Essential Candlestick Patterns Every Trader Must Know

Candlestick patterns have been used for centuries to predict price movements. Originating from Japanese rice traders in the 1700s, these patterns remain incredibly relevant in modern trading.

Anatomy of a Candlestick

Before diving into patterns, understand the components:

Single Candlestick Patterns

Doji

A candle where open and close are nearly equal, showing indecision:

Hammer and Hanging Man

Both have small bodies and long lower wicks:

Shooting Star and Inverted Hammer

Both have small bodies and long upper wicks:

Double Candlestick Patterns

Engulfing Patterns

When the second candle completely engulfs the first:

Tweezer Tops and Bottoms

Two candles with matching highs (top) or lows (bottom):

Triple Candlestick Patterns

Morning Star and Evening Star

Three-candle reversal patterns:

Morning Star (Bullish):

Evening Star (Bearish):

Three White Soldiers / Three Black Crows

Three consecutive strong candles:

Trading with Candlestick Patterns

Confirmation is Key

Never trade a pattern in isolation:

Entry and Exit Rules

Pattern Reliability Rankings

High Reliability:

Medium Reliability:

Lower Reliability (need confirmation):

Conclusion

Candlestick patterns provide valuable insights into market psychology. Combine them with trend analysis, volume, and indicators like SimpleAlgo for the highest probability trades.