Candlestick Patterns - Reading the Sentiments
Master candlestick patterns - from single pin bars to complex three-candle formations with GarudaAlgo's detection.
What are Candlestick Patterns?
Candlestick patterns are visual representations of market psychology. Each candle tells a story of the battle between buyers (bulls) and sellers (bears) over a specific timeframe.
Single Candle Patterns
Hammer / Pin Bar
Signifies rejection of lower/higher prices. Strong reversal signal when found at key S/R levels.
Doji
Indicates indecision. Neither buyers nor sellers gained control. Often precedes a shift in trend.
Marubozu
A candle with no wicks. Indicates extreme momentum and absolute dominance by one side.
Two Candle Patterns
Engulfing Patterns
A larger candle completely covers the previous candle. Signifies an aggressive shift in momentum.
Tweezer Tops/Bottoms
Two candles with identical highs or lows. Indicates a solid wall of support or resistance.
Three Candle Patterns
Morning/Evening Star
A three-candle reversal pattern that signals the end of a trend and the start of a new move.
Three White Soldiers / Black Crows
Three consecutive strong candles in one direction. Indicates a very strong trend continuation.
How GarudaAlgo Uses Candlesticks
GarudaAlgo Enhancement
GarudaAlgo features an advanced candle recognition engine that scans every candle for potential patterns. Unlike manual trading, our system identifies patterns across 28+ pairs and multiple timeframes simultaneously.
Pattern Weight in Signal System
Candlestick pattern identification contributes 11% to the overall signal confidence score.
What GarudaAlgo Analyzes
- Pattern Recognition: Detects 32+ different candle formations
- Location Filter: Only alerts when patterns occur at key S/R levels
- Size Validation: Measures candle body relative to historical average
- Volume Confirmation: Checks if candle patterns align with volume spikes
Trading Strategies
Strategy 1: The Pin Bar Reversal
- Identify a major Support or Resistance zone
- Wait for a Pin Bar to form, rejecting that zone
- Enter on the break of the Pin Bar's nose
- Stop loss beyond the Pin Bar's tail
Strategy 2: Engulfing Continuation
- Confirm overall trend (e.g., price above 50 EMA)
- Wait for a small pullback in the trend
- Enter when an Engulfing candle forms in trend direction
- Ride the trend momentum for high R:R
Strategy 3: The Star Formation
- Look for an overextended trend move
- Identify a Morning Star (bullish) or Evening Star (bearish)
- The gaps within the pattern (if on stocks) add higher probability
- Excellent for catching the absolute top or bottom
Best Practices
- Location is everything — A pattern in the middle of nowhere is meaningless
- Size matters — The larger the engulfing or pin bar, the more powerful the signal
- Wait for the close — Never enter a pattern until the candle has officially closed
- Combine with S/R — Candlestick patterns are confirmation tools, not standalone systems