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Common Candlestick Chart Patterns Explained

Every candlestick on a price chart packs four numbers β€” open, high, low, and close β€” into one shape, and a handful of recurring shapes have earned their own names among traders.

Reading a single candlestick

The thick "body" spans the opening and closing price over that period; the thin lines above and below, called wicks or shadows, mark the highest and lowest prices reached. The body's color usually shows whether the price closed higher or lower than it opened.

Doji

A candle where the open and close are nearly identical, leaving little or no body and often forming a thin cross shape. It generally signals indecision β€” buyers and sellers roughly canceled each other out over that period.

Hammer

A small body near the top of the candle with a long lower wick, typically appearing after a price decline. It is read as a potential bullish reversal signal, suggesting sellers pushed the price down before buyers stepped in and pushed it back up.

Shooting star

The mirror image of a hammer: a small body near the bottom with a long upper wick, typically appearing after a price rise. It is read as a potential bearish reversal signal, suggesting buyers pushed the price up before sellers took back control.

Bullish and bearish engulfing patterns

A two-candle pattern where the second candle's body completely covers the first one's body in the opposite direction β€” a small down candle followed by a larger up candle (bullish), or vice versa (bearish). It suggests one side of the market suddenly overwhelmed the other.

Morning star and evening star

Three-candle patterns often read as reversal signals: a morning star (a down candle, a small indecisive candle, then an up candle) suggests a bottom may be forming, while an evening star is the same pattern inverted, suggesting a possible top.

Patterns describe behavior, not guarantees

Candlestick patterns are a compact way of visualizing the tug-of-war between buyers and sellers over a given period. They describe a tendency observed across many historical charts, not a certainty β€” the same shape can and does fail to "work" plenty of the time.

Context changes what a pattern means

The same candle shape can mean very different things depending on where it appears β€” whether the broader trend is up or down, how much trading volume accompanied it, and what other indicators show. Traders who rely on candlestick patterns typically use them alongside other tools rather than in isolation.

Frequently Asked Questions

Are candlestick patterns a reliable way to predict prices?

No pattern guarantees a specific outcome. They reflect historical tendencies in buyer and seller behavior, not certainties, and this is general market information rather than financial advice or a recommendation to trade any particular way.

Do these patterns only apply to stocks?

No β€” candlestick charting works for any asset with open, high, low, and close price data, including crypto, forex, and commodities. The same shapes and general interpretations are used across all of them.