Candlestick Patterns Explained: The Patterns Worth Knowing

Where do candlestick patterns come from?

Candlestick charts grew out of Japan's rice markets. They are usually credited to Munehisa Homma (1724–1803), a rice merchant from Sakata who traded on the Dojima rice exchange in Osaka. The credit is shaky. Steve Nison, the analyst who brought candlesticks to Western traders, concluded from his research that the charts were more likely developed in the early Meiji period, in the late 1800s, decades after Homma's death. What does trace back to Homma is the focus on the emotions of the people trading, which is what every pattern below tries to read.

Nison's 1991 book, Japanese Candlestick Charting Techniques, introduced the method to the West, and most Western teaching of the patterns builds on it. Exact rules still vary from one textbook to the next, so treat the definitions below as the common core, not law.

If bodies, wicks and colors are new to you, start with how to read candlestick charts. For where patterns sit next to trends, levels and indicators, see technical analysis for beginners.

How to read this candlestick patterns guide

Every pattern below gets the same four checks, in this order. A pattern that looks right but sits in the wrong place, or never gets confirmed, is not a trade.

A few words come up again and again, so they are defined once here.

1. Looks like: the shape, and the move that has to come before it.
2. Says: what the shape shows about buyers and sellers in that period.
3. Confirm: what to wait for before acting.
4. Fails: the price that proves it wrong, which is where the stop goes, and the places where it means little.

Body

The thick part of a candle, from the open to the close. Green when the close is above the open, red when it is below.

Wick (shadow)

The thin lines above and below the body, marking the high and the low. A long wick shows prices that traded but were rejected.

Prior trend

The move before the pattern. A reversal pattern needs something to reverse: a hammer needs a decline before it, a shooting star needs a rise.

Confirmation

A later candle that closes in the pattern's direction, for example above a hammer's high. Waiting for it costs some price and filters out some failures.

Midpoint

Halfway between the open and the close of a candle's body. The piercing line, dark cloud cover and the star patterns are measured against it.

What are the bullish candlestick patterns?

Bullish patterns appear after a decline and show sellers losing control. The drawing at the top of this page shows four of them, each after a few falling candles: the hammer, the bullish engulfing, the morning star and the piercing line. The inverted hammer is the fifth, and it is not drawn.

• Hammer. Looks like: a small body near the top of the candle, a lower wick at least about twice the body, and little or no upper wick, after a decline. Says: sellers drove price well down and buyers took most of it back by the close. Confirm: a following candle closes above the hammer's high. Fails: on a close below the hammer's low, and it means little away from a level.
• Inverted hammer. Looks like: a small body near the bottom of the candle and a long upper wick, after a decline. Says: buyers tried to push higher and were pushed back, but sellers could not extend the decline either. It is weaker than a hammer. Confirm: a following candle closes above its body; stricter traders want a close above its high. Fails: on a close below its low.
• Bullish engulfing. Looks like: a small red candle, then a green candle whose body covers the whole red body. Only the bodies count, not the wicks. Says: buyers erased the previous period's selling and more. Confirm: the next candle closes above the green candle's close. Fails: on a close below the low of the two candles. On 5-minute charts a green candle swallowing a tiny red one is routine and says little.
• Piercing line. Looks like: a long red candle, then a green candle that opens below the red candle's low and closes above the midpoint of the red body, but not above its open (that would be an engulfing). Says: sellers got a lower open and buyers then won back more than half of the previous candle. Confirm: a following candle closes above the green candle's high. Fails: on a close below the pattern's low. The strict version needs a gap down, so it shows up mostly on daily charts; looser definitions accept an open below the red candle's close.
• Morning star. Looks like: three candles. A long red one, then a small-bodied candle lower down (the star; textbook versions want it to gap below the first body), then a long green candle that closes above the midpoint of the first red body. Says: selling ran dry in the middle candle and buyers took over in the third. Confirm: the third candle is the confirmation; careful traders still want the next candle to hold above the star. Fails: on a close below the star's low, which often means a wide stop.

What are the bearish candlestick patterns?

Bearish patterns are the mirror image: they appear after a rise and show buyers losing control. The drawing below shows four of them, each after a few rising candles: the shooting star, the bearish engulfing, the evening star and the dark cloud cover. The hanging man is not drawn, because it has exactly the hammer's shape from the top of the page; only the trend before it differs.

• Shooting star. Looks like: a small body near the bottom of the candle and a long upper wick, after a rise. Says: buyers pushed price well up and sellers drove it back down by the close. Confirm: a following candle closes below the shooting star's body; stricter traders want a close below its low. Fails: on a close above its high.
• Hanging man. Looks like: the hammer's shape, a small body on top and a long lower wick, but after a rise. Says: sellers managed a hard push down in the middle of an uptrend. It is an early warning, not a reversal. Confirm: a following candle closes below the hanging man's body. Fails: often. In a strong uptrend the next candle simply closes above its high and the trend carries on.
• Bearish engulfing. Looks like: a small green candle, then a red candle whose body covers the whole green body. Says: sellers erased the previous period's buying and more. Confirm: the next candle closes below the red candle's close. Fails: on a close above the high of the two candles.
• Dark cloud cover. Looks like: a long green candle, then a red candle that opens above the green candle's high and closes below the midpoint of the green body. Says: buyers got a higher open and sellers then took back more than half of the previous candle. Confirm: a following candle closes below the red candle's low. Fails: on a close above the pattern's high. Like the piercing line, the strict version needs a gap, so it is mostly a daily-chart pattern.
• Evening star. Looks like: a long green candle, a small-bodied candle higher up, then a long red candle that closes below the midpoint of the first green body. Says: buying ran dry in the middle candle and sellers took over in the third. Confirm: the third candle is the confirmation; the next candle should stay below the star. Fails: on a close above the star's high.

Doji and harami: what do indecision candles mean?

A doji is a candle whose open and close are equal or almost equal, so the body is a thin line: neither side won the period. The drawing below shows the four kinds you will see named. A plain doji has short wicks on both sides. A long-legged doji has long wicks on both sides: both sides pushed hard and neither held. A dragonfly doji opens and closes at the high after a long lower wick, so sellers pushed down and buyers brought price all the way back. A gravestone doji opens and closes at the low after a long upper wick, so buyers pushed up and lost it all.

A doji is neither bullish nor bearish. After a long run into a level, it can mean momentum is fading. In the middle of a range, or on a quiet 5-minute chart, it means almost nothing. The confirmation is the next close: above the doji's high for a long, below its low for a short. Trends often pause on a doji and then simply continue.

A harami is the two-candle cousin. A large candle is followed by a small one whose body sits inside the large body, usually in the opposite color. A bullish harami comes after a decline (a long red candle, then a small green one inside it), a bearish harami after a rise. When the small candle is a doji, it is called a harami cross. It says the big move got no follow-through. Confirm it with a close beyond the large candle in the new direction. It fails on a close beyond the other side, and often it is only a pause before the trend resumes.

Three white soldiers and three black crows

Three white soldiers are three long green candles in a row, after a decline or a quiet base. Each opens within the previous body and closes at or near its high. They show steady buying over three periods, not a single spike. Three black crows are the mirror after a rise: three long red candles, each opening within the previous body and closing at or near its low.

Where they fail is the entry. By the time the third candle closes, price has already traveled a long way, the stop under the first candle is far off, and price often pulls back before going further. After a long trend, three big candles in the same direction can mark exhaustion rather than strength.

Hypothetical: a stock bases at $40.00, then prints three green candles that close at $40.60, $41.20 and $41.80. Buying at $41.80 with a stop under the first candle at $39.90 risks $1.90 a share. Waiting for a pullback to $41.00, with a stop at $40.50 under the second candle, risks $0.50 for the same idea, though the pullback may never come. Missing a move costs nothing; the pullback trading strategy covers the patient version.

Why location matters more than the shape

The same pattern means a lot at one price and nothing at another. A hammer at support shows buyers defending a price other traders watch. The same hammer halfway between support and resistance only shows that price wiggled. Location also hands you the plan: the level tells you where the stop goes and where the target is.

A hypothetical that works. A stock has support at $48.00–$48.30 (yesterday's low) and resistance at $50.80–$51.00. A 15-minute candle dips to $47.90 and closes at $48.50, a hammer inside the support zone. The next candle closes at $48.80, above the hammer's high of $48.60. You buy at $48.80 with a stop at $47.80, under the wick and the zone, risking $1.00 a share. The target is the bottom of resistance at $50.80, $2.00 away: a 1:2 risk-reward ratio.

A hypothetical that fails. Same stock, same zone, another day. The hammer forms and confirms the same way, and you buy at $48.80. Two candles later sellers return and price trades through $47.80. The stop fills there, or a little lower in a fast market: a loss of about $1.00 a share. If you sized the trade to risk $100, that is 100 shares and a $100 loss, planned and survivable, which is why the stop exists. The position size calculator does that math.

So mark the levels before you look for patterns: support and resistance zones, the prior day's high and low, VWAP, a trend line. The support and resistance strategy guide shows how. A pattern at the end of a move into a level deserves attention; a pattern in the middle of nowhere does not.

Why wait for the close, and are 5-minute patterns reliable?

A candle is not a pattern until it closes. Hypothetical: twelve minutes into a 15-minute candle at resistance near $102.00, a stock spikes to $102.50 and falls back to $101.70. It looks like a textbook shooting star. In the last three minutes buyers return and the candle closes at $102.45, above resistance. The rejection you saw has become a breakout candle, the opposite signal. Judge only closed candles and act on the next one. Tools that signal before the close can show arrows that later vanish, which is called repainting.

The timeframe changes the weight. The regular US session, 9:30 a.m. to 4:00 p.m. ET, prints 78 five-minute candles, so hammers, dojis and small engulfing candles appear all day, mostly in the middle of nowhere, and the first minutes after the open are the noisiest. A pattern on a 15-minute or 1-hour chart sums up more trading, and one on the daily chart more still.

If you trade the 5-minute chart, take patterns only at levels you marked on a higher timeframe, and check that the bigger trend agrees, as explained in multi-timeframe analysis. Note also that the strict gap rules of the piercing line, dark cloud cover and stars rarely appear intraday, because each 5-minute candle usually opens where the last one closed.

How to trade a candlestick pattern, step by step

A candlestick pattern is the last step of a plan, not the first. A simple routine:

Single candles and small groups are only part of the picture. Larger shapes such as double tops, flags and triangles are covered in chart patterns.

1. Mark the levels first, on the 15-minute chart or higher: support, resistance, the prior day's high and low.
2. Note the trend. A bullish pattern at support in an uptrend is worth more than one fighting a downtrend.
3. Wait for price to reach a level after a move, then wait for a pattern there.
4. Wait for the pattern candle to close, then for confirmation in the next candle or two.
5. Put the stop where the pattern is proven wrong, beyond its extreme and the level: under a hammer's low, above a shooting star's high. See stop loss and take profit.
6. Set the target at the next level, and skip the trade if that distance is not clearly bigger than the risk.
7. Size the position so that a stop-out costs a small, fixed amount you chose in advance.

Where UpTickFlow fits

UpTickFlow is our invite-only TradingView indicator, so weigh this accordingly. It does not detect candlestick patterns. It works on the same principle as this guide: it waits for a candle to close at a level, then draws an entry, a stop and a target before the trade, scores the setup from 0 to 100, and stays quiet in chop and in the first minutes after the open.

Use it as a second check that a level is worth trading, not as a pattern scanner. You can read every pattern on this page by hand on a free TradingView chart. It cannot make a pattern work, and no tool can. Details are on the pricing page.