Candlestick patterns are the language of price action — small shapes that reveal the battle between buyers and sellers. There are dozens, but you don't need all of them. This cheat sheet covers 12 essential patterns every trader should recognise, organised by what they signal. Bookmark it as your quick reference.
First, how to read a candle
Every candlestick shows four prices for its time period: open, high, low and close. The body is the range between open and close; the shadows (wicks) show the extremes. A green (or white) body means price closed higher than it opened; a red (or black) body means it closed lower. (For the fundamentals, see candlestick basics.)
Everything below is just the body and shadows telling a story.
Indecision patterns
1. Doji. Open and close are nearly equal — a tiny body. Neither side won. It signals indecision and can hint at a turning point after a strong move. (See what is a doji.)
2. Harami. A large candle followed by a small opposite-colour candle sitting inside it. Signals hesitation and a possible loss of momentum. A doji version is a "harami cross." (See harami pattern.)
Single-candle reversals
3. Hammer. A small body with a long lower shadow, after a downtrend. Buyers rejected lower prices — a possible bottom. (See hammer pattern.)
4. Hanging man. The same shape as a hammer, but after an uptrend. Here the long lower shadow warns of a possible top. (See hanging man.)
5. Shooting star. A small body with a long upper shadow, after an uptrend. Buyers pushed up but sellers slammed price back down — a top warning. (See shooting star.)
Two-candle reversals
6. Bullish engulfing. After a downtrend, a big green candle completely swallows the prior red one. Buyers take control. (See bullish engulfing.)
7. Bearish engulfing. After an uptrend, a big red candle swallows the prior green one. Sellers take control. (See bearish engulfing.)
8. Piercing pattern. After a downtrend, a candle closes above the midpoint of the previous red candle. Bullish. (See dark cloud and piercing.)
9. Dark cloud cover. After an uptrend, a candle opens at a new high then closes below the midpoint of the previous green candle. Bearish — the mirror of piercing.
Three-candle reversals
10. Morning star. After a downtrend: a long red candle, a small hesitation candle, then a long green candle. A bottom reversal. (See morning star.)
11. Evening star. After an uptrend: a long green candle, a small hesitation candle, then a long red candle. A top reversal. (See evening star.)
12. Doji star. A doji gapping away from the prior candle, often the middle of a morning or evening star. Deep indecision that strengthens a reversal signal.
The rules that apply to all 12
No matter which pattern you spot, the same discipline turns a shape into a tradeable signal:
- Context is half the pattern. The exact same shape can mean opposite things depending on the trend (hammer vs hanging man). Always read the trend first.
- Location matters. Patterns mean most at support and resistance — where the market is likely to react anyway.
- Wait for confirmation. Most patterns need the next candle to confirm the new direction before you act.
- Size matters. A large, decisive candle carries a stronger signal than a small, weak one.
Warning
No candlestick pattern is a guarantee. Each one shifts the odds, not the outcome. Trading a pattern without confirmation or context is how beginners lose money on "textbook" setups.
Reversal vs continuation
Most of the patterns above are reversal signals — they warn a trend may turn. Candlesticks can also confirm continuation, especially when they align with chart patterns like flags, pennants and triangles. The key is never to read a candle in isolation.
Risk
Candlestick patterns improve your odds; they don't remove risk. Confirm every signal, respect the trend, and protect each trade with a stop loss.
A quick reference table
Here's the whole cheat sheet at a glance, grouped by what each pattern signals:
- Indecision: Doji, Harami, Doji star — a pause or hesitation; watch for what follows.
- Bullish reversals (after a downtrend): Hammer, Bullish engulfing, Piercing pattern, Morning star.
- Bearish reversals (after an uptrend): Hanging man, Shooting star, Bearish engulfing, Dark cloud cover, Evening star.
Notice the symmetry: almost every bullish pattern has a bearish mirror. Hammer mirrors hanging man; morning star mirrors evening star; piercing mirrors dark cloud cover; bullish engulfing mirrors bearish engulfing. Learning them in pairs roughly halves the effort — understand one side and the opposite falls into place.
Common mistakes with candlestick patterns
Even traders who memorise all 12 fall into the same traps. Avoid these:
- Trading the shape, ignoring the trend. A hammer at the top of a rally isn't a hammer at all — context defines the pattern.
- Skipping confirmation. Acting on the pattern candle itself, before the next candle confirms, turns a good signal into a coin flip.
- Forcing patterns onto noise. In a choppy, rangebound market, "patterns" appear everywhere and mean almost nothing. They matter most at clear levels within a clear trend.
- Ignoring the timeframe. A pattern on a 1-minute chart carries far less weight than the same pattern on a daily chart. Higher timeframes produce more reliable signals.
Start with five, then grow
If 12 feels like a lot, start with the five must-know patterns — doji, hammer, engulfing, stars and shooting star — and add the rest as your eye sharpens. Trying to spot all 12 at once is how beginners get overwhelmed; mastering a few and using them well beats half-knowing all of them.
Practise reading candles live
Recognising these patterns quickly comes only with screen time. A regulated broker with a free demo lets you spot all 12 on live charts before risking real money.
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