8/19/23, 9:43 AM Candlestick pattern - Wikipedia

Candlestick pattern
In financial technical analysis, a candlestick pattern is a movement in prices shown graphically
on a candlestick chart that some believe can predict a particular market movement. The
recognition of the pattern is subjective and programs that are used for charting have to rely on
predefined rules to match the pattern.[1] There are 42 recognized patterns that can be split into
simple and complex patterns.[2] Author Thomas Bulkowski takes an in-depth look at 103
candlestick formations, from identification guidelines and statistical analysis of their behaviour to
detailed trading tactics. He makes important discoveries and statistical summaries, as well as a
glossary of relevant terms and a visual index to make candlestick identification easy.[3]

History
Some of the earliest technical trading analysis was used to track prices of rice in the 18th century.
Much of the credit for candlestick charting goes to Munehisa Homma (1724–1803), a rice
merchant from Sakata, Japan who traded in the Ojima Rice market in Osaka during the Tokugawa
Shogunate. According to Steve Nison, however, candlestick charting came later, probably
beginning after 1850.[4]

Formation of candlestick
Candlesticks are graphical representations of price movements
for a given period of time. They are commonly formed by the
opening, high, low, and closing prices of a financial
instrument.[5]

If the opening price is above the closing price then a filled

(normally red or black) candlestick is drawn.

If the closing price is above the opening price, then normally a The aspects of a candlestick pattern
green or hollow candlestick (white with black outline) is shown.

The filled or hollow portion of the candle is known as the body or real body, and can be long,
normal, or short depending on its proportion to the lines above or below it.

The lines above and below, known as shadows, tails, or wicks, represent the high and low price
ranges within a specified time period. However, not all candlesticks have shadows.

Simple patterns

Big Black Candle Has an Big White Candle Has an

unusually long black body with a
wide range between high and
low. Prices open near the high
and close near the low.
Considered a bearish pattern.
unusually long white body with a
wide range between high and low
of the day. Prices open near the
low and close near the high.
Considered a bullish pattern.

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Black Body Formed when the White Body Formed when the
opening price is higher than the closing price is higher than the
closing price. Considered to be opening price and considered a
a bearish signal. bullish signal.

Long-Legged Doji Consists of a

Doji Formed when opening and
Doji with very long upper and
closing prices are virtually the
lower shadows. Indicates strong
same. The lengths of shadows
forces balanced in opposition. If
can vary. If previous are bearish,
previous are bullish, after long
after a Doji, may be ready to
legged doji, may be ready to
bullish.
bearish.
Dragonfly Doji Formed when
Gravestone Doji Formed when
the opening and the closing
the opening and closing prices are
prices are at the highest of the
at the lowest of the day. If it has a
day. If it has a longer lower
longer upper shadow it signals a
shadow it signals a more bullish
bearish trend. When it appears at
trend. When appearing at
market top it is considered a
market bottoms it is considered
reversal signal.
to be a reversal signal.
Hanging Man A black or white
Hammer A black or white
candlestick that consists of a small
candlestick that consists of a
body near the high with little or no
small body near the high with
upper shadow and a long lower
little or no upper shadow and a
tail. The lower tail should be two or
long lower tail. Considered a
three times the height of the body.
bullish pattern during a
Considered a bearish pattern
downtrend.
during an uptrend.
Shooting Star A black or white
Inverted Hammer A black or candlestick that has a small body,
white candlestick in an upside- a long upper shadow and little or
down hammer position. no lower tail. Considered a bearish
pattern in an uptrend.
Long Upper Shadow A black or
Long Lower Shadow A black or
white candlestick with an upper
white candlestick is formed with a
shadow that has a length of 2/3
lower tail that has a length of 2/3
or more of the total range of the
or more of the total range of the
candlestick. Normally
candlestick. Normally considered
considered a bearish signal
a bullish signal when it appears
when it appears around price
around price support levels.
resistance levels.
Marubozu A long or normal
Spinning Top A black or white
candlestick (black or white) with
candlestick with a small body. The
no shadow or tail. The high and
size of shadows can vary.
the low represent the opening
Interpreted as a neutral pattern but
and the closing prices.
gains importance when it is part of
Considered a continuation
other formations.
pattern.

Shaven Head A black or white

Shaven Bottom A black or white
candlestick with no upper
candlestick with no lower tail.
shadow. [Compared with
[Compare with Inverted Hammer.]
hammer.]

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Complex patterns

Bearish Harami Consists of an

unusually large white body Bearish Harami Cross A
followed by a small black body large white body followed by
(contained within a large white a Doji. Considered a reversal
body). It is considered a bearish signal when it appears at the
pattern when preceded by an top.
uptrend.

Bullish 3-Method
Bearish 3-Method Formation
Formation (Also known as
(Also known as "Falling Three")
"Rising Three") Consists of a
A long black body followed by
long white body followed by
three small bodies (normally
three small bodies (normally
white) and a long black body.
black) and a long white body.
The three white bodies are
The three black bodies are
contained within this jedi range
contained within the range of
of the first black body. This is
first white body. This is
considered a bearish
considered a bullish
continuation pattern.
continuation pattern.

Bullish Harami Consists of an

unusually large black body Bullish Harami Cross A
followed by a small white body large black body followed by
(contained within large black a Doji. It is considered a
body). It is considered a bullish reversal signal when
pattern when preceded by a preceded by a downtrend.
downtrend.

Engulfing Bearish Line Engulfing Bullish Consists

Consists of a small white body of a small black body that is
that is contained within the contained within the following
following large black large white candlestick.
candlestick. When it appears at When it appears at the
the top it is considered a major bottom it is interpreted as a
reversal signal. major reversal signal.

Evening Doji Star Consists

of three candlesticks. First is
a large white body
Evening Star Consists of a
candlestick followed by a Doji
large white body candlestick
that gaps above the white
followed by a small body
body. The third candlestick is
candlestick (black or white) that
a black body that closes well
gaps above the previous. The
into the white body. When it
third is a black body candlestick
appears at the top it is
that closes well within the large
considered a reversal signal.
white body. It is considered a
It signals a more bearish
reversal signal when it appears
trend than the evening star
at the top level.
pattern because of the Doji
that has appeared between
the two bodies.

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Morning Doji Star Consists

of a large black body
Morning Star Consists of a
candlestick followed by a Doji
large black body candlestick
that occurred below the
followed by a small body (black
preceding candlestick. On
or white) that occurs below the
the following day, a third
large black body candlestick.
white body candlestick is
On the following day, a third
formed that closes well into
white body candlestick is
the black body candlestick
formed that closes well into the
which appeared before the
black body candlestick. It is
Doji. It is considered a major
considered a major reversal
reversal signal that is more
signal when it appears at the
bullish than the regular
bottom.
morning star pattern because
of the existence of the Doji.

Rising Window A window

Falling Window A window
(gap) is created when the low
(gap) is created when the high
of the second candlestick is
of the second candlestick is
above the high of the
below the low of the preceding
preceding candlestick. It is
candlestick. It is considered that
considered that the window
the window should be filled with
should provide support to the
a probable resistance.
selling pressure.

Three White Soldiers

Three Black Crows Consists
Consists of three long white
of three long black candlesticks
candlesticks with
with consecutively lower closes.
consecutively higher closes.
The closing prices are near to
The closing prices are near
or at their lows. When it
to or at their highs. When it
appears at the top it is
appears at the bottom it is
considered a top reversal
interpreted as a bottom
signal.
reversal signal.

On Neckline In a downtrend,
consists of a black candlestick Doji Star Consists of a black
followed by a small body white or white candlestick followed
candlestick with its close is near by a Doji that gaps above or
the low of the preceding black below these. It is considered
candlestick. It is considered a a reversal signal with
bearish pattern when the low of confirmation during the next
the white candlestick is trading day.
penetrated.

Tweezer Bottoms Consists

Tweezer Tops Consists of two
of two or more candlesticks
or more candlesticks with
with matching bottoms. The
matching tops. The candlesticks
candlesticks may or may not
may or may not be consecutive
be consecutive and their
and their sizes or colours can
sizes or colours can vary. It is
vary. It is considered a minor
considered a minor reversal
reversal signal that becomes
signal that becomes more
more important when the
important when the
candlesticks form another
candlesticks form another
pattern.
pattern.
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Piercing Line Consists of a

Dark Cloud Cover Consists of
black candlestick followed by
a long white candlestick
a white candlestick that
followed by a black candlestick
opens lower than the low of
that opens above the high of
the preceding but closes
the white candlestick and
more than halfway into the
closes well into the body of the
black body candlestick. It is
white candlestick. It is
considered a reversal signal
considered a bearish reversal
when it appears at the
signal during an uptrend.
bottom.

Darth Maul The correct term for

this candle is a "high wave
Judas Candle Consists of a
spinning top", a small candle
large black candle followed
body with unusually large upper
by a smaller white candle
and lower shadows, suggesting
with a lower tail which is
that the prior trend has run into
equal to the black candle in
a period of indecision. The term
length. This is indicative of
"Darth Maul" comes from Star
price capitulation.
Wars, as the candle looks
somewhat like a lightsaber.

Island reversal In both stock

trading and financial technical
analysis, an island reversal is Darth Maul The correct term
a candlestick pattern with for this candle is a "high
compact trading activity within a wave spinning top", a small
range of prices, separated from candle body with unusually
the move preceding it. A large upper and lower
"candlestick pattern" is a shadows, suggesting that the
movement in prices shown prior trend has run into a
graphically on a candlestick period of indecision. The
chart. This separation shown on term "Darth Maul" comes
the chart, is said to be caused from Star Wars, as the
by an exhaustion gap and the candle looks somewhat like a
subsequent move in the lightsaber.
opposite direction occurs as a
result of a breakaway gap.

Darth Maul The correct term

for this candle is a "high
Dark Cloud Cover Consists of
wave spinning top", a small
a long white candlestick
candle body with unusually
followed by a black candlestick
large upper and lower
that opens above the high of
shadows, suggesting that the
the white candlestick and
prior trend has run into a
closes well into the body of the
period of indecision. The
white candlestick. It is
term "Darth Maul" comes
considered a bearish reversal
from Star Wars, as the
signal during an uptrend.
candle looks somewhat like a
lightsaber.

References

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1. Lebeau, Charles (1991). Technical Traders Guide to Computer Analysis of the Futures Markets
(https://www.amazon.com/Technical-Traders-Computer-Analysis-Futures/dp/1556234686/ref=s
r_1_1?s=books&ie=UTF8&qid=1326806415&sr=1-1).
2. "16 candlestick patterns every trader should know" (https://www.ig.com/en/trading-strategies/1
6-candlestick-patterns-every-trader-should-know-180615). Retrieved 4 July 2020.
3. "Bulkowski's Stock Market Studies" (https://thepatternsite.com/studies.html).
thepatternsite.com. Retrieved 2023-03-22.
4. "Introduction to Candlesticks" (http://stockcharts.com/school/doku.php?id=chart_school:chart_
analysis:introduction_to_candlesticks). StockCharts. Stockcharts.com. Retrieved 29 June
2016.
5. "Candlestick Patterns" (https://thelazytrader.com/candlestick-patterns/). Thelazytrader.
Thelazytrader.com. Retrieved 21 July 2022.

External Links
Candlestick Patterns Explained (https://www.alphaexcapital.com/candlestick-patterns) at
alphaexcapital.com
Candlestick Patterns Explained (https://www.alphaexcapital.com/candlestick-patterns) at
Finoहिंदी.com

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