Top 10 Candlestick Patterns Every Forex Trader Must Know
Each candlestick shows four prices for a period: open, high, low and close. The body is the range between open and close; the wicks show the extremes. Patterns of one to three candles reveal who is in control — buyers or sellers. Patterns work best at key support and resistance levels and in the context of the trend.
Bullish reversal patterns
1. Hammer
A small body at the top of the range with a long lower wick (at least twice the body). It shows sellers pushed price down but buyers took it back. Most meaningful after a decline, at support.
2. Bullish engulfing
A bullish candle whose body completely covers the previous bearish body. A strong sign that buyers have taken over.
3. Morning star
Three candles: a strong bearish candle, a small indecision candle, then a strong bullish candle closing well into the first candle's body.
4. Piercing line
After a bearish candle, the next candle opens lower but closes above the midpoint of the previous body.
Bearish reversal patterns
5. Shooting star
The mirror of the hammer: small body near the low with a long upper wick, appearing after a rally, at resistance.
6. Bearish engulfing
A bearish body that fully engulfs the previous bullish body — sellers have overwhelmed buyers.
7. Evening star
Three candles: strong bullish, small indecision, then strong bearish closing deep into the first body.
8. Dark cloud cover
After a bullish candle, the next opens higher but closes below the midpoint of the prior body.
Indecision and continuation
9. Doji
Open and close are almost equal. On its own it signals indecision; at a key level after a strong move it can warn of a reversal.
10. Inside bar
A candle whose entire range sits inside the previous candle. It shows consolidation; a break of the mother bar's high or low often starts the next move, usually in the trend direction.
How to trade candlestick patterns
- Location first. A hammer in the middle of nowhere means little; at strong support it can be powerful.
- Trend context. Favour patterns in the direction of the higher-timeframe trend.
- Confirmation. Wait for the next candle to break the pattern's high (bullish) or low (bearish).
- Stop placement. Place the stop beyond the pattern's extreme wick.
- Targets. Aim for the next key level with a positive risk-to-reward.
Keep learning
Candlestick patterns, chart patterns, support and resistance and Fibonacci are all covered in depth in our 15-day trading course. Want to see them applied live? Follow our free channel or explore the VIP plans.