📈 12 Candle Stick Pattern Cheat Sheet

Okay, so you’ve been staring at those squiggly lines on your trading app, wondering what in the actual heck they mean. Good news, buttercup! Those aren’t just random art; they’re telling a story, and once you get it, you’ll feel like a financial wizard. Forget crystal balls; we’re talking about candlestick patterns.

Think of these patterns as market gossip, giving you little hints about what might happen next. We’re diving into the absolute must-knows, the ones that scream “pay attention!” louder than your alarm on a Monday morning. Get ready to decode the charts like a pro.

1. Doji

When the market gets a bit indecisive, it throws a Doji. This pattern looks like a cross or a plus sign because the opening and closing prices are almost identical. It means buyers and sellers pushed equally hard, resulting in a stalemate.
This little guy often signals a potential reversal or a pause in the current trend. Don’t trade solely on a Doji; it needs confirmation from the next candle. It’s like the market shrugging its shoulders; what happens next is the real drama.

2. Hammer

Picture a tiny hammer ready to bang out some bullish news. The Hammer has a small body at the top of the candle with a long lower wick, typically appearing after a downtrend. It signals that sellers tried to push prices down, but buyers stepped in aggressively, pushing them back up.
Look for a strong green candle right after a Hammer to confirm the reversal. This little guy often signals that buyers are stepping in after a price drop, ready to lift things up.

3. Inverted Hammer

The Hammer’s upside-down cousin, still hinting at good vibes. The Inverted Hammer has a small body at the bottom and a long upper wick, also found after a downtrend. It shows that buyers attempted to push prices higher, but sellers brought them back down by the close.
Volume increase on the Inverted Hammer adds more conviction to its bullish reversal signal. Sellers tried to push it down, but buyers pushed back hard, indicating a new trend might be brewing.

4. Bullish Engulfing

This pattern is basically the market saying, ‘Hold my beer, I got this!’ A Bullish Engulfing pattern occurs when a small bearish candle is completely swallowed by a subsequent large bullish candle. It typically appears after a downtrend and clearly indicates a shift in momentum.
The bigger the engulfing candle, the stronger the potential reversal. It’s a clear power shift; the bulls have taken control and are ready to send prices soaring.

5. Bearish Engulfing

Uh oh, the bears are flexing, and they’re not playing nice. The Bearish Engulfing pattern is the opposite: a small bullish candle is completely swallowed by a subsequent large bearish candle. It forms after an uptrend, signaling that sellers have taken control.
Confirm with a break of previous support for an even stronger signal. This pattern is a big red flag, indicating that sellers are now dominating and a price drop is likely.

6. Morning Star

Like the dawn breaking after a dark night, this pattern brings hope. The Morning Star is a three-candle bullish reversal pattern: a long bearish candle, followed by a small-bodied candle (often a Doji or Spinning Top) that gaps lower, and finally, a long bullish candle that gaps higher and closes well into the body of the first candle.
The bullish candle should close well into the body of the first bearish candle for maximum impact. It’s a beautiful story of market recovery, hinting at a strong bullish reversal.

7. Evening Star

When the evening star appears, prepare for things to dim down. The Evening Star is the inverse of the Morning Star, a three-candle bearish reversal pattern. It features a long bullish candle, followed by a small-bodied candle that gaps higher, and then a long bearish candle that gaps lower and closes deep into the first candle’s body.
A significant overlap between the third candle and the first makes this pattern even more potent. This pattern screams ‘party’s over’ for the bulls, suggesting a strong bearish reversal is on the horizon.

8. Piercing Pattern

Think of it as a bullish jab right into the heart of a downtrend. The Piercing Pattern is a two-candle bullish reversal pattern. It starts with a long bearish candle, followed by a bullish candle that opens below the low of the first but closes more than halfway into its body.
The deeper the second candle penetrates the first, the more reliable the bullish signal. It’s a strong sign that buyers are fighting back, ready to reverse the downward momentum.

9. Dark Cloud Cover

A dark cloud rolling in, ready to spoil the bullish parade. The Dark Cloud Cover is a two-candle bearish reversal pattern, the opposite of the Piercing Pattern. It features a long bullish candle, followed by a bearish candle that opens above the first but closes more than halfway into its body.
If the bearish candle closes below the midpoint of the previous bullish candle, it’s a stronger signal. This pattern suggests sellers are aggressively taking over, potentially signaling a significant price drop.

10. Three White Soldiers

Marching in unison, these soldiers are ready to conquer the charts. This is a powerful bullish reversal pattern consisting of three consecutive long bullish candles. Each candle opens within the body of the previous one and closes higher, often with small or no wicks.
Each candle should have small wicks, indicating sustained buying pressure without much retracement. This is a super bullish signal, showing strong, consistent buying power pushing prices up.

11. Three Black Crows

When these three birds show up, expect some gloomy market weather. The Three Black Crows is the bearish counterpart, a strong bearish reversal pattern made up of three consecutive long bearish candles. Each candle opens within the body of the previous one and closes lower, again with small or no wicks.
Similar to the soldiers, small wicks on these crows mean strong, sustained selling pressure. A serious warning sign that sellers are in firm control, pushing prices down hard and fast.

12. Harami (Bullish/Bearish)

The ‘pregnant woman’ pattern, because the second candle is cradled by the first. A Harami pattern consists of a large candle (bullish or bearish) followed by a smaller candle of the opposite color, completely contained within the body of the first. It signals indecision and potential reversal.
A Doji as the second candle (a Harami Cross) makes the reversal signal even stronger. The market is pausing, catching its breath, and a change in direction might be just around the corner.

Conclusion

So there you have it, future market whisperer! These patterns aren’t just lines; they’re the market’s secret language. Start spotting them, and you’ll feel like you’ve got a cheat code for understanding price action. Remember, practice makes perfect, so get out there and start decoding those charts. Happy trading, trendsetter!