Candlesticks

Read single candles and classic one-, two- and three-candle patterns, and learn why location and confirmation matter and how patterns fail.

1. What one candle tells youEvery candle shows four prices: where it started, its highest, its lowest and where it finished.
2. Bodies and wicks: the tug of warA big body means one side won; a long wick means a push that got pushed back.
3. The hammerA hammer after a fall shows sellers pushed hard but buyers pushed the price back up.
4. The shooting starA shooting star after a rise shows buyers reached high but sellers slammed the price back down.
5. Marubozu: one side in full controlNo wicks means one side was in charge from the first second to the last.
6. Spinning top: nobody winsA small body with wicks on both sides means buyers and sellers ended in a tie.
7. The dojiWhen the open and close are almost the same price, the market could not decide.
8. Dragonfly and gravestone dojiA dragonfly has a long tail below and a gravestone has a long tail above, and the tail shows which side got pushed back.
9. The hanging man: same shape, different placeA hammer shape at the top of a rise is called a hanging man, and it warns that buyers may be tiring.
10. The inverted hammerAn upside-down hammer after a fall shows buyers tried to push up, and the next candle tells us if they win.
11. Engulfing patternsWhen a new candle's body swallows the last body, the other side has taken over, at least for now.
12. Piercing line and dark cloud coverIf the second candle wins back more than half of the first candle's body, the other side is fighting back.
13. Harami: the pause insideA small candle inside a big one means the big move just ran out of breath.
14. The inside barWhen a whole candle fits inside the one before it, the market is coiling, and the break of the box shows the next move.
15. Tweezer tops and bottomsTwo candles bouncing off the same price means that price is a wall, for now.
16. Morning star and evening starA big candle, a tiny pause, then a big candle the other way is the market changing its mind in three steps.
17. Three white soldiers and three black crowsThree strong candles in a row show a new side has taken charge, but a move that is too fast can get tired.
18. Location matters: the same candle in different placesA signal at an important price is worth more than the same signal in the middle of nowhere.
19. Wait for confirmationA pattern is a question, and the next candle is the answer.
20. When candle patterns failA pattern is a hint, not a promise, so always know the price where you are wrong.