Candlestick patterns: a visual guide
Written by an ex-institutional trader. How to read a candlestick, then the most important reversal and continuation patterns, each shown with a clear diagram and what it signals. A visual reference, not a promise that patterns predict the future.
Direct answer
A candlestick shows four prices for a period in one shape: the open, high, low and close. The body spans the open and close, and the thin wicks (or shadows) reach to the high and low. A candle is usually coloured green or hollow when the close is above the open (buyers won the period) and red or filled when the close is below the open (sellers won).
Candlestick patterns are recognisable single- or multi-candle shapes that traders read as clues about momentum and possible reversals, such as the doji (indecision), the hammer (a possible bottom), and the engulfing pattern (a momentum shift). They are a useful read on who is in control, not a prediction. Patterns work best as confirmation alongside trend, support and resistance, and risk management, never as standalone signals.
How to read a candlestick
Every candlestick packs four prices into one shape. The thick part, the body, is drawn between the open and the close. The thin lines above and below, the wicks or shadows, reach up to the high and down to the low of the period. Colour tells you direction: a green (or hollow) candle closed above where it opened, so buyers won the period, while a red (or filled) candle closed below its open, so sellers won.
That is the entire grammar. Once you can read open, high, low and close at a glance, the patterns below are just combinations of these shapes that recur often enough to have names.
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Single-candle patterns
The simplest patterns are a single candle whose shape reveals the period's story.
Doji
Indecision. Open and close nearly equal; buyers and sellers drew.
Hammer
Possible bottom. Sellers pushed down, buyers slammed it back up.
Shooting star
Possible top. Buyers pushed up, sellers took control by the close.
Spinning top
Weak momentum. A small body with wicks both sides signals a pause.
The hammer and shooting star are mirror images: both are small bodies with one long wick, and which one it is depends on whether that wick points down (hammer, after a fall) or up (shooting star, after a rise). The doji and spinning top both say the same thing in different strengths: the period was a draw.
Two-candle patterns
Two candles together can show a clear handover of control from one side to the other. The engulfing pattern is the classic example.
Bullish engulfing
A small red candle is followed by a larger green one that engulfs it. Momentum has flipped up.
Bearish engulfing
A small green candle is followed by a larger red one that engulfs it. Momentum has flipped down.
The logic is the same in both directions: the second candle completely covers the first one's body and closes the opposite way, which says the other side has taken over decisively. An engulfing pattern at a support or resistance level, in line with the trend, is one of the more respected reversal signals.
Three-candle patterns
Three-candle patterns tell a fuller story of a reversal building over time, which is partly why they are taken more seriously than a single ambiguous candle.
Morning star
A downtrend, a small indecision candle, then a strong green candle. A bullish reversal.
Evening star
An uptrend, a small indecision candle, then a strong red candle. A bearish reversal.
Three white soldiers
Three strong green candles in a row. Sustained buying and a bullish continuation.
Three black crows
Three strong red candles in a row. Sustained selling and a bearish continuation.
The star patterns mark reversals: a strong move, a pause (the small star), then a strong move the other way. The soldiers and crows mark continuation through sheer persistence: three decisive candles in the same direction confirm that one side is firmly in control.
How to use candlestick patterns
The honest part. Candlestick patterns are a genuinely useful read on momentum and on who is winning the fight between buyers and sellers, but they are not a crystal ball, and trading them mechanically is a fast way to lose money. The same hammer that marks a perfect bottom in one chart is meaningless in another.
What makes a pattern worth acting on is context:
- Location. A reversal pattern at a known support or resistance level carries far more weight than the same pattern in the middle of a range.
- Trend. A pattern that fits the prevailing trend is more reliable than one fighting it. A continuation pattern in a strong trend is safer than a reversal pattern against it.
- Confirmation. Waiting for the next candle to confirm the signal filters out many false reads.
- Risk control. Whatever the pattern, the trade still needs a defined stop loss and a position sized to your risk, because most patterns fail often enough that survival depends on managing the losers.
Used this way, as one input within a method that includes trend, levels and risk, candlestick patterns earn their place. Used as standalone signals, they do not. The base rate is unforgiving: most retail CFD and forex accounts lose money, and no pattern changes that. Build the rest of the foundation with what is a pip, forex trading strategies and how to trade forex in Australia, and choose a broker with clean charts and tight spreads from the best forex brokers in Australia ranking.
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Diagrams are illustrative. Last reviewed: 2026-06-01.
Frequently asked questions
What is a candlestick in trading?
A candlestick is a chart symbol that shows four prices for a time period at once: the open, the high, the low and the close. The rectangular body spans the open and close prices, and the thin lines above and below, called wicks or shadows, reach to the high and the low. The candle is coloured one way when the close is above the open and the other way when it is below, so a glance tells you whether buyers or sellers won the period.
Do candlestick patterns actually work?
Candlestick patterns describe momentum and the balance between buyers and sellers, and they can be a useful read, but they are not predictive on their own. The same pattern can precede a reversal in one situation and mean nothing in another. They work best as confirmation within a wider method: a hammer at a known support level with a clear trend behind it is far more meaningful than a hammer in the middle of nowhere. Treat them as one input alongside trend, support and resistance, and strict risk management.
What is the most reliable candlestick pattern?
No pattern is reliable in isolation, but the engulfing pattern and the morning or evening star are among the more respected reversal signals because they involve a clear shift in momentum across more than one candle, rather than a single ambiguous shape. Context matters more than the pattern itself: any pattern that appears at a significant support or resistance level, in line with the prevailing trend, carries more weight than the same pattern in a quiet, directionless market.
What is a doji candlestick?
A doji is a candle where the open and close are almost equal, so it has little or no body and looks like a cross or plus sign. It signals indecision: buyers and sellers fought to a draw over the period. A doji after a strong move can hint that momentum is stalling and a reversal may be near, but on its own it only says the market paused. Like all patterns, it means more at a key level and with confirmation from the next candle.
What is the difference between a hammer and a shooting star?
They are mirror images. A hammer has a small body near the top of the range and a long lower wick, showing that sellers pushed the price down during the period but buyers drove it back up by the close; it appears after a downmove and hints at a possible bottom. A shooting star has a small body near the bottom and a long upper wick, showing buyers pushed up but sellers took control by the close; it appears after an upmove and hints at a possible top.
Can you trade forex with candlestick patterns alone?
You can, but you should not. Patterns are a read on short-term momentum, not a complete strategy, and trading them mechanically without trend, level and risk context is a fast way to lose money. Most retail CFD and forex accounts lose money, and pattern-only trading does not change those odds. Use candlesticks as confirmation within a method that includes where you are in the trend, where support and resistance sit, and a defined stop loss and position size on every trade.
