Top 5 Candlestick Patterns Every Trader Must Know

Candlestick charts originated in Japan over 200 years ago and remain one of the most powerful tools in a trader's arsenal.

1. Doji

A Doji forms when the opening and closing prices are nearly equal. It signals indecision in the market and often precedes a reversal.

2. Hammer

A Hammer has a small body at the top and a long lower shadow. It appears at the bottom of a downtrend and signals a potential bullish reversal.

3. Engulfing Pattern

A Bullish Engulfing occurs when a large green candle completely engulfs the previous red candle. It's a strong reversal signal.

4. Morning Star

A three-candle pattern: a large red candle, a small-bodied candle (the star), and a large green candle. Signals the end of a downtrend.

5. Shooting Star

Opposite of a Hammer — small body at the bottom, long upper shadow. Appears at the top of an uptrend and signals a bearish reversal.

Practice Makes Perfect

Use our Quiz section to test your knowledge of these patterns!