Candlestick Charts Reversal Patterns

16 most important candlestick patterns

Japanese candlestick is the most popular chart type used by traders. Japanese candlestick patterns are one of the methods used to predict a price direction. All patterns are divided into bullish, bearish, and neutral, as well as reversal and continuation.

16 most important candlestick patterns

If you dig out the list, many candlestick patterns will pop up with different characteristics, but these six patterns are specifically popular among traders. For instance, if you witness a bullish candlestick pattern generating after some time of consolidation, it might indicate that the market is about to increase. Candlestick patterns are standard tools that occur on a chart of any asset. Thus, you can find Forex candlestick patterns, crypto patterns, commodity candle patterns, etc. This fact makes them essential tools you need to predict a price direction.

Basic Candlestick Patterns in Chart Trading:

Often, these classical patterns are based on support and resistance levels and trend lines, which indicate where the market might reverse or continue its ongoing trend. When the pattern appears, trades are looking for a level where the price breaks above or below a certain price level, and by using this data, they estimate the future direction of the market. A popular Doji candlestick trading strategy involves looking for Dojis to appear near levels of support or resistance.

Which candlestick pattern is most reliable for day trading?

The shooting star candlestick is primarily regarded as one of the most reliable and one of the best candlestick patterns for intraday trading. In this type of intra-day chart, you will typically see a bearish reversal candlestick, which suggests a peak, as opposed to a hammer candle which suggests a bottom trend.

The Wyckoff Accumulation occurs when the price of a particular asset falls or rises following a trend and then enters a period of price consolidation. In this range, prominent players can presumably manipulate the price to buy the asset at a lower price (or higher if the pattern is bearish). With time, you will get to know more about candlestick patterns and their trick of higher success chances. Moreover, as a result, without further selling pressure, the candlesticks resemble higher price seller cover, and the buyer leverages the lower stock pricing.


It occurs in a bullish trend when the upper extremes of two candles arise at the same level. Forex traders view tweezer tops as potential selling opportunities. They are readily discernable on candlestick charts and can be an ideal way of shorting a currency pair. After an advance or long white candlestick, a Doji signals that buying pressure may be diminishing and the uptrend could be nearing an end. Whereas security can decline simply from a lack of buyers, continued buying pressure is required to sustain an uptrend. Therefore, a Doji may be more significant after an uptrend or long white candlestick.

Going forward, the lows that were set out of this pattern should provide strong support on any potential re-tests. The rising wedge is a bearish chart pattern that occurs at the end of a bullish uptrend and usually represents a trend reversal. The pattern indicates the end of a bullish trend and 19 candlestick patterns is a frequently occurring pattern in financial markets. It is the opposite of the falling wedge pattern that occurs at the end of a bearish downtrend and is known as a bullish pattern. The Mat Hold pattern is a five candlestick formation that signals the continuation of the ongoing trend.

Most efficient Forex patterns: a complete guide

There are only a few continuation patterns and the rising three method is one of them and is considered quite reliable by traders. Traders and investors often look for these engulfing patterns to help them identify potential trend reversals and make informed trading decisions. By understanding how this pattern works, you can better analyze market movements and develop effective trading strategies. When looking at a candle, it’s best viewed as a contest between buyers and sellers.

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Candlestick Trading Strategies

The bearish island is a signal to sell the market in the hopes of cashing in on a bullish trend reversal. The falling wedge pattern is a bullish trend reversal chart pattern that signals the end of the previous trend and the beginning of an upward trend. The head and shoulders reversal pattern appears in the charts less frequently than other chart patterns. It forms three vertices, one of which is located in the middle above the other two.

Do professional traders use candlestick patterns?

Price Action traders rely on Candlesticks to read the Price action and understand the market behavior. But there's a major difference in how price action traders use candlesticks – They don't use candlestick patterns!

This suggests that the uptrend is stalling and has begun to reverse lower. Also, note the prior two days’ candles, which showed a double top, or a tweezers top, itself a reversal pattern. A daily candlestick represents a market’s opening, high, low, and closing (OHLC) prices. The rectangular real body, or just body, is colored with a dark color (red or black) for a drop in price and a light color (green or white) for a price increase.

Does candlestick pattern analysis really work?

Only enter after a confident consolidation of the price and an increase in trading volumes. Stop loss in this case should be set above or below the broken level, depending on the type of formation. We could sell the instrument after the price fell below the ‎neckline and the quotes consolidated below this level.

Based on statistical and graphical data, the trader aims to do profitable trades. In this article, we will analyze popular patterns for stock markets, which can also be applied to various complex instruments, for example, currency and cryptocurrency pairs. Day traders often use them when trading with leverage on the derivatives market. With knowledge about these tools, you will be able to identify market entry points and benefit from various situations that develop in price candlestick charts.

How accurate are Japanese candlesticks?

Japanese Candlesticks provide more detailed and accurate information about price movements, as compared to bar charts. They provide a graphical representation of the supply and demand behind each time period's price action.