If you have ever opened a trading app and wondered why the chart looks like a row of colourful rectangles with little sticks poking out — those are candlesticks, and they are one of the most useful tools in a trader’s toolkit. Each one packs four pieces of price information into a single visual shape, and certain patterns can signal that a price move is about to happen.
This guide explains the most important candlestick patterns for beginners in plain English, so you can start recognising them on any chart.
Key Takeaways
A candlestick is a chart element that displays four price points for a single time period — whether that is one minute, one day, or one week:
The rectangular body of the candle spans from open to close. The thin lines extending above and below the body are called wicks (or shadows) and they show the high and low. If you need a refresher on chart basics first, our guide on how to read a stock chart is a great starting point.
The colour of the candle body tells you immediately whether buyers or sellers were in control during that period:
At a glance, a chart full of green candles suggests upward momentum; a chart full of red candles suggests downward pressure.
Some important signals come from just one candlestick:
A doji forms when the open and close prices are almost identical, leaving a very thin or non-existent body. It signals indecision — neither buyers nor sellers could gain control. A doji after a long uptrend or downtrend can suggest the current move is losing steam.
A hammer has a small body near the top of the candle with a long lower wick — at least twice the size of the body. It appears after a downtrend and suggests that sellers initially pushed the price down, but buyers stepped in strongly and pushed it back up. This is a potential bullish reversal signal.
The shooting star is the hammer flipped upside down — a small body near the bottom with a long upper wick. It appears after an uptrend and signals that buyers pushed the price up during the period, but sellers overwhelmed them and pushed it back down. This is a potential bearish reversal signal.
A marubozu is a candle with a large body and almost no wicks. A green marubozu means buyers were in complete control from open to close — strong bullish momentum. A red marubozu signals strong bearish momentum.
This pattern consists of two candles: a small bearish (red) candle followed by a larger bullish (green) candle whose body completely “engulfs” the previous one. It signals that buyers have overtaken sellers and a reversal to the upside may be beginning.
The opposite: a small bullish candle followed by a larger bearish candle that engulfs it. This appears after an uptrend and suggests sellers have taken control — a potential reversal to the downside.
The morning star is a three-candle bullish reversal pattern that appears after a downtrend:
It signals that selling pressure has exhausted itself and buyers are returning.
The evening star is the bearish version: a large bullish candle, a small indecisive candle, then a large bearish candle closing below the midpoint of the first. It signals a potential end to an uptrend.
Three white soldiers: Three consecutive bullish candles, each opening within the previous candle’s body and closing higher — a strong continuation signal in an uptrend. Three black crows: The bearish equivalent — three consecutive bearish candles, each closing lower than the last.
Candlestick patterns are clues, not guarantees. Here are a few principles to keep in mind:
The best way to build confidence with candlestick patterns is to practise reading charts in a no-pressure environment. The Wall St. 101 simulator lets you do exactly that — trade real-time markets with virtual money until the patterns start to feel familiar.
No pattern is 100% reliable. Candlestick patterns are probability tools — they increase the likelihood of a certain outcome based on historical data, but they never guarantee it. Always use them alongside other analysis.
The hammer and bullish/bearish engulfing patterns are widely regarded as good starting points because they are easy to identify and commonly appear on charts.
Yes. Candlestick patterns were developed for stock markets but apply to any market where price data can be plotted on a chart, including crypto and forex.
