Top 10 Candlestick Patterns for Traders to Master the Market

In a bullish Kicker, the first candlestick is bearish, followed by a bullish candle. This abrupt change highlights a significant shift from selling to buying pressure. Candlestick patterns are key instruments for analysing market conditions and making informed trading decisions. However, traders should remember that candlestick formations don’t provide specific entry and take-profit points. For profit targets, traders commonly use the nearest support/resistance levels and the most significant swing points. It is the exact opposite of the falling three, which is considered a bearish trend continual indicator.

The opposite is true for the bullish pattern, called the ‘rising three methods’ candlestick pattern. It is comprised of three short red candles sandwiched within the range of two long green candles. The pattern shows traders that, despite some selling pressure, buyers are retaining control of the market. If a candlestick pattern doesn’t indicate a change in market direction, it is what is known as a continuation pattern. These can help traders to identify a period of rest in the market, when there is market indecision or neutral price movement.

Top 5 Bullish Candlestick Patterns

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The second candle is a bearish candle that completely overwhelms the previous bullish candle. A Standard Doji forms when the open and close prices are almost equal, resulting in a small body. This pattern indicates a balance between buyers and sellers, suggesting market indecision. It often appears after significant price movements, signalling a potential reversal or pause in the current trend. However, there are those that signal a potential trend continuation or may provide both reversal and continuation signs, so traders should analyse market conditions carefully.

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This suggests that the bears have been unable to maintain their dominance, and the bulls are now taking control of the market. The pattern consists of two or more candles with equal or identical lows forming a horizontal support level. This candlestick pattern is typically formed at the bottom of the price chart and signals a potential shift of momentum from bearish to bullish side.

Bullish Candlestick Patterns

The three white soldiers pattern is a bullish reversal pattern consisting of three green candlesticks with small shadows. This pattern is more reliable when it forms in a downtrend that has been developing for a longer period of time. The image illustrates the Three Black Crows pattern, which consists of three consecutive long bearish candles, each closing lower than the previous one. This pattern emerges after an uptrend, signaling a strong shift from bullish to bearish sentiment.

The Inverted Hammer is valued for signalling a possible change in market sentiment from bearish to bullish and is related to the regular Hammer pattern. Traders look for confirmation with a subsequent bullish candlestick before considering it a valid reversal. A common risk management strategy is to place a stop loss below the Hammer’s low. Similar to the engulfing pattern, the Piercing Line is a two-candle bullish reversal pattern, also occurring in downtrends.

1. Here, in this video about candlestick patterns, our expert Shivam Gaba explains how to scan candlesticks using Strike.
2. This sequence suggests a weakening of the downtrend and increasing buying interest.
3. The three black crows pattern is a bearish reversal pattern that is more accurate when it forms at the end of an uptrend.
4. Conversely, a short upper shadow may imply that buyers remained dominant throughout the session, indicating a strong bullish sentiment.
5. These patterns can suggest a potential trend reversal, continuation of a downtrend, or the formation of a resistance level.
6. The trend reversals indicated by the three inside up and down often do not lead to a significant trend reversal.

A bearish harami pattern results from a small body (Red) candle developing after a larger body (Green). Usually showing a possible bearish trend reversal, this pattern appears at the top of the price chart. This pattern is significant for traders as it suggests a clear, strong momentum in the direction of the candle, signalling either the continuation or a reversal of the trend. Traders often look for confirmation with a subsequent bearish candle and may place a stop loss above the high of the Shooting Star. The formation is significant because it highlights increased selling interest at higher prices, suggesting a potential reversal to the downside. Traders often view the close of the fifth candlestick as confirmation of the reversal and may place a stop loss below the low of the fourth candle.

1. The image above shows a tristar pattern formed of three consecutively appearing doji candlesticks.
2. The psychology behind the Mat Hold pattern reflects a brief period of consolidation or indecision in the market, where the opposing force attempts to reverse the trend but fails.
3. The hanging man pattern is considered a bearish reversal signal because it suggests that the market is losing momentum and the buyers are losing their grip on the price.
4. The image above represents the bullish abandoned baby pattern with gaps between the candlestick.
5. The second candle is a doji, which indicates both buyer weakness and the indecision of the market players.
6. It signifies a peak or slowdown of price movement, and is a sign of an impending market downturn.

This pattern indicates consolidation and a decrease in volatility, often signalling a potential breakout in either direction. It reflects a period of indecision or equilibrium between buyers and sellers. Traders look for signs of reversal after the third gap, such as a bearish candle. A stop loss is typically placed above the highest point of the pattern to potentially manage risk.

The Three Gaps pattern is valuable as it highlights market exuberance that could precede a downturn. Traders look for confirmation with a subsequent bearish candle and may place a stop loss above the Hanging Man’s high to potentially manage risk. The Hanging Man is significant because it marks the point where selling interest starts to outweigh buying interest. The Dark Cloud Cover is significant because it reveals a substantial change in market sentiment. Traders often view the Bearish Harami as an early sign of a trend reversal, with confirmation coming from subsequent bearish movement.

The absence of significant wicks on these candles indicates that each session’s closing price was near the day’s high, underscoring the strength of the bullish momentum. The three white soldiers most powerful candlestick patterns pattern is even more reliable when it forms near a key support level or when confirmed by rising volume, suggesting a strong, sustained reversal. However, traders should also be cautious of potential overbought conditions if the pattern is accompanied by an exceptionally sharp price increase. The 3-candle rule is a trading strategy that uses candlestick patterns to identify potential entry and exit points. Traders look for a sequence of 3 candles where the first candle moves in one direction, the second candle reverses, and the third candle confirms the reversal.