41 Candlestick Patterns Explained With Examples

If price closes back inside the pattern after a breakout, I’m out—no debates. Failed patterns often reverse violently, and staying in them can turn a small loss into a margin call. I’ve forex candlestick patterns held onto trades way past their expiration date because I refused to admit the pattern failed. For example, I’d watch a breakout retrace into the pattern’s body, leaving a long wick, but cling to hope instead of cutting losses.

Reversal patterns are critical technical analysis tools that indicate a potential shift in market sentiment and price direction. For instance, when I see a morning star candlestick pattern like in the image below after an uptrend, I know a bearish reversal pattern might be brewing. Forex traders use candlestick chart patterns to identify Forex trading signals – or signs of future price movements, in order to enter a trade at the right place. Candlesticks are formed using the open, high, low and close of the bar. The principle difference between candlestick patterns and bar patterns lies in the emphasis on the open and close. Bar charts do not treat the open and close with any special weighting.

• While candlestick patterns are very useful for identidying market trend, they have  limitations that can impact their reliability.
• It signals a potential peak with more deliberation than a single-candle pattern, showing a gradual shift from buying to selling pressure.
• A stop loss is reasonable to set at the local low inside the second channel, which was marked before the channel’s resistance had been broken out (Stop zone).

Double Top chart pattern

Two-candle pattern where the second candle opens lower and closes above the midpoint of the first candle, signaling bullish reversal. The long upper wick demonstrates that buyers initially pushed the price higher. However, aggressive selling quickly stepped in to reverse the direction and close the candle near the open.

• The closer the close is to the high, the closer the Bulls are to winning the engagement, and the closer the close is to the low, the closer the Bears are to winning.
• The upward trajectory has overtaken the preceding downward path even though the bears controlled the first candle, the bulls have forcefully seized power.
• A candlestick enacts the battle between Bulls (Buyers) and Bears (sellers) during the time frame of the candlestick.
• This written/visual material is comprised of personal opinions and ideas and may not reflect those of the Company.
• The Dragonfly Doji candlestick pattern is formed by one single candle.

Two or more candles with matching lows indicating a potential bullish reversal. Small bullish candle fully contained within previous bearish candle; suggests reversal or trend weakening. Three consecutive long bullish candles, signaling strong bullish momentum.

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Often observed in longer time frames, the rounding top pattern is used by traders to anticipate the end of an uptrend and the beginning of a potential downtrend. This pattern suggests a strong shift in market sentiment from bullish to bearish. This pattern shows a significant shift in market sentiment from bearish to bullish. Three-candle pattern with middle candle as Doji; signals indecision followed by bearish reversal. Small body at bottom with long upper shadow; indicates bearish reversal at uptrend. Three-candle pattern signaling bearish reversal; first bullish, second inside, third bearish.

Combining with Other Technical Indicators

While this guide covers many patterns, traders often start by mastering a few high-probability setups seen most often in the market. Candlestick patterns are structured visual representations of price movement that reflect the interaction between buying and selling forces over a given time period. Without understanding key Forex candlestick signals, it’s easy to misinterpret the foreign exchange market. If volatility is low, if the pattern’s boundaries are messy, or if momentum indicators are flat, I walk away. Waiting for A+ setups—those aligned with the trend, confirmed by volume, and timed around key support/resistance—saves mental capital and keeps my win rate intact. When I first started trading patterns, I thought recognising a head and shoulders or a double top was enough to guarantee profits.

Continuation Patterns

Instead, for scalp trades I start with the 4-hour chart to see the bigger trend—before zooming into the 15-minute or 5-minute charts to time my entries. The Rising Wedge is a pattern converging upward toward trendlines in an uptrend. If you see a break downward, it’s likely a sign of a bearish reversal. For traders seeking additional confirmation, combining this pattern with harmonic patterns, which use Fibonacci ratios to pinpoint reversal zones can increase the reliability of your setup. When swing trading, or spot trading over periods of weeks, months or even years, you still want to use some basic technical analysis. If you are building a long-term investment such as index funds, you will likely have recurring bids or buy orders every month, reducing the need for chart analysis.

Expanding Wedge – profitable Forex pattern

A white marubozu candle has a long white body and is formed when the open equals the low and the close equals the high. The white marubozu candle indicates that buyers controlled the price of the stock from the open to the close, and is considered very bullish. While patterns appear on all timeframes, their signals are often more reliable on higher timeframes like the 4-hour (H4) and Daily charts, as they filter out market noise. A common strategy is to identify a major pattern on a daily chart and use a lower timeframe like the 1-hour (H1) for a precise trade entry. We have compiled real-time performance data and trader success stories from 2020–2025.

Price in forex pairs is also tied to broader geopolitics, financial news or major events. Entering traders on currency pairs before major announcements such as the Consumer Price Index, inflation and even global liquidity. When you can tell the difference between a healthy pause and a real reversal, you gain the confidence to stay in your winning trades longer. You stop making that classic, costly mistake of closing a perfectly good position just because the market took a little break. The sheer dominance of that second candle is a clear visual warning. The bigger the engulfing candle is compared to the first one, the more powerful the bearish signal becomes.

The first one usually happens when there is a break in trading on an exchange; the second one results from fundamental factors, affecting the market. This methodology suggests exploiting the second type of gaps, that is, the gaps emerging during trading sessions. Statistically, it is thought that most of the financial instruments that gap at the opening often move back towards the previous levels before trading resumes in the usual mode. In common technical analysis, the Cube is classified as a continuation pattern, but it is most often a kind of the correction pattern, “flat waves”.

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Trading the scheme is based on the idea that the trend, prevailing before the channels started developing, will be resumed by the price once the channels are completed. The Mount pattern is commonly thought to be a reversal pattern, unlike the Three Crows that is a continuation one. The pattern is simply the inverse of the Head and Shoulders Top in the falling market with the neckline being a resistance level to watch for a breakout higher.

There is no formal bullish counterpart, but traders often compare it to the Three Black Crows due to visual similarity and bearish intent. It ideally forms near support zones, oversold RSI, or lower Bollinger Band. You are very likely to get a signal when the third candle gaps up, forming visual separation.