candle should be completely out of the
real bodies of first and third candle.

Down Trends

Up Trends

Evening Star
Pattern
Traders can enter a long position if next day a
bearish candle is formed and can place a stop-loss at
the high of the second candle.

Below is an example of Evening Star Candlestick

Pattern:
 18. Three Black Crows

The Three Black Crows is multiple candlestick

pattern which is formed after an uptrend indicating
bearish reversal.
These candlesticks are made of three long bearish
bodies which do not have long shadows and open
within the real body of the previous candle in the
pattern.

Down Trends

Up Trends

Three Black Crows Candlestick

Pattern
 19. Black Marubozu

The Black Marubozu is a single candlestick pattern

which is formed after an uptrend indicating bearish
reversal.
This candlestick chart has a long bearish body with
no upper or lower shadows which shows that the
bears are exerting selling pressure and the markets
may turn bearish.
At the formation of this candle, the buyers should be
caution and close their buying position.

Down Trends

Up Trends
 20. Three Inside Down

The Black Marubozu is a single candlestick pattern

which is formed after an uptrend indicating bearish
reversal.
This candlestick chart has a long bearish body with
no upper or lower shadows which shows that the
bears are exerting selling pressure and the markets
may turn bearish.
At the formation of this candle, the buyers should be
caution and close their buying position.

Down Trends

Up Trends
Traders can take a short position after the
completion of this candlestick pattern.
 21. Bearish Harami

The Bearish Harami is multiple candlestick pattern

which is formed after the uptrend indicating bearish
reversal.
It consists of two candlesticks, the first candlestick
being a tall bullish candle and second being a small
bearish candle which should be in the range of the
first candlestick chart.
The first bullish candle shows the continuation of the
bullish trend and the second candle shows that the
bears are back in the market.

Down Trends

Up Trends

Bearish Harami Candlestick

Pattern
Traders can take a short position after the
completion of this candlestick pattern.
 22. Shooting Star

Shooting Star is formed at the end of the uptrend

and gives bearish reversal signal.
In this candlestick chart the real body is located at
the end and there is long upper shadow. It is the
inverse of the Hanging Man Candlestick pattern.

Down Trends

Up Trends

Shooting Star Candlestick

Pattern
This pattern is formed when the opening and closing
prices are near to each other and the upper shadow
should be more than the twice of the real body.
 23. Tweezer Top

The Tweezer Top pattern is a bearish reversal

candlestick pattern that is formed at the end of an
uptrend.
It consists of two candlesticks, the first one being
bullish and the second one being bearish candlestick.
Both the tweezer candlestick make almost or the
same high.
When the Tweezer Top candlestick pattern is formed
the prior trend is an uptrend. A bullish candlestick is
formed which looks like the continuation of the
ongoing uptrend.
On the next day, the high of the second day’s
bearish candle’s high indicates a resistance level.
Bulls seem to raise the price upward, but now they
are not willing to buy at higher prices.
 Tweezer Top Candlestick
Pattern

Same High

Down Trends

Up Trends

The top-most candles with almost the same high

indicate the strength of the resistance and also
signal that the uptrend may get reversed to form a
downtrend. This bearish reversal is confirmed on the
next day when the bearish candle is formed.
24. Three Outside Down

The Three Outside Down is multiple candlestick

pattern which is formed after an uptrend indicating
bearish reversal.
It consists of three candlesticks, the first being a
short bullish candle, the second candlestick being a
large bearish candle which should cover the first
candlestick.
The third candlestick should be a long bearish
candlestick confirming the bearish reversal.

Down Trends

Up Trends

Three Outside Down Candlestick

Pattern
The relationship of the first and second candlestick
should be of the Bearish Engulfing candlestick
pattern.
Traders can take a short position after the
completion of this candlestick pattern.
25. Bearish Counterattack

The bearish counterattack candlestick pattern is a

bearish reversal pattern that appears during an
uptrend in the market. It predicts that the current
uptrend in the market will make and the new
downtrend will take over the market.
 Bearish Counterattack
Candlestick Pattern

Down Trends

Close/Open Gap

Up Trends

Day 2

Day 1
 Continuation
Candlestick
Patterns

26. Doji

Doji pattern is a candlestick pattern of indecision

which is formed when the opening and closing prices
are almost equal.
It is formed when both the bulls and bears are
fighting to control prices but nobody succeeds in
gaining full control of the prices.

Doji Candlestick
Pattern

Opening and closing

almost same

The candlestick pattern looks like a cross with very

small real body and long shadows.
 27. Spinning Top

The spinning top candlestick pattern is same as the

Doji indicating indecision in the market.
The only difference between spinning top and doji is
in their formation, the real body of the spinning is
larger as compared to Doji.

Spinning Top Candlestick

Pattern
 28. Falling Three Methods

The “falling three methods” is a bearish, five candle

continuation pattern which signals an interruption,
but not a reversal, of the ongoing downtrend.
The candlestick pattern is made of two long
candlestick charts in the direction of the trend i.e
downtrend at the beginning and end, with three
shorter counter-trend candlesticks in the middle.

Falling Three Methods Candlestick

Pattern
The candlestick pattern is important as it shows
traders that the bulls still do not have enough power
to reverse the trend.
 29. Rising Three Methods

The “rising three methods” is a bullish, five candle

continuation pattern which signals an interruption,
but not a reversal, of the ongoing uptrend.
The candlestick pattern is made of two long
candlesticks in the direction of the trend i.e uptrend
in this case. at the beginning and end, with three
shorter counter-trend candlesticks in the middle.

Rising Three Methods Candlestick

Pattern
The candlestick pattern is important as it shows
traders that the bears still do not have enough
power to reverse the trend.
 30. Upside Tasuki Gap

It is a bullish continuation candlestick pattern which

is formed in an ongoing uptrend.
This candlestick pattern consists of three candles, the
first candlestick is a long-bodied bullish candlestick,
and the second candlestick is also a bullish
candlestick chart formed after a gap up.
The third candlestick is a bearish candle that closes
in the gap formed between these first two bullish
candles.

Up Trends

Up Trends

Upside Tasuki Gap Candlestick

Pattern
 31. Downside Tasuki Gap

It is a bearish continuation candlestick pattern which

is formed in an ongoing downtrend.
This candlestick pattern consists of three candles, the
first candlestick is a long-bodied bearish candlestick,
and the second candlestick is also a bearish
candlestick formed after a gap down.
The third candlestick is a bullish candle that closes in
the gap formed between these first two bearish
candles.

Downside Tasuki Gap Candlestick

Pattern
 32. Mat-Hold

A mat hold pattern is a candlestick formation

indicating the continuation of a prior trend.
There can be either bearish or bullish mat hold
patterns. A bullish pattern begins with a large
bullish candle followed by a gap higher and three
smaller candles which move lower.

Up Trends

Up Trends
These candles must stay above the low of the first
candle. The fifth candle is a large candle that moves
to the upside again. The pattern occurs within an
overall uptrend.