Candlestick Patterns - Complete Guide
Master all 16 candlestick patterns - Doji, Engulfing, Hammer, Morning Star, and more. Learn recognition, interpretation and trading strategies.
Understanding Candlestick Patterns
Candlestick patterns are formations created by one or more candles that suggest future price movements. Developed in 18th century Japan for rice trading, they remain one of the most reliable forms of price action analysis.
GarudaAlgo Pattern Detection
GarudaAlgo automatically scans for all 16 candlestick patterns in real-time across multiple timeframes. Each pattern is validated against strict formation rules and assigned a reliability score based on context (support/resistance location, trend alignment, volume confirmation).
Pattern Categories
- Reversal Patterns: Signal potential trend change (Hammer, Engulfing, Morning/Evening Star)
- Continuation Patterns: Signal trend continuation after pause (Three Soldiers/Crows)
- Indecision Patterns: Signal uncertainty/potential reversal (Doji, Spinning Top)
Single Candle Patterns
Doji Indecision
Single candle | Neutral
Open and close are nearly equal, creating a small or no body. Shows market indecision between buyers and sellers.
Signal: Potential reversal when at support/resistance
Types: Standard, Long-legged, Dragonfly, Gravestone
Hammer Bullish
Single candle | Reversal
Small body at top with long lower shadow (2-3x body). Shows buyers rejected lower prices.
Location: At bottom of downtrend
Confirmation: Next candle closes above hammer's high
Shooting Star Bearish
Single candle | Reversal
Small body at bottom with long upper shadow. Shows sellers rejected higher prices.
Location: At top of uptrend
Confirmation: Next candle closes below shooting star's low
Inverted Hammer Bullish
Single candle | Reversal
Small body at bottom with long upper shadow. In downtrend, suggests potential reversal.
Signal: Buyers starting to test higher prices
Confirmation: Bullish candle following
Marubozu Strong Trend
Single candle | Continuation/Reversal
Long body with no shadows. Shows complete dominance by buyers (bullish) or sellers (bearish).
Bullish Marubozu: Close = High, Open = Low
Bearish Marubozu: Open = High, Close = Low
Spinning Top Indecision
Single candle | Neutral
Small body with upper and lower shadows. Shows neither buyers nor sellers in control.
Signal: Market indecision, trend may pause or reverse
Context: More significant after strong trend
Two Candle Patterns
Bullish Engulfing Bullish
Two candles | Reversal
Large green candle completely engulfs previous red candle. Shows aggressive buying overtaking sellers.
Location: Bottom of downtrend
Strength: Larger engulfing candle = stronger signal
Bearish Engulfing Bearish
Two candles | Reversal
Large red candle completely engulfs previous green candle. Shows aggressive selling overtaking buyers.
Location: Top of uptrend
Confirmation: Follow-through selling next period
Bullish Harami Bullish
Two candles | Reversal
Small green candle contained within previous large red candle. "Harami" means pregnant in Japanese.
Signal: Selling pressure diminishing
Reliability: Moderate - needs confirmation
Bearish Harami Bearish
Two candles | Reversal
Small red candle contained within previous large green candle. Shows buying momentum weakening.
Signal: Buying pressure diminishing
Confirmation: Next red candle confirms
Belt Hold Reversal
Two candles | Reversal
Opening with a gap then strong move in opposite direction. Bullish belt hold in downtrend, bearish in uptrend.
Bearish: Gaps up, then closes near low
Key: Gap shows attempted continuation, rejection shows reversal
Counterattack Reversal
Two candles | Reversal
Two opposite-colored candles that close at the same level. Shows balance point reached.
Signal: Momentum shift, potential reversal
Confirmation: Next candle in reversal direction
Three Candle Patterns
Morning Star Bullish
Three candles | Reversal
Large red → Small body (star) → Large green. Classic bottom reversal pattern.
1. Large bearish candle
2. Small body with gap down (the "star")
3. Large bullish candle closing into first candle's body
Strength: Third candle should close above midpoint of first
Evening Star Bearish
Three candles | Reversal
Large green → Small body (star) → Large red. Classic top reversal pattern.
1. Large bullish candle
2. Small body with gap up (the "star")
3. Large bearish candle closing into first candle's body
Location: At resistance or after extended uptrend
Three White Soldiers Bullish
Three candles | Continuation/Reversal
Three consecutive long green candles with each closing higher. Shows strong sustained buying.
Each candle: Opens within previous body, closes near high
Warning: Very extended = potential exhaustion
Three Black Crows Bearish
Three candles | Continuation/Reversal
Three consecutive long red candles with each closing lower. Shows strong sustained selling.
Each candle: Opens within previous body, closes near low
Context: Most powerful after uptrend or at resistance
Three Inside Up Bullish
Three candles | Reversal
Bearish candle → Bullish harami → Bullish confirmation. Enhanced harami pattern.
1. Large bearish candle
2. Small bullish candle inside first
3. Bullish candle closing above first candle's open
Three Inside Down Bearish
Three candles | Reversal
Bullish candle → Bearish harami → Bearish confirmation. Enhanced harami pattern.
1. Large bullish candle
2. Small bearish candle inside first
3. Bearish candle closing below first candle's open
Three Outside Up Bullish
Three candles | Reversal
Bullish engulfing followed by continuation. Enhanced engulfing pattern.
1. Bearish candle
2. Bullish engulfing candle
3. Another bullish candle confirming momentum
Three Outside Down Bearish
Three candles | Reversal
Bearish engulfing followed by continuation. Enhanced engulfing pattern.
1. Bullish candle
2. Bearish engulfing candle
3. Another bearish candle confirming momentum
Trading Best Practices
- Location matters most — Patterns at key S/R levels are far more reliable
- Always seek confirmation — Never trade a pattern before it completes
- Check the trend — Reversal patterns against strong trends often fail
- Volume confirms — Higher volume on pattern completion adds reliability
- Higher timeframes = more reliable — H4/Daily patterns beat M15 patterns
- Use with other analysis — GarudaAlgo combines patterns with 74+ indicators for confluence