Candlestick pattern

In financial technical analysis, a candlestick pattern is a movement in prices shown graphically on a

candlestick chart that some believe can predict a particular market movement. The recognition of the pattern
is subjective and programs that are used for charting have to rely on predefined rules to match the pattern.
There are 42 recognised patterns that can be split into simple and complex patterns.[1]

Contents
History
Formation of candlestick
Simple patterns
Complex patterns
See also
Further reading
References
External links

History
Some of the earliest technical trading analysis was used to track prices of rice in the 18th century. Much of
the credit for candlestick charting goes to Munehisa Homma (1724–1803), a rice merchant from Sakata,
Japan who traded in the Ojima Rice market in Osaka during the Tokugawa Shogunate. According to Steve
Nison, however, candlestick charting came later, probably beginning after 1850.[2]

Formation of candlestick
Candlesticks are graphical representations of price movements for
a given period of time. They are commonly formed by the
opening, high, low, and closing prices of a financial instrument.[3]

If the opening price is above the closing price then a filled

(normally red or black) candlestick is drawn.

If the closing price is above the opening price, then normally a

green or hollow candlestick (white with black outline) is shown. The aspects of a candlestick pattern

The filled or hollow portion of the candle is known as the body or

real body, and can be long, normal, or short depending on its proportion to the lines above or below it.

The lines above and below, known as shadows, tails, or wicks, represent the high and low price ranges
within a specified time period. However, not all candlesticks have shadows.
Simple patterns
Big Black Candle Has an unusually
long black body with a wide range
between high and low. Prices open
near the high and close near the low.
Considered a bearish pattern.
Black Body Formed when the
opening price is higher than the
closing price. Considered to be a
bearish signal.
Doji Formed when opening and
closing prices are virtually the same.
The lengths of shadows can vary. If
previous are bearish, after a Doji,
may be ready to bullish.
Dragonfly Doji Formed when the
opening and the closing prices are
at the highest of the day. If it has a
longer lower shadow it signals a
more bullish trend. When appearing
at market bottoms it is considered to
be a reversal signal.
Hammer A black or white
candlestick that consists of a small
body near the high with little or no
upper shadow and a long lower tail.
Considered a bullish pattern during
a downtrend.
Inverted Hammer A black or white
candlestick in an upside-down
hammer position.
Big White Candle Has an
unusually long white body
with a wide range between
high and low of the day.
Prices open near the low
and close near the high.
Considered a bullish
pattern.
White Body Formed when
the closing price is higher
than the opening price and
considered a bullish signal.
Long-Legged Doji
Consists of a Doji with very
long upper and lower
shadows. Indicates strong
forces balanced in
opposition. If previous are
bullish, after long legged
doji, may be ready to
bearish.
Gravestone Doji Formed
when the opening and
closing prices are at the
lowest of the day. If it has a
longer upper shadow it
signals a bearish trend.
When it appears at market
top it is considered a
reversal signal.
Hanging Man A black or
white candlestick that
consists of a small body
near the high with little or no
upper shadow and a long
lower tail. The lower tail
should be two or three times
the height of the body.
Considered a bearish
pattern during an uptrend.
Shooting Star A black or
white candlestick that has a
small body, a long upper
shadow and little or no
lower tail. Considered a
bearish pattern in an
uptrend.

Long Upper Shadow A black or
white candlestick with an upper
shadow that has a length of 2/3 or
more of the total range of the
candlestick. Normally considered a
bearish signal when it appears
around price resistance levels.
Marubozu A long or normal
candlestick (black or white) with no
shadow or tail. The high and the low
represent the opening and the
closing prices. Considered a
continuation pattern.
Shaven Head A black or white
candlestick with no upper shadow.
[Compared with hammer.]
Complex patterns
Bearish Harami Consists of an
unusually large white body followed by
a small black body (contained within a
large white body). It is considered a
bearish pattern when preceded by an
uptrend.
Bearish 3-Method Formation A long
black body followed by three small
bodies (normally white) and a long
black body. The three white bodies are
contained within this jedi range of the
first black body. This is considered a
bearish continuation pattern.
Bullish Harami Consists of an
unusually large black body followed by
a small white body (contained within
large black body). It is considered a
bullish pattern when preceded by a
downtrend.
Long Lower Shadow A
black or white candlestick is
formed with a lower tail that
has a length of 2/3 or more
of the total range of the
candlestick. Normally
considered a bullish signal
when it appears around
price support levels.
Spinning Top A black or
white candlestick with a
small body. The size of
shadows can vary.
Interpreted as a neutral
pattern but gains
importance when it is part of
other formations.
Shaven Bottom A black or
white candlestick with no
lower tail. [Compare with
Inverted Hammer.]
Bearish Harami Cross A
large white body followed
by a Doji. Considered a
reversal signal when it
appears at the top.
Bullish 3-Method
Formation Consists of a
long white body followed
by three small bodies
(normally black) and a
long white body. The
three black bodies are
contained within the
range of first white body.
This is considered a
bullish continuation
pattern.
Bullish Harami Cross A
large black body followed
by a Doji. It is considered
a reversal signal when it
appears at the bottom.
 Engulfing Bearish Line
Dark Cloud Cover Consists of a long
Consists of a small white
white candlestick followed by a black
body that is contained
candlestick that opens above the high
within the following large
of the white candlestick and closes
black candlestick. When
well into the body of the white
it appears at the top it is
candlestick. It is considered a bearish
considered a major
reversal signal during an uptrend.
reversal signal.

Evening Doji Star

Consists of three
candlesticks. First is a
large white body
candlestick followed by a
Doji that gaps above the
white body. The third
Engulfing Bullish Consists of a small
candlestick is a black
black body that is contained within the
body that closes well into
following large white candlestick.
the white body. When it
When it appears at the bottom it is
appears at the top it is
interpreted as a major reversal signal.
considered a reversal
signal. It signals a more
bearish trend than the
evening star pattern
because of the Doji that
has appeared between
the two bodies.

Falling Window A
Evening Star Consists of a large white window (gap) is created
body candlestick followed by a small when the high of the
body candlestick (black or white) that second candlestick is
gaps above the previous. The third is a below the low of the
black body candlestick that closes well preceding candlestick. It
within the large white body. It is is considered that the
considered a reversal signal when it window should be filled
appears at the top level. with a probable
resistance.

Morning Doji Star Consists of a large Morning Star Consists of

black body candlestick followed by a a large black body
Doji that occurred below the preceding candlestick followed by a
candlestick. On the following day, a small body (black or
third white body candlestick is formed white) that occurs below
that closes well into the black body the large black body
candlestick which appeared before the candlestick. On the
Doji. It is considered a major reversal following day, a third
signal that is more bullish than the white body candlestick is
regular morning star pattern because of formed that closes well
the existence of the Doji. into the black body
candlestick. It is
considered a major

On Neckline In a downtrend, consists
of a black candlestick followed by a
small body white candlestick with its
close is near the low of the preceding
black candlestick. It is considered a
bearish pattern when the low of the
white candlestick is penetrated.
Three White Soldiers Consists of
three long white candlesticks with
consecutively higher closes. The
closing prices are near to or at their
highs. When it appears at the bottom it
is interpreted as a bottom reversal
signal.
Tweezer Tops Consists of two or more
candlesticks with matching tops. The
candlesticks may or may not be
consecutive and their sizes or colours
can vary. It is considered a minor
reversal signal that becomes more
important when the candlesticks form
another pattern.
Piercing Line Consists of a black
candlestick followed by a white
candlestick that opens lower than the
low of the preceding but closes more
than halfway into the black body
candlestick. It is considered a reversal
signal when it appears at the bottom.
Judas Candle Consists of a large
black candle followed by a smaller
white candle with a lower tail which is
equal to the black candle in length.
This is indicative of price capitulation.
reversal signal when it
appears at the bottom.
Three Black Crows
Consists of three long
black candlesticks with
consecutively lower
closes. The closing
prices are near to or at
their lows. When it
appears at the top it is
considered a top reversal
signal.
Tweezer Bottoms
Consists of two or more
candlesticks with
matching bottoms. The
candlesticks may or may
not be consecutive and
their sizes or colours can
vary. It is considered a
minor reversal signal that
becomes more important
when the candlesticks
form another pattern.
Doji Star Consists of a
black or white candlestick
followed by a Doji that
gaps above or below
these. It is considered a
reversal signal with
confirmation during the
next trading day.
Rising Window A
window (gap) is created
when the low of the
second candlestick is
above the high of the
preceding candlestick. It
is considered that the
window should provide
support to the selling
pressure.
Darth Maul The correct
term for this candle is a
"high wave spinning top",
a small candle body with
unusually large upper
and lower shadows,
 suggesting that the prior
trend has run into a
period of indecision. The
term "Darth Maul" comes
from Star Wars, as the
candle looks somewhat
like a lightsaber.

See also
The Island Reversal

Further reading
Lebeau, Charles (1991). Technical Traders Guide to Computer Analysis of the Futures
Markets (https://www.amazon.com/Technical-Traders-Computer-Analysis-Futures/dp/15562
34686/ref=sr_1_1?s=books&ie=UTF8&qid=1326806415&sr=1-1).

References
1. "16 candlestick patterns every trader should know" (https://www.ig.com/en/trading-strategies/
16-candlestick-patterns-every-trader-should-know-180615). Retrieved 4 July 2020.
2. "Introduction to Candlesticks" (http://stockcharts.com/school/doku.php?id=chart_school:chart
_analysis:introduction_to_candlesticks). StockCharts. Stockcharts.com. Retrieved 29 June
2016.
3. "patterns" (https://www.5paisa.com/school/candlestick-patterns). Retrieved 4 July 2020.

External links
Bulkowski's Stock Market Patterns On line, includes research, statistical validation, and
follow-on results. (http://thepatternsite.com/studies.html)
Understanding Candlestick Charts for Beginners (https://www.shortinfo.in/2020/07/what-is-c
andlestick-charting.html), Useful for small traders.

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