10 Most Powerful Candlestick Patterns Every Trader Must Know1. Doji – The Candle of Indecision
A Doji looks like a cross (+). This happens when the open and close price are almost the same.
What it means: Neither buyers nor sellers are in full control. Market is confused.
When it matters:
After a strong uptrend → could mean trend reversal (bears may take control).
After a strong downtrend → could mean bulls are coming back.
Types of Doji:
Standard Doji – neutral, just indecision.
Dragonfly Doji – long bottom shadow → buyers may soon dominate.
Gravestone Doji – long upper shadow → sellers may soon dominate.
Example: Imagine a stock rises for 7 days. On the 8th day, a Doji appears. This tells traders: “The rally may be slowing. Watch carefully.”
Tip: Doji alone is not enough. Always confirm with the next candle.
2. Hammer – A Bullish Reversal Signal
A Hammer looks like a hammer: a small body at the top with a long bottom shadow (at least 2x body size).
What it means: Sellers pushed the price down, but buyers fought back strongly and closed near the top. Bulls are gaining strength.
When it matters: Appears at the bottom of a downtrend, hinting at reversal.
Example: A stock keeps falling for 5 days. On the 6th day, a hammer forms near a support level. Next day, price rises. This confirms reversal.
Tip: Best when confirmed with high trading volume.
3. Inverted Hammer – A Hidden Bullish Clue
The Inverted Hammer looks like an upside-down hammer (small body at bottom, long top shadow).
What it means: Buyers tried to push higher, sellers resisted, but buyers showed strength. Could mean downtrend is weakening.
When it matters: Appears at the end of a downtrend, often followed by bullish candles.
Example: After a long fall, an inverted hammer forms. Next day, a strong green candle appears. This often signals a reversal.
Tip: Always wait for the next candle confirmation.
4. Shooting Star – The Bearish Reversal
The Shooting Star is the opposite of the Inverted Hammer, but it appears after an uptrend.
What it means: Buyers tried to push higher, but sellers pushed the price back down. Bears are taking over.
When it matters: Appears at the top of an uptrend, often signaling reversal.
Example: A stock keeps rising. Then a shooting star forms. Next day, a red candle follows → bearish reversal confirmed.
Tip: Stronger if it forms near resistance levels.
5. Bullish Engulfing – Buyers Take Control
The Bullish Engulfing is a two-candle pattern. A small red candle is followed by a larger green candle that engulfs it completely.
What it means: Buyers are now stronger than sellers.
When it matters: Appears after a downtrend, signaling reversal to the upside.
Example: A stock keeps falling. Then a small red candle is followed by a big green one. Price often rises further.
Tip: The bigger the green candle, the stronger the signal.
6. Bearish Engulfing – Sellers Dominate
The Bearish Engulfing is the opposite of Bullish Engulfing. A small green candle is followed by a big red candle that engulfs it.
What it means: Sellers have taken control.
When it matters: Appears after an uptrend, signaling possible reversal.
Example: A stock rises for 10 days. Then a small green candle is swallowed by a big red candle. Often, this is the start of a decline.
Tip: Stronger near resistance zones.
7. Morning Star – A Strong Bullish Reversal
The Morning Star is a three-candle pattern:
Large red candle.
Small candle (red or green, showing indecision).
Large green candle closing above the midpoint of the first red candle.
What it means: Sellers are losing control, buyers are coming back strong.
When it matters: Appears at the bottom of a downtrend.
Example: A stock keeps falling. Then a red candle, a doji, and a strong green candle appear. Trend reverses upward.
Tip: Works best with high volume on the third candle.
8. Evening Star – The Bearish Counterpart
The Evening Star is the opposite of Morning Star:
Large green candle.
Small candle (indecision).
Large red candle closing below the midpoint of the first green candle.
What it means: Buyers are exhausted, sellers are taking control.
When it matters: Appears at the top of an uptrend.
Example: Stock rises for days, then a green candle, a doji, and a big red candle form. Often, this signals a bearish trend.
Tip: Stronger when seen near resistance.
9. Harami – The Subtle Warning
A Harami is when a small candle forms inside the body of the previous candle.
Bullish Harami: Small green inside large red → sellers weakening.
Bearish Harami: Small red inside large green → buyers weakening.
What it means: Trend may be slowing down. Could signal reversal or pause.
When it matters: Works best when combined with support/resistance zones.
Example: After a long rally, a large green candle appears. Next day, a small red candle forms inside it → bearish harami. Price may fall next.
Tip: Always wait for the next candle for confirmation.
10. Three White Soldiers & Three Black Crows
These are powerful multi-candle patterns.
Three White Soldiers: 3 strong green candles in a row, each closing higher.
Meaning: Strong bullish momentum.
Context: After a downtrend → reversal upward.
Three Black Crows: 3 strong red candles in a row, each closing lower.
Meaning: Strong bearish momentum.
Context: After an uptrend → reversal downward.
Example: After a fall, three green candles appear → bulls taking over.
Tip: Be cautious of overbought/oversold levels.
How to Use These Patterns in Real Trading
Candlestick patterns are powerful, but they are not magic. Here’s how to use them properly:
Combine with Support & Resistance – Patterns near key zones are stronger.
Check Volume – Higher volume makes signals more reliable.
Look at Bigger Timeframes – A pattern on daily charts is more powerful than on 5-minute charts.
Use Indicators Together – Combine with RSI, MACD, or Moving Averages.
Risk Management – Always use stop-loss. Patterns can fail.
Common Mistakes to Avoid
Trading only based on one pattern.
Ignoring overall market trend.
Not waiting for confirmation.
Forgetting volume analysis.
Overtrading every signal.
Conclusion
Candlestick patterns are the language of the market. If you learn to read them, you can understand what buyers and sellers are planning.
The 10 most powerful patterns — Doji, Hammer, Inverted Hammer, Shooting Star, Bullish Engulfing, Bearish Engulfing, Morning Star, Evening Star, Harami, and Three Soldiers/Three Crows — are essential for any trader.
They don’t guarantee profits, but when combined with support/resistance, volume, and indicators, they become a strong weapon in trading.
Remember: trading is about probabilities, not certainties. Candlesticks help tilt the odds in your favor.
