In this guide, we’ll break down the top 5 candlestick patterns, explain their meanings, show when to use them, and help you decide which pattern works best for your situation.
What is a Candlestick Pattern?
A candlestick pattern is a visual representation of price movement on a trading chart. Each “candlestick” shows four key data points for a specific time period:
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Open price (where the asset started),
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Close price (where it ended),
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High price (the top point reached),
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Low price (the bottom point reached).
1. The Hammer
Meaning:
A hammer forms at the end of a downtrend. It looks like a tiny body with a long lower wick — signaling that buyers stepped in to push the price back up.
Type: Bullish reversal pattern.
2. The Shooting Star
Meaning:
This pattern is the mirror opposite of the hammer. A small body with a long upper wick forms at the top of an uptrend, suggesting buyers tried to push higher but lost momentum.
Type: Bearish reversal pattern.
3. The Doji
Meaning:
The doji shows indecision — the open and close prices are nearly the same, with wicks on either side.
Type: Neutral (can indicate reversal or continuation depending on context).
4. The Engulfing Pattern
Meaning:
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Bullish engulfing: A green candle fully “swallows” the previous red candle.
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Bearish engulfing: A red candle fully engulfs the prior green one.
Type: Strong reversal pattern.
5. The Morning Star / Evening Star
Meaning:
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Morning Star: Three-candle pattern showing a bearish candle, then indecision (doji/small body), followed by a strong bullish candle. Signals a bullish reversal.
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Evening Star: The opposite, signaling a bearish reversal.
Type: Reversal pattern (bullish or bearish depending on type).
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