Candlestick patterns

Candlestick patterns are the foundation of price action analysis and one of the most widely used tools for reading forex charts. Developed in 18th-century Japan, these visual patterns reveal market sentiment and help traders anticipate potential reversals and continuations.

Anatomy of a candlestick

Every candlestick on your forex charts contains four data points: the open, high, low, and close. The rectangular body represents the range between open and close, while the thin lines (wicks or shadows) show the high and low. A green or white body indicates a bullish candle (close above open), while a red or black body indicates a bearish candle (close below open).

Single-candle patterns

The single-candle patterns most often cited:

• Doji — A candle where the open and close are virtually identical, creating a cross-like shape. The doji signals market indecision and often appears at the end of a trend, suggesting a potential reversal. Variations include the dragonfly doji, gravestone doji, and long-legged doji.
• Hammer — A bullish reversal pattern with a small body at the top and a long lower wick (at least twice the body length). The hammer appears at the bottom of downtrends and signals that buyers have stepped in aggressively.
• Shooting Star — The bearish counterpart to the hammer, featuring a small body at the bottom with a long upper wick. The shooting star appears at the top of uptrends and indicates sellers have pushed prices back down from highs.
• Marubozu — A candle with no wicks, indicating strong directional conviction. A bullish marubozu has no upper or lower shadow, showing buyers controlled the entire session.

Two-candle patterns

Two-candle chart patterns are read as stronger signals, because they show a shift in momentum over two periods:

• Engulfing Pattern — A bullish engulfing pattern occurs when a large green candle completely engulfs the previous red candle, which is read as a sign of reversal. The bearish engulfing is the inverse, with a large red candle consuming the prior green candle.
• Harami — Japanese for "pregnant," this pattern features a small candle contained entirely within the body of the previous candle. A bullish harami after a downtrend suggests the selling pressure is weakening.

Three-candle reversal patterns

The three-candle patterns most often cited:

• Morning Star — A three-candle bullish reversal: a long bearish candle, followed by a small-bodied candle (the star), and then a long bullish candle. This pattern is read as a possible bottom.
• Evening Star — The bearish counterpart to the morning star, read as a possible top.
• Three White Soldiers / Three Black Crows — Three consecutive long-bodied candles in the same direction, read as strong momentum.

Trading candlestick patterns effectively

Practitioners usually look for confirmation of candlestick signals from support and resistance levels, volume analysis, and other technical indicators. Patterns that form at key levels carry significantly more weight than those appearing in the middle of a range. That weight is a convention among the traders who use them: a pattern describes what buyers and sellers did in the candles that formed it, and the evidence that it predicts what comes next is weak and disputed. Practice identifying these patterns on historical forex charts before applying them in live trading.

Revised 4 October 2026. Patterns described as giving “stronger signals” or as “confirming” a move are now described as what their users read them to mean, and the lesson says that the evidence that candlestick patterns predict prices is weak and disputed.