The

Secretsof

Candlestick Patterns
Every trader must know
Table of Contents

What are Candlestick Patterns?...................................................1 Top 12 Candlestick

Patterns..........................................................2 Bullish Engulfing................................................................................3
Hammer Pattern.................................................................................4 Inverted
Hammer...............................................................................5 Piercing
pattern..................................................................................6 Morning
Star........................................................................................7 Dragonfly
Doji.....................................................................................8 Bearish
Engulfing...............................................................................9

Shooting Star.....................................................................................10 Hanging

Man......................................................................................11 Dark Cloud
Cover............................................................................12 Evening
Star.......................................................................................13 Gravestone
Doji................................................................................14 My Best Six Candlestick
Patterns............................................15 How to trade Bullish Engulfing?...............................................16 How to trade
Hammer?................................................................17 How to trade Bearish Engulfing?.............................................18
How to trade Shooting Star?......................................................19
Conclusion.........................................................................................20

What are Candlestick Patterns?

Candlestick patterns are an important technical tool for analyzing market movements. Each candlestick represents a
specific period, depending on the time frame chosen by the trader. Candlestick charts are believed to have been
developed in the 18th century by Japanese rice trader Munehisa Homma. Steve Nissen brought candlestick patterns
to the Western world in his 1991 bestseller "Japanese Candlestick Charting Techniques".
The area between the opening and closing prices is called the real body, and the price fluctuations above and below
the real body are called shadows (also known as legs or wicks). Wicks shows the highest and lowest trading prices
of assets within the represented time interval. A candle is called a bullish candle if the closing price is higher than its
opening price, similarly if the closing price is lower than its opening price, the candle is called a bearish candle

There are various candlestick patterns that can be used to predict the future direction of the market, but only a few
are actually worth knowing about. Including bullish and bearish engulfing, hammer, inverted hammer, shooting star,
hanging man doji, etc. Here are the top 12 candlestick patterns every trader must know.

Top 12 Candlestick Patterns

First, we will discuss the top 6 bullish candlestick patterns, and then we will discuss the bearish candlestick patterns.

Top 6 Most Powerful Bullish Candlestick Patterns

1. Bullish Engulfing

A bullish engulfing candlestick pattern is a bullish reversal pattern usually found at the end of a downtrend. It
consists of two candlesticks, the first is red and the second is green. The size of the red candlestick is not important,
but it should not be a doji that is relatively easy to engulf. The green candle must completely engulf the body of the
first red candlestick.

This pattern can convert a downtrend to an uptrend, but all bullish engulfing patterns cannot convert a downtrend to
an uptrend. Only a 100% perfect bullish engulfing pattern can turn a downtrend into an uptrend.

Here are the 3 points that determine a 100% perfect bullish engulfing

1. Both candles should be average.

2. Green candle should be between 120% and 200% compared to red.
3. There must be an upper and lower shadow on the both sides of the green candle.

These three points are important to identify a 100% perfect bullish engulfing candlestick pattern. For best results, we
should only use this pattern when a bullish engulfing is formed after at least three or more red candles.

2. Hammer Pattern

The Hammer candlestick pattern is a bullish reversal candlestick pattern. It consists of a short body and a longer
lower shadow that looks like a real hammer, because its lower wick is longer and shorter body at the top of the
candlestick, and the lower shadow must be at least twice its actual body.
This pattern can convert a downtrend to an uptrend, but all Hammer candlestick patterns cannot convert a downtrend
to an uptrend. Only a 100% perfect Hammer pattern can turn a downtrend into an uptrend.

Let's look at the conditions for the formation of a 100% perfect hammer candlestick pattern.

No. 1: There should be a small green square body with a longer lower leg. The lower leg must be between 3 and 5
times the height of the real body. No. 2: For better results it is necessary to have a small upper leg as shown in the
picture.
No. 3: The hammer must form in the support or oversold area.

These three points are very important to identify a 100% perfect Hammer candlestick pattern. For best results, we
should only use this pattern when a Hammer is formed after at least two or more red candles.

3. Inverse Hammer

The Inverted Hammer looks like an inverted version of a Hammer candlestick. It also occurs at the bottom of a
downtrend and can be used as a warning of a potential bullish reversal pattern. For better results, the body of the
inverted hammer should be a square with a very small lower shadow and longer upper shadow.
Here are the 3 points that determine a 100% perfect Inverted Hammer
No. 1: There should be a small green square body with a longer upper leg. The upper leg must be between 3 and 5
times the actual body height. No. 2: For better results it is necessary to have a small lower leg as shown in the
picture.
No. 3: The Inverted Hammer must be formed in the support or oversold area.

These three points are very important to identify a 100% perfect Inverted Hammer candlestick pattern. For best
results, we should only use this pattern when the Inverse Hammer is formed after at least two or more red candles.

4. Piercing pattern

The Piercing candlestick pattern is a bullish reversal candlestick pattern consisting of two candlesticks that mark a
potential short-term reversal from a downtrend to an uptrend, but all Piercing patterns can not convert a downtrend
to an uptrend. Only a 100% perfect Piercing pattern can turn a downtrend into an uptrend.

The first candle of the Piercing pattern is a bearish, opening near the high and closing near the low. The first candle
must be a medium or large real body, but not very large, the second candle is bullish, open near the low and close
near the high, and must close above the middle of the first candle's body.

It looks similar to the Bullish Engulfing, the only difference is that the Bullish Engulfing closes above the previous
day's candle, while the piercing pattern closes below the previous candle's open.

Let's look at the conditions for a 100% perfect piercing candlestick pattern.

No. 1: The first candle of the Piercing pattern should be a strong bearish red No. 2: The second candle should open
lower than the previous close. No. 3: The second candle should cross more than 50% of the body of the previous
candle.
No. 4: Both candles should be average or large, but not too large or too small No. 5: This pattern must be formed at
the support or over bought areas.

These five points are very important for determining a 100% perfect Piercing candlestick pattern. For best results,
we should only use this pattern when it

5. Morning Star

The Morning Star candlestick pattern is a bullish reversal candlestick pattern, consisting of three candlesticks with a
star in the middle, which signals a potential short-term reversal from a downtrend to an uptrend.

The first candle must be a medium or large real body, but not very large, second candle is a short bullish or bearish
doji, or a small body candlestick, the third candle is the bullish, opening near the low and closing near the high, and
must close above the middle of the real body of the first candle.

Let's look at the conditions for a 100% perfect Morning Star candlestick pattern.

No. 1: The first candle of the Morning Star pattern should be a strong bearish red candle.
No. 2: The second candle is a short bullish or bearish doji or a small body candlestick that should open with a gap
down.
No. 3: The third day is the bullish open with gap up and it must close above the middle of the first candle.
No. 4: This pattern must form in the support or oversold area.

These four points are very important in determining a 100% perfect Morning Star candlestick pattern. For best
results, we should only use this pattern when it

6. Dragonfly Doji

The Dragonfly Doji candlestick pattern is a bullish reversal candlestick pattern that looks like a Hammer because it
has a longer lower wick and a very short body at the top of the candlestick. The only difference is that the hammer
has a square body, while the dragonfly doji has no body or a very small short body.
The opening price, low price and closing price are all close to each other, so it creates a "T" pattern. There is a long
lower shadow, indicating a bullish reversal signal, which converts a down trend into an up trend, but all Dragonfly
doji cannot convert a down trend into an upward trend. Only a 100% perfect Dragonfly doji pattern can turn a down
trend into an up trend.

Let's take a look at the conditions that form a 100% perfect Dragonfly Doji candlestick pattern.

No. 1: The opening and closing prices should be the same.

No. 2: There should be a longer lower leg like a hammer candlestick. No. 3: The opening & closing price should be
near the top of the candle

These three points are very important in determining a 100% perfect Dragonfly Doji candlestick pattern. For best
results, we should only use this pattern when the Dragonfly Doji is formed after at least three or more red candles.

Top 6 Most Powerful Bearish Candlestick Patterns

1. Bearish Engulfing

A bearish engulfing candlestick pattern is a bearish reversal pattern usually found at the end of an uptrend. It
consists of two candlesticks, the first is green and the second is red. The size of the green candlestick doesn't matter,
but it should not be a doji that is relatively easy to engulf. The red candle must completely engulf the body of the
first green candlestick.
This pattern can convert an uptrend to a downtrend, but all Bearish Engulfing patterns can not convert an uptrend to
a downtrend. Only a 100% perfect Bearish Engulfing pattern can turn an uptrend to a downtrend.

Here are the 3 points that determine a 100% perfect bearish engulfing

1. Both candles should be average

2. Red candle should be between 120% and 200% compared to green
3. There must be an upper and lower shadow on the both sides of the red candle.

These three points are very important in identifying a 100% perfect Bearish Engulfing candlestick pattern. To get the
best results, we should only use this pattern when a Bearish Engulfing is formed after at least three or more green
candles.

2. Shooting Star

Shooting star is a bearish reversal candlestick pattern consist of a short body with a longer upper shadow. Usually,
you will find it at the top of an uptrend. This pattern indicates that the price has reached the top and is in a trend
reversal position. This looks like an inverted hammer candlestick.
This pattern can convert an uptrend to a downtrend but all Shooting star candlestick patterns can not convert an
uptrend to a downtrend. Only a 100% perfect Shooting star pattern can turn an uptrend to a downtrend.

Let's look at the conditions for a 100% perfect Shooting star candlestick pattern.

No. 1: There should be a small red square body with a longer upper leg. The upper leg must be between 3 and 5
times the height of the real body. No. 2: For better results it is necessary to have a small lower leg as shown in the
picture.
No. 3: The shooting star must form in the resistance or overbought area.

These three points are very important to identify a 100% perfect Shooting Star candlestick pattern. For best results,
we should only use this pattern when Shooting Stars form after at least three or more green candles.

3. Hanging Man

The Hanging Man pattern is the same as the Hammer, but it forms at the top of an uptrend and it looks like an
inverted version of the Shooting Star. It is formed by a green or red candlestick with a short body and a long lower
shadow. It appears at the end of an uptrend. This indicates that the price has reached the top and is in a trend reversal
position.
Here are the 3 points that determine a 100% perfect Hanging Man candlestick pattern
No. 1: There should be a small red square body with a longer lower leg. The lower leg must be between 3 and 5
times the height of the real body.
No. 2: For better results it is necessary to have a small lower leg as shown in the picture.
Point 3: The Hanging Man must form in the resistance or overbought zone or after three or more green candles.

These three points are very important in determining a 100% perfect Hanging Man candlestick pattern. For best
results, we should only use this pattern when a Hanging Man is formed after at least three or more green candles.

4. Dark Cloud Cover

The Dark Cloud Cover candlestick pattern is a bearish reversal candlestick pattern consisting of two candlesticks
that mark a potential short-term reversal from an uptrend to a downtrend.

The first candle must be a medium or large real body, but not very large, the second candle is the bearish, open near
the high and close near the low, or must close below the middle of the first candle's body.

It looks similar to the Bearish Engulfing, but the different is that the bearish Engulfing closes below the previous
day's candle, while the Dark Cloud Cover pattern closes above the opening price of the previous candle.

Let's look at the conditions for a 100% perfect dark cloud cover candlestick pattern.

No. 1: The first candle of the Dark Cloud Cover pattern should be a strong bullish green candle.
No. 2: The second candle should open higher than the previous close. No. 3: The second candle should cross more
than a 50% of the body of the previous candle.
No. 4: Both candles should be average or large, but not too big or too small No. 5: This pattern must form in the
resistance or overbought area.

These five points are very important for determining a 100% perfect Dark Cloud Cover candlestick pattern.

5. Evening Star
The Evening Star candlestick pattern is a bearish reversal candlestick pattern that consists of three candlesticks. The
first candle of the Evening Star pattern is a bullish, opening near the low and closing near the high. The first candle
must be a medium or large green body, but not very large. The second candle is a short bearish or bullish doji, or a
small body candlestick, and the third candle is the bearish, opening near the high and closing near the low, and must
close below the middle of the real body of the first candle.

When a Evening Star candlestick pattern appears at the top of an up trend, this can be an indication that a reversal
trend is going to take place. Therefore most traders sell securities and profit from the trade. They can only make
money when the pattern becomes 100% perfect.

Let's look at the conditions for a 100% perfect Evening Star Candlestick pattern.

No. 1: The first candle of the Evening Star pattern should be strong bullish green candle.
No. 2: The second candle is a short bearish or bullish doji, or a small body candlestick that should open up with a
gap.
No. 3: The third day is the bearish open with gap down, and it must close below the middle of the first candle.
No. 4: This pattern must form in the resistance or overbought areas.

These four points are very important in determining a 100% perfect Evening Star candlestick pattern.

6. Gravestone Doji

The Gravestone Doji candlestick pattern is a bearish reversal candlestick pattern that looks like a Shooting Star
because it has a longer upper wick and a very short body at the bottom of the candlestick. The only difference is that
Shooting Star has a small body, while Gravestone Doji has no body, or a very small body.
The Gravestone Doji pattern doesn't appear often, but when it does, it's a warning sign that the trend may change
direction. The opening price, low price and closing price are all close to each other, and there is a long upper
shadow, indicating a bearish reversal signal which converts an up trend into a down trend.

Let's look at the conditions for a 100% perfect Gravestone Doji candlestick pattern.

No. 1: The opening and closing prices should be the same.

No. 2: There should be a longer upper leg
No. 3: The opening & closing price should be near the bottom of the candle

These three points are very important in determining a 100% perfect Gravestone Doji candlestick pattern. For best
results, we should only use this pattern when a gravestone doji is formed after at least three or more green candles.

My Best Six Candlestick Patterns

In my own trading, I only use 6 candlestick patterns, three (Bullish Engulfing, Hammer and Inverted Hammer) as
buy signals and three (Bearish Engulfing, Shooting Star and Hanged Man) as sell signals.

For Buy Signals

No.1

No.2
 No.3
For Sell Signals

No.1
 No.2

No.3

How to trade Bullish Engulfing?

There are many different ways to trade the Bullish Engulfing; however, you should only use this pattern as a buy
signal if you see a Bullish Engulfing on a horizontal or break and retest support, trendline support, pivot points
support, Bollinger band support, or moving Average support.

A break and retest will be the best for beginners, you can use the 7, 5, 3 period zigzag indicator to find break and
retest signals. If the market is above the 50 period EMA then you should only search for buy signals. Below you can
see the perfect signal for a Bullish Engulfing at the break and retest of support.
You should only use a buy signal if the zig-zag breaks out and closes above the previous high and then returns to the
previous high for support.
The risk-reward ratio is important in managing a trader's profitability. You can use a risk-reward ratio of 1:2. A risk-
reward ratio of 1:2 means that if you win the trade, you win double the risk.

How to trade Hammer?

There are many different ways to trade the Hammer; however, you should only use this pattern as a buy signal if you
see a Hammer on a horizontal or break and retest support, trendline support, pivot points support, Bollinger band
support, or moving Average support.

If the market is above the 50 period EMA then you should only search for buy signals. Below you can see the
perfect signal for a Hammer at the break and retest of support.
You should only use a buy signal if the zig-zag breaks out and closes above the previous high and then returns to the
previous high for support.
How to trade Bearish Engulfing?

There are many different ways to trade the Bearish Engulfing; however, you should only use this pattern as a sell
signal if you see a Bearish Engulfing at a horizontal or break and retest resistance, trendline resistance, pivot points
resistance, Bollinger band resistance, or moving Average resistance.

If the market is below the 50 period EMA then you should only search for sell signals. Below you can see the
perfect signal for a Bearish Engulfing at the break and retest resistance.
You should only use a sell signal if the zig-zag breaks out and closes below the
How to trade Shooting Star?

There are many different ways to trade the Shooting Star; however, you should only use this pattern as a sell signal
if you see a Shooting Star at a horizontal or break and retest resistance, trendline resistance, pivot points resistance,
Bollinger band resistance, or moving Average resistance.

If the market is below the 50 period EMA then you should only search for sell signals. Below you can see the
perfect signal for a Shooting Star at the break and retest resistance.
You should only use a sell signal if the zig-zag breaks out and closes below the
Conclusion:

This information has been prepared by Bhuwan Bhandari and contains all the important information that traders
need to trade using candlestick patterns. This information comes from his 12 years of experience. Hope you have
learned all the technical terms from this eBook.

Once you know how to use these candlestick patterns, it will be easy to identify market movements, which is very
important for beginners to learn the basics of technical analysis using candlestick patterns. You can continue
learning about Forex trading through educational resources on the website and Easy Trading Tips' YouTube
channel.

www.easytradingtips.com