Candlestick Patterns
Candlesticks show the battle between buyers and sellers. Certain patterns signal potential reversals or continuations. Here are the three most useful ones.
Pin Bar (Hammer/Shooting Star)
A candle with a long wick and small body, showing rejection from a price level.
- Bullish pin bar: Long lower wick, price rejected downward move
- Bearish pin bar: Long upper wick, price rejected upward move
How to trade: Wait for pin bar at support/resistance. Enter in direction of rejection.
Engulfing Pattern
A candle that completely "engulfs" the previous candle's body.
- Bullish engulfing: Green candle completely covers previous red candle
- Bearish engulfing: Red candle completely covers previous green candle
How to trade: Strong reversal signal at key levels. Enter in direction of the engulfing candle.
Doji
A candle where open and close are nearly equal, creating a cross shape.
- Shows indecision in the market
- Neither buyers nor sellers won
- Often precedes reversals at extremes
How to trade: Doji alone isn't a signal. Wait for confirming candle after doji before entering.
Context Matters
Candlestick patterns are NOT standalone signals:
- ✅ Pin bar at resistance after uptrend = good signal
- ❌ Pin bar in middle of range = noise
- ✅ Engulfing after liquidity sweep = strong signal
- ❌ Engulfing in choppy market = unreliable
Always combine patterns with market structure and liquidity analysis.