12 Candlestick Patterns You Need to Know

As a proficient trader, something that you need to know all about are candlestick patterns. Now, we already did an article on candlestick patterns yesterday, but today we are here to provide you with a more in depth guide on the various patterns that you might come across.

Yesterday, we did a more general article on Candlestick charts and patterns, but today we want to help you familiarize yourself with the various patterns that you might see on those charts. Remember folks, it is very important that you are able to identify the various candlestick patterns out there, because they each signify something slightly different, and they each allow you to trade in a slightly different manner.

Remember, it’s all about being able to make as much profit in as little time as possible, and candlestick patterns are in great way for doing this. Let’s get to it and provide you with a list of all of the most important Candlestick patterns that you need to know about.

A Brief Introduction to Candlestick Charts

Before we start talking about the most common Candlestick patterns that you need to be familiar with let’s just give you a quick crash course on Candlestick charts and patterns. So can you stick charts are a visual representation of the emotion and sentiment that is currently happening in the market. In other words, these Candlestick charts provide you with a really easy way to see what a market trend is like, and moreover if there is a trend reversal on the horizon.

VISIT ANDREW’S TRADING CHANNEL

The two most important components of any candle stick chart are the bodies and the Wicks of the candles. If you can read the Wicks and the bodies of the candles in relation to the other candles on the chart, then you will start seeing these patterns, and based on these patterns you can then trade in specific ways. let’s move on and take a look at the most common Candlestick patterns that you may be faced with when taking a look at a Candlestick chart.

 

Bullish Candlestick Patterns

In case you didn’t know a bullish market is one where the prices are expected to rise. Bullish candlestick patterns may appear after a market downtrend, and they generally signal a reversal of the price movement from a downtrend to and uptrend. There are a variety of bullish candlestick patterns that you should absolutely know.

The Hammer

The hammer pattern features a green candle with short body and a long lower wick, and this is found at the bottom of a downtrend, with other green candles generally following. A hammer usually indicates that the word selling pressure throughout the day, but ultimately a strong buying pressure drove the price direction back up. Generally speaking, the color of the body of this candle can vary, but green hammers do usually indicate that there is a stronger bold market than red hammers.

The Inverse Hammer

A similar bullish candlestick pattern for the one we just looked at, the inverted hammer, is one that features a green candle that has a short body and a very long upper wick, along with a short lower wick. the inverse hammer pattern indicates that there is strong buying pressure followed by selling pressure that wasn’t strong enough to drive the market price down. This particular Candlestick pattern suggests that the buyers will soon again had control of the market.

The Piercing Line

The piercing line is a very simple candlestick pattern that features just two candles, and this is made up out of one long red candle that is then followed by a long green candle. There’s usually also a pretty large gap between the closing price of the first candlestick and the opening of the next green candlestick. This particular pattern indicates that there is strong buying pressure, because the pressure is pushed upwards or above the mid price of the previous day.

Bullish Engulfing

Another common bullish candlestick pattern is the bullish engulfing pattern, and this is formed by Two’s candlesticks. The first candlestick generally has a short red body that is completely engulfed by a much larger green candle. Although the second day generally opens lower than the first day, the bullish market then pushes the price upwards, which results in a win for the buyers.

Three White Soldiers

Here we have a very special candlestick pattern, one that keeps occurs over the period of three days. this particular pattern consists of three long green candles, all of which have small Wicks, and they all open and close progressively higher than the previous day. This is one of the strongest bullish candlestick patterns out there, and it occurs after a downtrend, and it shows that there is a steady advance of pressure from the buyers.

The Morning Star

The 6th and final bullish candlestick pattern that we want to take a look at is the Morning star, and this is generally seen as a big sign of hope in a bleak market downtrend. This is a pattern that consists of three separate sticks, a short bodied candle that sits between a long red candle and a long green candle.

Usually, that star will not have an overlap with the longer bodies, because the market gaps both on open and close. Is generally signals that the selling pressure from the first date is reducing, and that the bull market is on the horizon.

Bearish Candlestick Patterns

Now that we have figured out what the most common bullish candlestick patterns aren’t, let’s take a closer look at some of the most common bearish candlestick patterns. Remember that these usually happen after a market uptrend, and signified that the market downtrend is on horizon.

The Shooting Star

The shooting star pattern actually has the same shape as the inverted hammer, but it’s a red candle instead of a green candle, and it’s formed in an uptrend, instead of a downtrend. This pattern features a small lower body, and along upper wick. Generally, you will see the market have a gap that is slightly higher on opening, and will then rally to an intraday high, before closing at a price that is just above the open, just like a star that is falling to the ground.

The Hanging Man

The next candlestick pattern that you should know about is the hanging man, and this is the bearish equivalent of the hammer. It has the same shape as the hammer but it forms at the end of an uptrend. This pattern indicates that there was significant selling during the day, but that buyers were then able to push the price back up. This large sell off is usually seen as a sign that the bulls are losing control of the market.

The Evening Star

One of the other most important bearish candlestick patterns that you need to know about is the evening star. This is a 3 candlestick pattern and it is the equivalent of the bullish Morningstar. This is a candle that is formed when there is a short candle that is stuck between a long green candle and a large red candle. Is generally indicates that there is a reversal of the uptrend, and that it’s particularly strong when the third candle erases all of the gains made by the first candle.

Bearish Engulfing

This particular pattern always happens at the end of an uptrend, and it is characterized by a first candle that has a small green body that is then completely engulfed by a long red candle. This generally signifies that there is a peak or a slowdown of the price movement, and that there is an impending downturn on the horizon. The lower the second candle goes, the stronger that new trend is going to be.

Dark Cloud Cover

The next bearish candlestick pattern that needs to know about is a dark cloud cover pattern. Here you will see two candlesticks, a red one that opens above the previous green body, and closes below the midpoint of the previous green candle. This signals that the bears have taken over the market, and the market and that the price is being pushed at lower. If the wicks of the candles are very short, it suggests that the next downtrend is going to be very strong.

Three Black Crows

The last candlestick pattern that we want to look at today is the three black crows pattern, and this consists of three consecutive long red candles, that have short or no wicks at all. Each of the sessions opens at a very similar price to the previous day, but the selling pressure pushes the price lower and lower with each of the next closes. This is generally seen as an interpretation that a bearish downtrend is about to start.

Candlestick Patterns – Final Thoughts

The bottom line here is that if you are able to identify these 12 candle stick patterns that we have talked about today, then your chances of becoming a profitable trader increase drastically.

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