Anatomy of a Candlestick
Each candlestick represents price action over a specific period. Understanding the four key components is essential before learning patterns.
Close is higher than open. Buyers won.
Close is lower than open. Sellers won.
Upper wick = high, lower wick = low. Show price rejection.
Large body = strong conviction. Small body = indecision.
Single Candle Patterns
Reversal SignalsDoji
⚖️ IndecisionOpen and close are nearly equal. Signals potential reversal when found at trend extremes.
- After uptrend: Potential bearish reversal
- After downtrend: Potential bullish reversal
Hammer
📈 Bullish ReversalSmall body at top, long lower wick (2-3x body). Found at bottom of downtrends.
- Sellers pushed price down
- Buyers fought back and closed near open
- Confirmation: Next candle closes green above hammer
Shooting Star
📉 Bearish ReversalSmall body at bottom, long upper wick. Found at top of uptrends. Inverse of hammer.
- Buyers pushed price up
- Sellers rejected and closed near open
- Confirmation: Next candle closes red below star
Spinning Top
⚖️ IndecisionSmall body with equal upper and lower wicks. Market is undecided.
- Neither bulls nor bears in control
- Often precedes trend change
- Wait for confirmation candle
Double Candle Patterns
Strong SignalsBullish Engulfing
📈 Bullish ReversalGreen candle completely engulfs previous red candle. Strong buying signal at support.
- Found at bottom of downtrends
- Second candle opens below, closes above first
- Higher volume on engulfing candle = stronger
Bearish Engulfing
📉 Bearish ReversalRed candle completely engulfs previous green candle. Strong selling signal at resistance.
- Found at top of uptrends
- Second candle opens above, closes below first
- Higher volume on engulfing candle = stronger
Piercing Line
📈 Bullish ReversalGreen candle opens below prior low but closes above midpoint of prior red candle.
- Gap down open shows initial selling
- Recovery shows buyers stepping in
- Close above 50% of prior candle is key
Dark Cloud Cover
📉 Bearish ReversalRed candle opens above prior high but closes below midpoint of prior green candle.
- Gap up open shows initial buying
- Selloff shows sellers stepping in
- Opposite of piercing line
Bullish Harami
📈 Bullish ReversalSmall bullish candle is completely contained within the body of the prior large bearish candle.
- Found at bottom of downtrends
- "Harami" means pregnant in Japanese
- Signals selling pressure is weakening
Bearish Harami
📉 Bearish ReversalSmall bearish candle is completely contained within the body of the prior large bullish candle.
- Found at top of uptrends
- Signals buying momentum weakening
- Wait for bearish confirmation candle
Triple Candle Patterns
High ReliabilityMorning Star
📈 Bullish ReversalThree candle pattern: Large red → Small body/doji → Large green. Found at bottom of downtrends.
- First candle: Strong selling continues
- Second candle: Indecision, selling pressure fades
- Third candle: Buyers take control, closes above midpoint of first
Evening Star
📉 Bearish ReversalThree candle pattern: Large green → Small body/doji → Large red. Found at top of uptrends.
- First candle: Strong buying continues
- Second candle: Indecision, buying pressure fades
- Third candle: Sellers take control, closes below midpoint of first
📊 Candlestick Patterns Cheat Sheet
| Pattern | Type | Candles | Signal | Reliability |
|---|---|---|---|---|
| Doji | Indecision | 1 | ⚖️ Depends on context | Medium |
| Hammer | Reversal | 1 | 📈 Bullish | Medium-High |
| Shooting Star | Reversal | 1 | 📉 Bearish | Medium-High |
| Bullish Engulfing | Reversal | 2 | 📈 Bullish | High |
| Bearish Engulfing | Reversal | 2 | 📉 Bearish | High |
| Morning Star | Reversal | 3 | 📈 Bullish | Very High |
| Evening Star | Reversal | 3 | 📉 Bearish | Very High |
| Piercing Line | Reversal | 2 | 📈 Bullish | Medium-High |
| Dark Cloud Cover | Reversal | 2 | 📉 Bearish | Medium-High |
Practice Pattern Recognition
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Frequently Asked Questions
What is the most reliable candlestick pattern?
The engulfing pattern (both bullish and bearish) is considered one of the most reliable candlestick patterns with a success rate around 75-80% when confirmed by volume. The morning star and evening star three-candle patterns are also highly reliable at key support and resistance levels.
Do candlestick patterns work in crypto?
Yes, candlestick patterns work in crypto markets because they reflect trader psychology, which is universal. However, crypto markets are more volatile, so patterns may have slightly lower success rates. Always confirm candlestick signals with volume and other indicators for best results.
What timeframe is best for candlestick analysis?
The daily timeframe produces the most reliable candlestick patterns because each candle represents a full day of trading activity. The 4-hour chart also works well. Patterns on 1-hour or lower timeframes have more noise and lower reliability.
How many candlestick patterns should I learn?
Start with 5-6 core patterns: doji, hammer/shooting star, engulfing, morning/evening star, and harami. These cover most trading scenarios. Once comfortable, add more complex patterns. Quality of recognition matters more than quantity.
Practice Candlestick Trading
Mock Trade Challenge
Read the candles and decide your next move.
After a sustained downtrend, a large bullish engulfing candle appeared with 3.5x average volume. RSI shows extreme oversold...
What would you do here?
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