12 Candlestick Patterns Every Trader Should Know (With Examples)
Learn 12 candlestick patterns, from the hammer and doji to engulfing and morning star: what each shows, where it matters and where the stop goes.
Hammers, stars, engulfing bars: every chart is full of shapes with names. Learning candlestick patterns is easy. This guide sorts the ones that deserve your attention from the noise.
Quick answer: Candlestick patterns are one-, two- or three-candle shapes that show a shift in the balance between buyers and sellers. The 12 most useful are the hammer, inverted hammer, shooting star, hanging man, doji, both engulfing patterns, piercing line, dark cloud cover, morning star, evening star and inside bar. They matter most at a level, after a move, once confirmed.
What are candlestick patterns?
A candlestick records four prices for one period: the open, high, low and close. The thick body runs from the open to the close, and the thin wicks reach to the high and the low. If that is new to you, tap through the candle below, or read our guide on how to read candlestick charts before going further.
The body is the range between the open and the close. A long body means one side was firmly in control for the whole period.
A quick refresher before the patterns: tap the body, the wicks, the open and the close. Every pattern in this guide is built from these four prices.
A candlestick pattern is a recognisable shape made by one, two or three candles in a row. Each is a short story about a change in who controls the price: a long lower wick says sellers pushed hard and failed; a candle that swallows the one before it says one side took over in a single period.
You will see them sorted in three ways:
- By direction. Bullish candlestick patterns suggest buyers are gaining control, so they matter after a fall. Bearish candlestick patterns suggest sellers are gaining control, so they matter after a rise.
- By job. Most patterns here are reversal candlestick patterns: they hint that the move before them is tiring. The inside bar shows a pause instead.
- By size. One, two or three candles. Longer patterns carry more information but take longer to form.
This guide uses the last grouping. For each pattern you get what it looks like, the story it tells, where it matters and where a trader would usually put a stop loss.
A pattern describes what has happened. Its value is that it marks a precise point where one side was rejected, which gives you a logical place to define your risk. The Academy lesson on candlestick anatomy covers the building blocks, with a short quiz.
Single-candle patterns: hammer, shooting star and doji
Five of the twelve patterns are a single candle. Four of them are really two shapes, each with two names: the name changes with what came before.
1. Hammer candlestick
What it looks like: a small body at the top of the range, a long lower wick and little or no upper wick. A common rule of thumb is that the lower wick should be at least twice the length of the body. The body can be either colour.
The story: sellers drove price well down, then buyers took it all back and closed near the high. Lower prices were tried and rejected.
Where it matters: after a fall, ideally at a support level where buyers have appeared before. The classic version dips just below support and closes back above it: the market tested the level, found buyers and left.
The stop: a few pips below the low of the wick. If price trades back below the point where buyers stepped in, the rejection has failed.
2. Hanging man
What it looks like: exactly the same shape as a hammer, but appearing after a rise.
The story: at the top of an advance, sellers managed to push price well below the open. Buyers recovered by the close, but the fact that sellers could do that much damage at the highs is a warning that the advance is tiring.
Where it matters: after a clear rise into resistance. It is one of the weaker signals here, because the candle still closed near its high, so most traders wait for a bearish close below its body before acting.
The stop: for a sell, a few pips above the hanging man’s high.
3. Inverted hammer
What it looks like: a small body at the bottom of the range and a long upper wick: a hammer turned upside down.
The story: after a fall, buyers pushed price well up but could not hold it. It counts as bullish because it is the first time in a while that buyers have shown any strength. It is only a probe.
Where it matters: after a fall into support, and only once the next candle confirms by closing above its body. Without that follow-through it is just a failed rally.
The stop: below the inverted hammer’s low.
4. Shooting star
What it looks like: the same shape as the inverted hammer, but appearing after a rise.
The story: buyers pushed price higher, sellers drove it back down to close near the low. Higher prices were rejected. It is the mirror image of the hammer and one of the cleaner bearish candlestick patterns.
Where it matters: after a rise into resistance, especially when the wick pokes above the level and the close lands back below it.
The stop: a few pips above the top of the wick. On a sell, stops trigger on the ask price, so add the spread to your buffer.
5. Doji
What it looks like: open and close equal or nearly equal, so the body is a thin line. With a long lower wick it is called a dragonfly doji; with a long upper wick, a gravestone doji.
The story: both sides tried and neither won. Price finished where it started.
Where it matters: after a long, strong run, a doji can be the first sign that the dominant side has stopped pressing. In a quiet market dojis appear constantly and mean almost nothing. On its own a doji is neither bullish nor bearish; the next candle shows which way the indecision resolved.
The stop: beyond the far end of the doji’s range.
The fastest way to fix these shapes in your head is to build them yourself.
Build a hammer, then turn it into a shooting star by swapping the wicks. Then shrink the body to a doji. The name follows the ratio of body to wick, not the colour.
Two-candle patterns: the engulfing pattern, piercing line and inside bar
Two candles can describe a change: the second one overpowers, cancels or sits quietly inside the first. That extra information is why many traders give them more weight than single candles.
One forex detail first. Textbook definitions come from share markets, where the second candle often opens with an overnight gap. Forex trades almost continuously from Monday to Friday, so each candle usually opens at the previous close. Forex traders therefore judge two-candle patterns mainly by where the second candle closes.
6. Bullish engulfing pattern
What it looks like: after a fall, a small bearish candle followed by a larger bullish candle whose body completely covers the first.
The story: in one period, buyers wiped out all of the previous period’s selling and more. Control has changed hands quickly.
Where it matters: at support after a decline, or at the end of a pullback in an uptrend. The larger the second candle is compared with its neighbours, the louder the message.
The stop: below the lowest point of the two candles, plus a small buffer.
7. Bearish engulfing pattern
What it looks like: after a rise, a small bullish candle followed by a larger bearish candle whose body completely covers it.
The story: sellers overwhelmed the previous period’s buying. Anyone who bought the last candle is now holding a loss, and some will sell to get out, adding to the pressure.
Where it matters: at resistance after a rise, or at the top of a rally in a downtrend.
The stop: above the highest point of the two candles, plus a buffer and the spread.
8. Piercing line
What it looks like: after a fall, a long bearish candle followed by a bullish candle that closes above the midpoint of the first candle’s body, but not above its open.
The story: a partial engulfing pattern. Buyers recovered more than half of the previous period’s loss, a meaningful shift, but not all of it.
Where it matters: at support after a decline. Being weaker than an engulfing pattern, it benefits from a confirming close above the first candle’s open.
The stop: below the low of the two candles.
9. Dark cloud cover
What it looks like: the bearish twin of the piercing line. After a rise, a long bullish candle is followed by a bearish candle that closes below the midpoint of the first candle’s body.
The story: sellers erased more than half of the previous period’s gain, but not all of it.
Where it matters: at resistance after a rise.
The stop: above the high of the two candles.
10. Inside bar
What it looks like: a candle whose whole range fits inside the range of the candle before it, often called the mother bar.
The story: the market paused. Neither side could push beyond the previous candle’s extremes. Contractions like this are often followed by expansion.
Where it matters: it is not a reversal pattern on its own. Traders use it as a pause within a trend, waiting for a break of the mother bar in the trend’s direction, or at a key level, waiting to see which side breaks first.
The stop: for a breakout above the mother bar, below the inside bar’s low or, more conservatively, below the mother bar’s low. Reverse it for a break below.
Now try reading a two-candle pattern in real time. Decide what you would do, then let the rest of the chart play out.
EUR/USD has dropped back to the 1.0800 area, where it bounced before, and the last candle engulfed the one before it. What would you do next?
Illustrative EUR/USD prices. A bullish engulfing candle at a tested level, then the rest of the chart. Here it followed through; on another day it would not, which is why the stop is planned first.
Three-candle reversal candlestick patterns: morning star and evening star
Three-candle patterns tell the fullest story here: one side in control, a pause, then the other side taking over. They form less often and you enter later, but each contains its own confirmation.
11. Morning star
What it looks like: after a fall, three candles. First, a long bearish candle. Second, a candle with a small body (the star) that trades lower. Third, a long bullish candle that closes above the midpoint of the first candle’s body.
The story: sellers were in control, the star shows their push stalling, and the third candle shows buyers taking over. It is a slow-motion hammer: combine the three candles into one and you usually get a long lower wick with a close near the top.
Where it matters: at support after a clear decline, especially when the star dips below the level and is left behind by a strong third candle.
The stop: below the low of the star, which is normally the lowest point of the pattern.
12. Evening star
What it looks like: the mirror image. After a rise, a long bullish candle, then a small-bodied star that trades higher, then a long bearish candle that closes below the midpoint of the first candle’s body.
The story: buyers were in control, the star shows them running out of energy, and the third candle shows sellers taking over. Combined into one candle, it usually looks like a shooting star.
Where it matters: at resistance after a clear rise.
The stop: above the high of the star, plus a buffer and the spread.
All 12 candlestick patterns at a glance
| Pattern | Candles | Bias | Look for it | Stop usually goes |
|---|---|---|---|---|
| Hammer | 1 | Bullish | After a fall, at support | Below the wick |
| Hanging man | 1 | Bearish warning | After a rise, at resistance | Above the high |
| Inverted hammer | 1 | Bullish, needs confirmation | After a fall, at support | Below the low |
| Shooting star | 1 | Bearish | After a rise, at resistance | Above the wick |
| Doji | 1 | Neutral | After a long run | Beyond the far end |
| Bullish engulfing | 2 | Bullish | After a fall, at support | Below the pattern low |
| Bearish engulfing | 2 | Bearish | After a rise, at resistance | Above the pattern high |
| Piercing line | 2 | Bullish | After a fall, at support | Below the pattern low |
| Dark cloud cover | 2 | Bearish | After a rise, at resistance | Above the pattern high |
| Inside bar | 2 | Neutral until it breaks | In a trend or at a level | Beyond the inside or mother bar |
| Morning star | 3 | Bullish | After a fall, at support | Below the star |
| Evening star | 3 | Bearish | After a rise, at resistance | Above the star |
Why context decides what candlestick patterns mean
Scroll back through any chart and you will find hammers, dojis and engulfing candles everywhere, most of them followed by nothing in particular. The patterns are not wrong; most simply formed where their story did not matter. Compare the two identical hammers below.
The left-hand hammer says something specific: the market tried lower prices at an important place and refused them. It also gives you a clean stop, just below the wick. The right-hand hammer rejected a price nobody cared about, with no obvious stop and no obvious target.
Before you act on any candlestick pattern, ask three questions.
- Where is it? Is it at a support or resistance zone you had marked before it formed? Our guide to support and resistance in forex shows how to find those zones.
- What came before it? A reversal pattern needs something to reverse: a meaningful fall, or a pullback within a trend. The lesson on trends explains how to read the direction first.
- Which timeframe is it on? A daily pattern reflects a full day of trading by the whole market; a five-minute pattern can be the footprint of one large order.
When the answers line up, you have confluence: independent reasons pointing the same way. The lesson on multi-timeframe analysis shows how to take the level from a higher timeframe and the pattern from a lower one.
Candlestick patterns also live inside larger chart patterns. The second low of a double bottom often prints a hammer or a bullish engulfing candle; the right shoulder of a head and shoulders often ends with a shooting star.
Bearish reversal
Price fails at the same high twice, then breaks the low between the two peaks. Buyers tried twice and gave up.
Six classic chart patterns. Candlestick patterns often mark their turning points: a hammer at the second low of a double bottom, a shooting star on the right shoulder of a head and shoulders.
The candle tells you when the turn happened; the larger pattern tells you why that place mattered. The lesson on chart patterns covers all six.
How to trade candlestick patterns: confirmation, entry and stop
At the right place, a candlestick pattern is a trigger that turns an idea into a plan with a defined risk. That takes three decisions.
1. Confirmation. Wait for the pattern’s candle to close. Then decide whether you also want the next candle to confirm, for example by closing above a hammer’s high. Confirmation filters out some failed patterns, but you enter later, at a worse price, with a wider stop. There is no right answer, only a rule you choose in advance and apply every time.
2. The stop. Every pattern here has a natural invalidation point: the extreme where one side was rejected. Your stop goes just beyond it, with a buffer for the spread and noise. Our guide on where to place a stop loss explains the buffer.
3. The target and the size. Find the next level in the direction of the trade. If it is closer than your stop, the pattern may be perfect and the trade still poor. Then size the position from the stop and a fixed risk per trade. The lesson on position sizing shows the arithmetic, and our guide to the risk-reward ratio explains why the target matters as much as the entry.
Step through an evening star at resistance, one decision at a time.
Illustrative GBP/USD prices. An evening star at a tested resistance level, read step by step. The last step checks the reward, which is where many good-looking patterns turn into poor trades.
The stop-loss placement lesson covers the buffer and the arithmetic in more detail.
Common mistakes with candlestick patterns
Learning names instead of stories
If you know a hammer means “buyers rejected lower prices”, you can read any candle, including the many shapes without a name. If you only know the name, you are stuck the moment a candle differs from the textbook. Ask of every candle: who pushed, who won and what was rejected?
Trading every pattern you see
Patterns appear many times a day on every pair. Mark your levels first, then look for patterns only there. Seeing patterns because you want to trade is a form of confirmation bias; our guide to trading psychology explains why it is so hard to resist.
Acting before the candle closes
Half-formed hammers become bearish candles, and engulfing candles shrink back inside their predecessor. Wait for the close.
Ignoring the size of the pattern
An engulfing candle after a news release can be 80 pips tall, putting the logical stop so far away that the position must be tiny. A pattern on a one-minute chart can be so small that the spread eats much of it. Check the stop distance before you get attached to the setup.
Trusting success-rate tables
Websites quote precise win rates for each pattern. Those figures depend on the market, period, timeframe and exact definition used, and rarely carry over to how you trade. The only statistics that matter are your own: log every pattern trade with a screenshot in a trading journal, practise on a demo account first, and trade live only with a firm authorised by a serious regulator such as the UK’s Financial Conduct Authority.
Frequently asked questions
What are the most reliable candlestick patterns?
No candlestick pattern is reliable on its own. Patterns with more information, such as engulfing patterns and morning and evening stars, are often given more weight than single candles, but any pattern is only as good as its location: at a tested level, after a clear move, on a higher timeframe. Your own journal is the best guide.
What is the difference between bullish and bearish candlestick patterns?
Bullish candlestick patterns, such as the hammer, bullish engulfing and morning star, suggest buyers are taking control and matter after a fall. Bearish ones, such as the shooting star, bearish engulfing and evening star, suggest sellers are taking control and matter after a rise. Some shapes, like the hammer and hanging man, are identical and named by what came before.
How many candlestick patterns are there?
Traditional Japanese charting names a great many, and you do not need most of them. The 12 in this guide cover the main stories a candle can tell: rejection, indecision, takeover and pause. Understand those and you can read unnamed candles too.
Is a doji bullish or bearish?
Neither. A doji shows that neither side won the period. After a long rise it can warn that buyers are tiring; after a long fall, that sellers are. The next candle usually shows which way the indecision resolved, which is why most traders wait for it.
Do candlestick patterns work in forex?
The reading works the same way as in any market, because it describes buying and selling pressure. Two details differ: forex rarely gaps between candles during the week, so two-candle patterns are judged by their closes, and daily candles depend on when your platform closes the day.
Which timeframe is best for candlestick patterns?
Higher timeframes, such as the four-hour and daily charts, give fewer but more meaningful patterns. Lower timeframes give many more, with more noise. A common approach is to find the trend and levels on a higher timeframe and look for the pattern on the one you trade.
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