Ultimate Candlestick & Chart Pattern Guide for Traders
Page 1: Introduction to Candlestick Charts
Candlestick charts are a popular way to visualize price movements in financial markets. Developed
in Japan centuries ago, they combine the open, high, low, and close prices in a single candlestick
that helps traders quickly understand market sentiment.
Compared to bar or line charts, candlesticks provide richer information and clearer signals, making
them a favorite for both beginners and professional traders.
Page 2: Anatomy of a Candlestick
A candlestick consists of:
Real Body: The area between the open and close price.
Upper Shadow (Wick): The line above the body showing the highest price.
Lower Shadow (Wick): The line below the body showing the lowest price.
A green (or white) candle means the close was higher than the open (bullish), and a red (or black)
candle means the close was lower than the open (bearish).
Page 3: Benefits of Candlestick Patterns
Candlestick patterns:
Provide clear visual cues of buying and selling pressure.
Help identify trend reversals and continuations early.
Offer entry, exit, and stop loss signals.
Are easy to interpret quickly, even on mobile screens.
Pages 410: 8 Single Candlestick Patterns
1. Hammer
A bullish reversal with a small body and long lower wick. Signals buyers stepped in after sellers
pushed price down.
Buy: After confirmation candle.
Stop Loss: Below the low.
2. Shooting Star
A bearish reversal with a small body and long upper wick, showing rejection of higher prices.
Sell: After confirmation.
Stop Loss: Above the high.
3. Doji
Indecision candle with open and close almost equal. Indicates market uncertainty.
Wait: For next candle confirmation.
4. Inverted Hammer
Bullish reversal after a downtrend, with a small body and long upper wick.
Buy: After confirmation.
Stop Loss: Below the low.
5. Hanging Man
Bearish reversal after an uptrend, small body with long lower wick.
Sell: After confirmation.
Stop Loss: Above the high.
6. Marubozu
Strong bullish or bearish candle with no shadows. Indicates strong momentum.
Buy/Sell: Follow trend.
Stop Loss: Below/above body.
7. Spinning Top
Small body with long shadows, indicates indecision.
Wait: Confirm next candle.
8. Long-Legged Doji
Extremely long shadows, indecision, possible reversal.
Wait: For confirmation.
Pages 1118: 10 Multi-Candlestick Patterns
1. Engulfing Pattern
Bullish or bearish reversal where the second candle completely engulfs the first.
Buy/Sell: On confirmation.
Stop Loss: Beyond pattern extremes.
2. Morning Star
Bullish 3-candle reversal pattern.
Buy: After third candle closes bullish.
Stop Loss: Below low of the star.
3. Evening Star
Bearish 3-candle reversal.
Sell: After confirmation.
Stop Loss: Above high of star.
4. Piercing Line
Bullish reversal where second candle closes above midpoint of first.
Buy: After confirmation.
Stop Loss: Below low.
5. Dark Cloud Cover
Bearish reversal; second candle closes below midpoint of first.
Sell: After confirmation.
Stop Loss: Above high.
6. Tweezer Tops and Bottoms
Two candles with matching highs (top) or lows (bottom), signaling reversal.
Buy/Sell: After confirmation.
Stop Loss: Beyond pattern extremes.
7. Three White Soldiers
Three consecutive bullish candles; strong uptrend signal.
Buy: On confirmation.
Stop Loss: Below first candle low.
8. Three Black Crows
Three consecutive bearish candles; strong downtrend.
Sell: On confirmation.
Stop Loss: Above first candle high.
9. Harami
Small candle inside previous large candle body, indicating reversal.
Wait: For confirmation.
10. Doji Star
Doji candle after a strong trend; potential reversal.
Wait: Confirm next candle.
Pages 1927: 15 Chart Patterns
1. Head and Shoulders
Bearish reversal pattern with three peaks; middle peak highest.
Sell: After neckline break.
Stop Loss: Above right shoulder.
2. Inverse Head and Shoulders
Bullish reversal mirror image.
Buy: After neckline break.
Stop Loss: Below right shoulder.
3. Double Top
Bearish reversal after two peaks at resistance level.
Sell: After support break.
Stop Loss: Above top.
4. Double Bottom
Bullish reversal after two lows at support.
Buy: After resistance break.
Stop Loss: Below bottom.
5. Ascending Triangle
Bullish continuation with flat resistance and rising support.
Buy: On breakout above resistance.
Stop Loss: Below rising support.
6. Descending Triangle
Bearish continuation with flat support and falling resistance.
Sell: On breakdown below support.
Stop Loss: Above resistance.
7. Symmetrical Triangle
Indecision pattern, breakout direction defines trend.
Buy/Sell: On breakout.
Stop Loss: Opposite side of breakout.
8. Flag
Small rectangle pattern after sharp move; continuation expected.
Buy/Sell: On breakout direction.
Stop Loss: Opposite flag side.
9. Pennant
Small symmetrical triangle after sharp move.
Buy/Sell: On breakout.
Stop Loss: Opposite side.
10. Cup and Handle
Bullish continuation resembling a cup shape followed by a small handle.
Buy: After breakout above handle.
Stop Loss: Below handle low.
11. Rectangle
Consolidation between support and resistance.
Buy/Sell: On breakout or breakdown.
Stop Loss: Opposite side of breakout.
12. Rounding Bottom
Bullish reversal with a gradual curve.
Buy: On breakout above resistance.
Stop Loss: Below curve low.
13. Rising Wedge
Bearish reversal or continuation with converging upward trendlines.
Sell: On breakdown.
Stop Loss: Above wedge high.
14. Falling Wedge
Bullish reversal with converging downward trendlines.
Buy: On breakout.
Stop Loss: Below wedge low.
15. Broadening Formation
Uncertain pattern with expanding highs and lows.
Wait: For clear breakout.
Page 28: Trading Tactics
Always confirm patterns with volume.
Use stop losses to manage risk.
Combine candlestick signals with indicators like RSI or MACD.
Avoid trading during low liquidity or major news events.
Page 29: Strategy & Risk Management
Only trade high-probability patterns.
Use a risk-reward ratio of at least 1:2.
Limit risk to 12% of your capital per trade.
Maintain a trading journal to review trades.
Page 30: Final Tips
Practice patterns on historical charts before live trading.
Be patient and wait for confirmation.
Avoid emotional trading decisions.
Keep learning and adapting your strategies.
