In a previous blog post, we introduced you to candlesticks. In this article, we will introduce you to some basic candlestick patterns and what they represent.  

Just like the candlesticks, the patterns can also be bullish or bearish and we also divide them into two more groups. Simple and complex.  

Simple patterns are formed with just 1 candle and more complex patterns involve 2, 3, or even more candles.  

In this blog post, we will focus on 8 candlestick patterns with a strong potential to change the current trend/direction.

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BULLISH PATTERNS

1. Hammer

Hammer patterns consist of 1 candlestick. It has a small body in the upper end of the candle with a small or no upper shadow and a long lower shadow. The lower shadow must be at least two times the size of the body.  

Hammer is a bullish reversal pattern and is found at the bottom of the downtrend. It can be green or red, but it is stronger if the candle is green.  

Volume is also important and it must be higher than the volume on previous falling candles.

2. Inverted hammer 

Inverted hammer also consists of 1 candlestick. It has a small body in the lower end of the candle with a small or no lower shadow and a long upper shadow (the upper shadow must be at least two times greater than the size of the body).  

An inverted hammer also appears at the bottom of the downtrend and suggests a trend reversal. An upward movement in price.  

Volume is also important and it must be higher than the volume on previous falling candles.  

3. Morning star 

A Morning star pattern consists of 3 candlesticks. One candlestick with a short body between a long red and a long green. The small candlestick in the middle can be green or red.  

Morning star signals that the sale pressure is declining and that the bulls are taking control.  

If the volume on the third candle is high the pattern is confirmed and it is considered as a strong trend reversal and a good buy signal.    

4. Three White soldiers 

This pattern consists of 3 long green candlesticks and each of them closes higher.  

When it appears at the bottom of a downtrend and each candle closes near the high (does not have a big upper shadow) it is considered as a strong reversal signal.      

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BEARISH PATTERNS  

5. Hanging man 

Hanging man consists of 1 candlestick. Looks the same as the hammer. It has a small body in the upper end of the candle with a small or no upper shadow and a long lower shadow (the lower shadow must be at least two times the size of the body).

Hanging man is a bearish reversal pattern and is found at the top of the uptrend. It can be green or red, but it is considered stronger if the candle is red.  

Volume is also important and it must be higher than the volume on previous candles.    

6. Shooting Star

Shooting star consists of 1 candlestick. Looks the same as the inverted hammer. It has a small body in the lower end of the candle with a small or no lower shadow and a long upper shadow (the upper shadow must be at least two times greater than the size of the body). 

A shooting star is found at the top of the uptrend and suggests a trend reversal. A downward movement in price. It can be green or red, but it is considered stronger if the candle is red.  

Volume is also important and it must be higher than the volume on previous candles.

7. Evening star 

Evening star consists of 3 candlesticks. One candlestick with a short body between a long green and a long red. The small candlestick in the middle can be green or red.  

Evening star signals that sale pressure is increasing and that the bears are taking control.  

If the volume on the third candle is high the pattern is confirmed and it is considered as a strong trend reversal and a good sell signal.    

8. Three Black Crows 

This pattern consists of 3 long red candlesticks and each of them closes lower.  

When it appears at the top of an uptrend and each candle closes near the low (does not have a big lower shadow) it is considered as a strong reversal signal from a bull to a bear market.    

Note that patterns will give you some basic information about the future price movement but they are not always 100% accurate and you should not use them as a buy or sell signal.