41 Candlestick Patterns Explained With Examples

The range is calculated by subtracting the low price from the high price. The candlestick chart consists of individual candlesticks, each representing a single time interval, such as an hour, day, or week. The Falling Three Method candlestick is the counterpart of the Rising Three Method candlestick pattern. Falling Three Method candlestick pattern appears during a Bearish trend. Identifying bullish engulfing along with other technical tools increases accuracy in day trade. The High Wave candlestick pattern is formed by one single candle.

Candlesticks: Definition, Origin, Parts, Patterns and What It Indicates?

Even more potent long candlesticks are the Marubozu brothers, black and white. Marubozu bars don’t have upper or lower shadows and the high and low are represented by the open or close (see image below). The area between the open and the close is called the real body, price excursions above and below the real body are shadows (also called wicks).

The Spinning Top candlestick pattern is formed by one single candle. The Gravestone Doji candlestick pattern is formed by one single candle. The Black Marubozu candlestick pattern is formed by one single candle. The Shooting Star candlestick pattern is formed by one single candle. The Hanging Man candlestick pattern is formed by one single candle.

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This 3-candle bullish candlestick pattern is a reversal pattern, meaning that it’s used to find bottoms. This 2-candle bullish candlestick pattern is a reversal pattern, meaning that it’s used to find bottoms. This 1-candle bullish candlestick pattern is a reversal pattern, meaning that it’s used to find bottoms.

Gravestone doji form when the open, low, and close are equal, and the high creates a long upper shadow. The resulting candlestick looks like an upside-down “T” due to the lack of a lower shadow. Gravestone doji indicate buyers dominated trading and drove prices higher during the session. However, by the end of the session, sellers resurfaced and pushed prices back to the opening level, and the session low.

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The second sequence reflects more volatility and some selling pressure. These are just two examples; there are hundreds of potential combinations that could result in the same candlestick. According to Steve Nison, candlestick charting first appeared sometime after 1850. Much of the credit for candlestick development and charting goes to a legendary rice trader named Homma from the town of Sakata.

By studying historical price changes, Homma identified patterns that signaled shifts in sentiment and market control, helping him anticipate price reversals and trends. His system became widely adopted among Japanese merchants and evolved into a structured approach to market analysis. Candlestick charts are unique in their ability to convey multiple data points within a single graphical representation. Unlike simple line charts, which display only closing prices over time, candlestick charts include the open, high, low, and close of a given trading period. This additional information can provide chartists with a richer understanding of market dynamics.

Whenever the price reaches around $156, sellers push the price lower. Hilton stock finally breaches the resistance level in the November month. Channels can be ascending, descending, or horizontal, depending on the direction of price movement. In channels, an upper trendline connects the highs, and a lower trendline connects the lows. Candlestick charts were developed in the 1700s by a Japanese rice trader named Munehisa Homma. Homma used these charts to analyze the price of rice contracts in the Dojima Rice Exchange, one of the earliest futures exchanges in Osaka.

To be precise, there are approximately 35 to 42 accepted candlestick patterns—used in trading. It is a two-bar candlestick where one is the mother bar, and the other is the inside bar. The inside bar is shorter than the mother bar lying within the high and low range of the mother candlestick chart excel bar. The asset price follows market trends—the trader, therefore, can opt for a short position on the downward trend and a long position on the uptrend.

After a long downtrend, long black candlestick, or at support, a dragonfly doji could signal a potential bullish reversal or bottom.
The Hanging Man candlestick pattern is formed by one single candle.
Resistance in the uptrend is one of the things a Bearish Candlestick denotes when it appears in the charts .
After a long downtrend, long black candlestick, or at support, the focus turns to the evidence of buying pressure and a potential bullish reversal.

#7 – Hammer

While long white candlesticks are generally bullish, much depends on their position within the broader technical picture. After extended declines, long white candlesticks can mark a potential turning point or support level. If buying gets too aggressive after a long advance, it can lead to excessive bullishness. Trendlines are drawn on candlestick charts by connecting the lows or highs of price movements.

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This is a variation of the bearish harami, where the second candle is a doji, showing near identical opening and closing prices. StockCharts.com maintains a list of all stocks that currently have common candlestick patterns on their charts in the Predefined Scan Results area. To see these results, click here and scroll down until you see the “Candlestick Patterns” section. After an advance or long white candlestick, a doji signals that buying pressure may be diminishing and the uptrend could be nearing an end.

After a decline, the long upper shadow indicates buying pressure during the session. However, the bulls were not able to sustain this buying pressure and prices closed well off of their highs to create the long upper shadow. Because of this failure, bullish confirmation is required before action. An Inverted Hammer followed by a gap up or long white candlestick with heavy volume could act as bullish confirmation. It consists of a large bearish candlestick followed by a smaller bullish candlestick that is completely contained within the body of the previous larger candle. This formation suggests that selling pressure is weakening, and on the second day, buyers are reasserting control.

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While this may seem like enough to act on, hammers require further bullish confirmation. Further buying pressure, and preferably on expanding volume, is needed before acting. Such confirmation could come from a gap up or long white candlestick. Hammers are similar to selling climaxes, and heavy volume can serve to reinforce the validity of the reversal. The Inverted Hammer looks exactly like a Shooting Star, but forms after a decline or downtrend. Inverted Hammers represent a potential trend reversal or support levels.

What is the Origin of Candlesticks Pattern?

The use of candlestick charts remained confined to Japan until Nison introduced them to Western financial markets in the late 20th century.
The colors and shapes of the candlesticks easily signal to traders if the price went up or down and by how much.
For example, the hammer and the hanging man candles have a similar structure, but different contexts.
The first pair, Hammer and Hanging Man, consists of identical candlesticks with small bodies and long lower shadows.

The Bearish candlestick pattern displayed above is commonly referred to as the Bearish Engulfing pattern. A Bearish trend is indicated with the red candlestick engulfing the previous green candlestick. The difference between the closing of the Bullish candle and the opening of the Bearish candle is referred to as “Gap up opening” in the above figure. The method of candlesticks was adopted and still used because of its ease of reading and understanding the movement of prices. Later the method was used to predict future price movements as well. Bearish reversal candlestick patterns show that sellers are in control, or regaining control of a movement.

For example, the hammer and the hanging man candles have a similar structure, but different contexts. The hammer appears at the bottom of a downtrend, signaling a potential bullish reversal, while the hanging man occurs at the top of an uptrend, warning of a bearish reversal. His innovation led to the creation of candlestick charts, which record daily price action in a clear and interpretable format (see figure 1).

The Bearish Harami candlestick pattern is formed by two candles. The Evening Star candlestick pattern is formed by three candles. The Dark Cloud Cover candlestick pattern is formed by two candles. The Bullish Counterattack Line candlestick pattern is formed by two candles. The Tweezer Bottom candlestick pattern is formed by two candles.

The In Neck Bearish candlestick pattern is formed by five candles. The Falling Window candlestick pattern is formed by two candles. The Falling Three Methods candlestick pattern is formed by five candles. The In Neck Bullish candlestick pattern is formed by five candles. The On Neck Bullish candlestick pattern is formed by two candles. The Rising Three Methods candlestick pattern is formed by five candles.