Candlestick patterns
Shapes made by one or a few candles that show how buyers and sellers fought over a period. Read in context, they are among the oldest tools in charting.
What candlestick patterns are.
Shapes made by one to three candles that hint at who is in control: buyers or sellers.
Each candle shows four prices for one period: the open, the high, the low and the close. The thick part, the body, spans the open and the close.
The thin lines above and below the body are wicks, also called shadows. They show how far price travelled before it was pushed back.
When the close is above the open, it is an up candle. When the close is below the open, it is a down candle. Colours depend on your platform.
On the charts in this guide, up candles are hollow and down candles are solid navy. Many platforms use green and red instead.
A candlestick pattern is a recognisable shape made by one to three candles. Traders read patterns for clues about whether buyers or sellers are gaining ground.
How to read a candle.
Four questions to ask of any candle before you look for a pattern.
Which way did it close?
An up candle closed above its open. A down candle closed below it. This tells you who won the period.
How big is the body?
A long body shows a strong move from open to close. A small body shows little change, a sign of indecision.
How long are the wicks?
A long lower wick means sellers pushed price down but buyers pushed it back. A long upper wick shows the opposite.
Where does it sit?
The same candle means different things after a long fall, after a long rise or in the middle of a range.
Once you can read a single candle, patterns become easier to follow. Here are seven of the most widely used.
| Pattern | What it looks like | What it can suggest |
|---|---|---|
| Doji | Open and close almost equal, with wicks either side | Indecision between buyers and sellers |
| Hammer | Small body near the top, lower wick at least twice the body | Buyers pushed back after a fall |
| Shooting star | Small body near the bottom, long upper wick | Sellers pushed back after a rise |
| Bullish engulfing | An up body that covers the whole previous down body | Buyers taking control after a fall |
| Bearish engulfing | A down body that covers the whole previous up body | Sellers taking control after a rise |
| Morning star | A long down candle, a small candle, then a long up candle | A possible turn up after a fall |
| Evening star | A long up candle, a small candle, then a long down candle | A possible turn down after a rise |
How traders use them.
Patterns matter most in the right place, and once the next candle has closed.
Context first.
A hammer means something after a long fall, near support. The same shape in the middle of a range tells you very little.
Wait for confirmation.
Many traders wait for the next candle. In the chart above, the strong up candle after the hammer is that confirmation.
Size matters.
A pattern built from long candles shows more conviction than one built from tiny candles in a quiet market.
Timeframe matters.
A pattern on a daily chart reflects a full day of trading. The same pattern on a one-minute chart reflects far less.
Common mistakes.
Where traders new to candlestick patterns most often go wrong.
Reading a pattern without its context. Shapes after a long trend or at a key level carry more meaning than shapes in the middle of a range.
Acting before the candle closes. Until the period ends, a hammer can still turn into a different shape.
Learning dozens of patterns at once. A handful of common ones, read well, is more useful than a long list.
Ignoring the trend. A single reversal pattern against a strong trend often fails.
Forgetting that colours vary. Check your platform settings so you know which candles are up and which are down.
Using them on MetaTrader 5.
Candlesticks are one of the three chart types in MT5.
Open a chart.
In MetaTrader 5, open the instrument and timeframe you want to study.
Switch to candlesticks.
Go to Charts, then Candlesticks, or press Alt+2. Alt+1 gives a bar chart and Alt+3 a line chart.
Set the colours.
Press F8 to open the chart properties. On the Colors tab, choose the colours for up and down candles.
Check the prices.
Press Ctrl+D to open the Data Window. Hover over a candle to see its open, high, low and close.
Questions, answered.
What traders ask most about candlestick patterns.
01Do I need to learn every pattern?
02Why are my candles different colours from the chart here?
03Which timeframe is best for candlestick patterns?
04Is a hammer the same as a hanging man?
05Can I practise reading candles first?
Practise it on a demo.
Switch to candlesticks on a free MT5 demo and practise spotting patterns in context before you trade with real money.
Trading CFDs on a live account puts your capital at risk and you can lose money. A demo does not.