Candle Patterns

There are several patterns of candles. Here, we’ll explain the most popular ones. The most reliable signs appear in the diary. In H4 and H1, reliability falls. In Weekly and Monthly, the reliability of the general trend forecast increases, but the possibility of strong temporary deviations from the trend also increases. For example, candles may have very long shadows.   

Reversion Patterns

Reversal patterns indicate the high chances that a trend will change direction. These patterns are useful for identifying possible entry points at the beginning of the new trend.

Note that for rollback patterns:

  • The longer the trend, the stronger the signal.
  • The steeper the trend, the stronger the signal.
  • The signal is stronger if it appears close to a strong level of resistance / support. 
  • The signal is stronger if there were pincer patterns formed in recent trading sessions.

Pessimistic patterns (falling)

Pessimistic reversion patterns appear at the end of a bullish trend.

1.png Falling star . A pattern of 1 candle. The body of the candle is small. The upper shadow is long and exceeds the body in at least 2 times. The broad upper shadow implies that the market tried to find where resistance and support were located, but the upside was rejected by the (pessimistic) bears. The candle may have any color, but if it is bearish, the sign is stronger. 

 

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Night star . A pattern of 3 candles. After a long optimistic candle, there is an optimistic gap up. The bulls are in control, but they do not get much. The second candle is quite small and its color is not important. The third pessimistic candle opens with a gap down and fills the previous optimistic gap. This candle is often longer than the first.

3.png Night star doji . A pattern of 3 candles. The pattern is similar to the night star, but is considered a stronger signal because the middle candle is doji.
4.gif Hangman. A pattern of 1 candle. It can signal the end of a bullish trend, a bullish or a support level. The candle has a long lower shade, which should be at least twice the length of the actual body. The candle may have any color, but if it is bearish, the sign is stronger. Requires more bearish confirmation. The sell signal is confirmed when a bearish candle closes below the candle opening on the left side of this pattern.  
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Dark cloud cover . A pattern of 2 candles. The first candle is bullish and has a long body. The second candle should open significantly above the closure of the first candle and close below 50% of the body of the first candle. Your body should also be very long.

6.png Bearish engulfing pattern . A pattern of 3 candles. The first candle is bullish. The second candle is bearish and should open higher than the height of the first candle and should close above the first low (swallow it completely). Moderately strong signal.
77.gif Harami bearish . A pattern of 2 candles. The body of the second candle is completely contained in the body of the first candle and has the opposite color.
88.gif Bearish harami cross . A pattern of 2 candles similar to Harami. The difference is that the last day is a Doji.
9.gif Three black crows . A pattern of 3 candles. There are a series of 3 bullish candles with long bodies. Each candle opens inside the body of the first, better below its middle. Each candle closes to a new low, near its minimum. The reliability of this pattern is very high, but it is still suggested a confirmation in the form of a bearish candle holder with a smaller closure or a gap-down.

Optimistic patterns (bullish, bullish)

Optimistic reversal patterns appear at the end of a bullish trend.

1.png Hammer . A pattern of a candle. It can signal the end of a bearish trend, a background or a support level. The candle has a long lower shade, which should be at least twice the length of the actual body. The color of the hammer does not matter. However, if it is bullish, the signal is stronger. Requires more bullish confirmation. The buy signal is confirmed when a candle closes above the opening price of the candlestick on the left side of the hammer.
2.png Morning star . A pattern of 3 candles. After a long pessimistic candle, there is a pessimistic loop down. The bulls are in control, but they do not get much. The second candle is quite small and its color is not important. The third pessimistic candle opens with a gap up and fills the previous pessimistic gap. This candle is often longer than the first.
3.png Morning star doji . A pattern of 3 candles. Almost the same as the previous, but some traders consider it as a stronger signal.
4.gif Inverted hammer . A pattern of 1 candle. The candle has a small body and a long upper shade, which is at least 2 times longer than the actual body. The color of the hammer does not matter. However, if it is bullish, the signal is stronger. Requires more bullish confirmation   
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Drilling line . A pattern of 2 candles. The first candle is long and bearish. The second candle opens with a gap down, below the closing of the first. It is a large bullish candle that closes above 50% of the body of the first candle. The two bodies must be long enough. Moderately strong signal.

 

Harami bullish. A pattern of 2 candles. The body of the second candle is completely contained within the body of the first candle and has the opposite color.
Cross harami bullish . A pattern of 2 candles similar to Harami. The difference is that the last day is a Doji.
7.png Bullish engulfing pattern . A pattern of 2 candles appears at the end of the fall trend. The second candle (bullish) should open lower than the lower one of the first candle and should close above the first candle (swallow it completely). Moderately strong signal.
8.gif Three white soldiers . A pattern of 3 candles. There are a series of 3 bullish candles with long bodies. Each candle should open inside the anterior body, better above its middle. Each candle closes in a new high, close to its maximum. The reliability of this pattern is very high, but confirmation is suggested in the form of a white candle with a higher closure or gap up.  

Continuation Patterns

Most candlestick patterns are reversal, but there are certain trends that represent rest times. Patterns of continuation suggest that the market will maintain an existing trend after a pause. These standards are useful for identifying possible entry points, providing evidence to keep positions already open or to add to them.

Continuation of a bullish trend

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Lacuna Tasuki up . A bullish candle forms after a gap upward from the previous white candle. The next candle opens below and closes below the previous candle. If the gap is not met, the bulls have maintained control and can open long positions. If the gap was filled, the breath of the bulls came to an end.

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Three growing methods. After a long white candle there are a number of small bearish candles. The optimal number of pull-back candles should be 3, although 2, 4 or 5 pull-back candles can also be observed. It is important that these bearish candles do not close below the opening of the large bullish candle. Their shadows should also not go below the opening of the bullish candle. The final formation candle should open on the body of the last pull-back candle and close above the first large white candle.

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Lines of separation. There is a long bearish candle followed by a bullish candle that opened on the same level as the opening of the bearish candle.

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Mat hold . After a large white candle, there is an upward gap followed by a series of small bearish candles. The second or third of them plunges into the body of the wide bullish candle. The final candle of this pattern presents upward gap and continues its upward movement to close above the trading range of any of the previous days. This is a good point to add positions. The Mat hold candlestick pattern is a stronger continuation pattern than the Three Crescent methods. During correction days, unlike the Three Crescent methods, the price is close to the top of the upper range of the white (or green) candle.

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Three Lines Strike (the three deceptive soldiers). After the 3 bullish candles (3 white soldiers), which indicate that the bullish trend continues, there is a candle opening higher, but then back to close below the opening of the first bullish candle. The short-term pullback sentiment is out of the game and the bullish trend continues from that point on.

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Upside Gap Three Method . Similar to the Tasuki gap up. The pattern occurs in a market with strong trends. In a bullish trend, the gap happens between 2 bullish candles. The final day opens inside the highest bullish body and closes in the lower bullish body, filling the gap between them.

Continued downward trend

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Lacuna Tasuki down. A black candle forms after a gap down from the previous black candle. The next candle opens higher and closes higher than the previous candle. If the gap is not filled, the bears have kept control and can open short positions. If the gap was filled, the bears’ breath came to an end.

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Line on neck. The first bearish candle opens with a gap down and has a long body. The second candle is bullish and reaches only the low of the previous day, not its closing level.

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Line in neck. The pattern is similar to the On neck line pattern, with the difference that it closes at the closing level or only slightly above the previous day’s close. The In Neck line indicates some short covering, but not a change in trend direction. 

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Push. This pattern resembles the On neck and In neck patterns, however here the bullish candle closes close but slightly below the midpoint of the black body of the previous day.

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Three Falls Method . After a long bearish candle, there are a series of 2-5 small bullish candles. It is important that these bullish candles do not close above the opening of the large bearish candle. Their shadows should also not exceed the opening of the bearish candle. The final formation candle should open on the body of the last bullish candle and close below the close of the first large black candle.


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