The Language of Candlesticks
Candlestick charts originated in 18th-century Japan for rice trading. Today, they're the most popular chart type because they convey four data points per period: Open, High, Low, and Close.
Anatomy of a Candlestick
Reversal Patterns (Bullish)
1. Hammer
A small body at the top with a long lower wick (at least 2x the body). Signals that sellers drove prices down, but buyers pushed back strongly. Most reliable at the bottom of a downtrend.
2. Bullish Engulfing
A large green candle completely engulfs the previous red candle. Shows a decisive shift from selling to buying pressure.
3. Morning Star
A three-candle pattern: large red candle → small body (star) → large green candle. The star represents indecision, followed by bullish confirmation.
4. Piercing Line
A two-candle pattern where a green candle opens below the previous red candle's low but closes above its midpoint.
Reversal Patterns (Bearish)
5. Shooting Star
A small body at the bottom with a long upper wick. Signals rejection of higher prices. Most reliable at the top of an uptrend.
6. Bearish Engulfing
A large red candle completely engulfs the previous green candle. Indicates a shift from buying to selling pressure.
7. Evening Star
The bearish counterpart to the morning star: large green candle → small body → large red candle.
8. Dark Cloud Cover
A red candle opens above the previous green candle's high but closes below its midpoint.
Continuation Patterns
9. Doji
The open and close are virtually identical, creating a cross or plus sign. Represents market indecision. A doji after a strong trend often precedes a reversal.
10. Three White Soldiers
Three consecutive green candles with progressively higher closes. Confirms a strong bullish continuation.
11. Three Black Crows
Three consecutive red candles with progressively lower closes. Confirms a strong bearish continuation.
12. Rising/Falling Three Methods
A long candle followed by 3-4 small counter-trend candles, then another long candle in the original direction. Represents a brief pause before the trend resumes.
How to Trade Candlestick Patterns
Practice identifying these patterns on 10xTrade's advanced charting tools with real-time market data.