Candlestick Patterns Cheat Sheet 2023

Last Updated: July 23, 2023

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What have charting apps, stock analysis software and technical analysis tools in common? They all offer multiple chart types for price visualization, including candlestick charts. But what are the best bullish and bearish candlestick patterns that help you identify trend continuation and trade reversals?

Let me introduce you to the 19 most effective candlestick patterns with examples and charts. If you want to learn what it takes to become a day trader, please consider reading my free day trading guide.

Table of Contents

Anatomy of a Candlestick

Before we jump into the details of the best bullish and bearish candlestick patterns, let’s ensure we are all on the same page regarding the terms. Below you will find a picture that indicates what I refer to when talking about the open, high, low and close prices, bullish and bearish candlesticks and the upper and lower wicks and shadows:

Open, High, Low, Close

A candlestick always consists of four price points that are shown in a candlestick chart. The open represents the opening price of the period, the high is the highest price of the period, the low represents the lowest low within the period, and the close is the closing price of the period.

Candle Body

The body of the candlestick represents the price difference between the opening price and the closing price of the period. If the close is above the open, the candlestick is bullish, and if the close is below the open, the candlestick is bearish.

Candle Wick/Shadow

The small lines above and below a candle body are called shadows of the candle or wicks and represent the price difference between the high of the period vs. the upper price of the candle body (upper wick/shadow) and the price difference of the low of the period vs. the lower price of the candle body (lower wick/shadow).

Candle Color

The candle color can be chosen within your trading or analysis platform. Most of the time, green candles signal a bullish period, and red candles are a bearish period, but you can also mark your candles in blue, purple or whatever color you want. It is important that you use colors that you interpret correctly to identify price trends correctly.

Bullish Candlestick Patterns

Bullish candlestick patterns are used within the technical analysis to either confirm an uptrend (higher lows, higher highs) or to identify potential reversals of an existing downtrend that potentially reverses to a bullish uptrend.

Hammer Candlestick

The Hammer is a reversal pattern frequently occurring at the end of a selloff, indicating that the demand increases after multiple periods with downside momentum. The Hammer candlestick is especially powerful when the previous market selloff showed high trading volume, so people who potentially sold their positions earlier will help to get more upside momentum again to move to the upside.

The Hammer candlestick works pretty well at higher lows in an overall uptrend of the market.

Type: Bullish
Most powerful: At higher lows, after a market selloff
Number of candles required: 1

Inverted Hammer

The Inverted Hammer is also a bullish reversal pattern, such as the regular Hammer candlestick. However, the setup looks a bit different since the closing price of the candle is at its lows, and it needs confirmation that the setup is valid. Such confirmation is the break of the high of the Inverted Hammer candlestick.

The psychology behind this is that within the period where the Inverted Hammer was formed, bears had control, and the assumption was that the market would continue to the downside, just like within the previous periods. But then, a big reversal starts in the following period, where the high of the Inverted Hammer gets broken to the upside to confirm the bullish validness of the candlestick pattern.

Type: Bullish
Most powerful: At higher lows
Number of candles required: 1

Bullish Engulfing Pattern

The Bullish Engulfing Pattern appears, as the name suggests, under bullish market conditions. That’s typically at higher swing lows. Let’s say the market went up strongly, then consolidated at a high price level. Three to five candlesticks later, you see a small red candle with small wicks on both ends. The following candlestick opens near its lows and then strongly moves to the upside.

The green bullish candlestick body is larger than the previous candles red body, and the close of the green candle is near its highs.

Type: Bullish
Most powerful: At higher lows
Number of candles required: 2

Piercing Pattern

The Piercing Pattern can be seen as a slight variation of the Bullish Engulfing Pattern, where the open of the new period is below the previous period close and then steadily climbs up to over the previous candlestick’s midpoint to close there, but without reaching the previous body’s high.

The candlestick pattern is a bullish one and indicates that bulls have gained back control.

Type: Bullish
Most powerful: At higher lows
Number of candles required: 2

Morning Star Pattern

The Morning Star Pattern is the first bullish candlestick pattern that consists of 3 candles. The first period’s candle has a long red body, the second period’s candle then has a small-bodied candle (green or red body), and finally, a long green body in the third period.

Type: Bullish
Most powerful: At higher lows
Number of candles required: 3

Three White Soldiers

The Three White Soldiers pattern does not happen that often since it needs 3 nearly identical candlesticks in subsequent order. The first candle is a bullish one with an open near the low and a close near the high with a wide green body.

The second period firstly opens weak with a huge down gap, but the prices turn to the upside again and close at new highs with a second strong green wide-range candle. Then, the same happens in the third period.

Think of it like this. After a strong period with upside direction, the price gaps lower, which at first is bearish, but before the candle closes, prices go beyond the previous period’s high and close above them. And the same happens the period after.

Type: Bullish
Most powerful: At higher lows, after a market selloff
Number of candles required: 3

Rising Three Methods

The Rising Three Methods pattern consists of 3 downside candles with a small candle body between two bullish upside candles, where the price range of the three candles in the middle is within the price range of the body of the first bullish candle.

The lowest prices of the small consolidation candles should never exceed the lowest price of the first candle and the fifth candle should close higher than the upper body price level of the first consolidation candle.

The psychology behind this chart pattern is that the first strong up move gives bulls control over the market, and bears try to push the market back to the downside. However, they fail and prices only consolidate slightly before bulls gain finally control with another strong up-move.

So, in the first period, prices rise significantly between the open and close, then in periods 2,3 and 4, the bears try to regain control. Still, they finally gave up in period 5 when the prices continuously rose from a low point to a close near the period’s high.

Type: Bullish
Most powerful: Near all-time highs
Number of candles required: 5

Bearish Candlestick Patterns

Bearish candlestick patterns are used within technical analysis to either confirm a downtrend (lower highs, lower lows) or to identify potential reversals of an existing uptrend that potentially reverses to a bearish downtrend.

Shooting Star Candlestick

Do you remember the Hammer candlestick mentioned in the bullish candlestick pattern section? The Shooting Star is the exact opposite of it and signals a potential reversal of an existing uptrend to the downside price momentum.

At this point, you don’t know yet if it is a short-term reversal or longer term, but the bears got control of the market in that period that formed the Shooting Star.

Here, the market shoots up strongly making new highs but then falls together back to near its opening price.

Type: Bearish
Number of candles required: 1

Hanging Man Candlestick

The Hanging Man candlestick is the counterpart pattern to the Inverted Hammer, where the market opens strong, then consolidates to significant new lows but closes near the daily high.

This, at first, looks like a bullish signal, but it is not necessarily the case because the reversal back to the upside is often the first building of a lower high on a lower time frame.

A confirmation of the bearishness of the Hanging Man candle is a downside move in the following period.

Type: Bearish
Number of candles required: 1

Bearish Engulfing Pattern

The Bearish Engulfing Pattern is for bears, while the Bullish counterpart is for bulls and consists of 2 candlesticks. The first period closes strong with small wicks on the upside and downside.

Then, in the second period, the market opens strong but falls together and closes below the previous period’s open. Therefore, the red body of the current period integrates the smaller green body of the previous candle.

This bearish candlestick pattern often ignites a subsequent down move since support zones of lower time frames have often been broken before.

Type: Bearish
Number of candles required: 2

Dark Cloud Cover

The Dark Cloud Cover is the counterpart to the Piercing Pattern and the least stronger variant of the Bearish Engulfing Pattern. The market opens above the previous period’s close but then loses upside momentum to close below the previous period’s candlestick body midpoint signaling a weakening market.

The break of the 2nd candle’s low of the Dark Cloud Cover is then the final confirmation of the trend reversal from bullish to bearish.

Type: Bearish
Number of candles required: 2

Evening Star Pattern

The Evening Star is the bearish counterpart to the Morning Star Pattern and signals a reversal from a bullish market to a bearish market.

It is the first bearish candlestick pattern that requires 3 candlesticks for its appearance, where the first period is a strong bullish period, followed by a kind of tight-range neutral period, and then a third period with bearish weakness in the market.

Type: Bearish
Number of candles required: 3

Three Black Crows

The Tree Black Crows are as seldom as the Three White Soldiers due to the price action needed to be a valid pattern. You see a first period with an open near the high of the period, then a close near the low of the period.

Then, the second period’s candle gaps up strong but weakened to finally close below the previous period’s close. And in the third period, it happens again. The bulls try to get control back over the market, and the period opens strong, but again, the close is below the previous period’s close.

Type: Bearish
Number of candles required: 3

Falling Three Methods

The Falling Three Methods pattern consists of 3 upside candles with a small candle body between two bearish downside candles, where the price range of the three candles in the middle is within the price range of the body of the first bearish candle.

The highest prices of the small pullback candles should never exceed the highest price of the first candle and the fifth candle should close lower than the lower body price level of the first small upside candle.

The psychology behind this chart pattern is that the first strong downside move gives bears control over the market, and bulls try to push the market back to the upside. However, they fail and prices only consolidate slightly before bears gain finally control with another strong downside move.

So, in the first period, prices fall significantly between the open and close, then in periods 2,3 and 4, the bulls try to regain control. Still, they finally gave up in period 5 when the prices continuously fell from a high point to a close near the period’s low.

Type: Bearish
Number of candles required: 5

Special Candlestick Patterns

Doji Candle

A Doji Candle can signal a reversal of an uptrend and downtrend. What makes it special is that the price of the close of the period equals the opening price (or at least extremely near together). So, neither bulls nor bears have control here.

Suppose a Doji appears after multiple bullish periods. In that case, it can signal a reversal to the downside, while when a Doji appears after multiple bearish periods, it can signal a reversal to the upside.

The upper and lower wicks are relatively small.

Type: Neutral
Number of candles required: 1 + confirmation

Spinning Top

The Spinning Top’s small body and long wicks suggest that neither the bulls nor the bears have gained market control.

While the Doji candle has only small candle shadows, the spinning top has relatively long shadows (wicks), and the closing prices are nearly equal to the opening prices.

Type: Neutral
Number of candles required: 1 + confirmation

Inside Bar Pattern

The inside bar pattern is a special 2-candlestick pattern, where the price range of the second period is entirely within the range of the previous period’s candle. So the high of the current period is below the high of the previous period, and the low of the current period is above the low of the previous period.

The break of the smaller candlesticks’ high or low signals the direction of the trend.

Type: Neutral
Number of candles required: 2 + confirmation

3 Bar Play Pattern

The 3 Bar Play Pattern is a powerful pattern that combines the power of the inside bar pattern with the opening range breakout. After a first period with a really strong bullish or bearish candlestick with a big candlestick body, the market consolidates in a narrow range collecting energy to finally break out of the formations high or low.

Type: Bullish and Bearish
Number of candles required: 3 + confirmation

What Is a Candlestick Pattern

Candlestick patterns are trading tools used by traders who utilize technical analysis methods to predict the price of an underlying asset. There are dozens of candlesticks and candlestick patterns, where a single candlestick can already signal a trend confirmation or reversal, and also candlestick patterns which consist of a minimum of two candles and signal also a trend confirmation or reversal.

What are Reversal Candlestick Patterns

Reversal candlestick patterns are more speculative than trend continuation patterns and indicate a potential reversal of the overall market trend from an existing bullish uptrend to a bearish downtrend or vise versa, from a bearish downtrend to a bullish uptrend.

Bullish Reversal Patterns

The bullish reversal patterns are those that appear in a current downtrend, where higher and lower time frames point lower. Then a bullish reversal pattern appears on a time frame where traders try to predict that the subsequent price moves in other time frames follow the trend to reverse the market from a bearish to a bullish one.

Bearish Reversal Patterns

The bearish reversal patterns are those that appear in a current uptrend, where higher and lower time frames point higher. Then a bearish reversal pattern appears on a time frame where traders try to predict that the subsequent price moves in other time frames follow the trend to reverse the market from a bullish to a bearish one.

Candlestick Patterns Summary

Candlestick patterns and charts help traders to understand the price movements within the chosen time frame better and provide more insights than a line chart would. Backtesting software is frequently used to identify the candle patterns that work best in current market environments. A combination of candlestick patterns and other tools out of the technical analysis toolbox can improve analysis further.