Candlestick Pattern
History of Candlestick: -
It was first developed in the 18th century by Japanese rice traders, notably Munehisa Homma, to
forecast rice prices
Definition of Candlestick: -
A candlestick in trading is a visual representation of price movement within a specific time frame,
showing the open, close, high, and low prices of an asset. It is one of the most widely used tools in
technical analysis to understand market sentiment and predict future price action.
Structure of a Candlestick: -
Each candlestick has Five main parts:
Real Body-
The wide part of the candle
Shows the difference between the opening price and closing price.
If the close is higher than the open → bullish (often green)
If the close is lower than the open → bearish (often red)
Upper Shadow-
The thin line above the body
Represents the highest price reached during the period
Lower Shadow-
The thin line below the body
Represents the lowest price reached during the period
Open- The price at which the session started
Close- The price at which the session ended
Why Traders Use Candlesticks
Trend analysis: Helps identify whether the market is bullish, bearish, or consolidating
Reversal signals: Patterns like Hammer, Doji, and Engulfing suggest possible changes in
trend.
Continuation signals: Patterns like Rising Three Methods indicate the trend is likely to
continue
Market psychology: Shows the battle between buyers and sellers during the time frame
Diagram of Candlestick
Sr. Number Of Confirmation
Name of Candlestick Nature Of Candlestick Place of Formation
No Candle Required
1 Standard Doji Single Neutral indecision Middle Of A Trend Yes
2 Gravestone Doji Single Bearish reversal Top Of An Uptrend Yes
3 Dragonfly Doji Single Bullish reversal Bottom Of A Downtrend Yes
4 Long-Legged Doji Single Extreme indecision Middle Of A Trend Yes
5 Four-Price Doji Single Rare neutrality Middle Of A Trend Yes
6 Spinning Top Single Neutral indecision Top Of An Uptrend Yes
7 Rickshaw Man Single Neutral indecision Middle Of A Trend Yes
Top Of An Uptrend/Bottom Of
8 High Wave Candle Single Neutral indecision A Downtrend Yes
9 Marubozu Single Neutral indecision Middle Of A Trend Yes
Top Of An Uptrend/Bottom Of
10 Belt Hold Single Neutral indecision A Downtrend Yes
11 Hammer Single Bullish reversal Bottom Of A Downtrend Yes
12 Inverted Hammer Single Bullish reversal Bottom Of A Downtrend Yes
13 Takuri Line Single Bullish reversal Bottom Of A Downtrend Yes
14 Shaven Head Single Bullish reversal Bottom Of A Downtrend Yes
15 Shooting Star Single Bearish reversal Top Of An Uptrend Yes
16 Hanging Man Single Bearish reversal Top Of An Uptrend Yes
17 Shaven Bottom Single Bearish reversal Top Of An Uptrend Yes
18 Tweezer Bottoms Double Bullish reversal Bottom Of A Downtrend No
Bullish Engulfing
19 Pattern Double Bullish reversal Bottom Of A Downtrend No
20 Bullish Kicking Pattern Double Bullish reversal Bottom Of A Downtrend No
21 Bullish Harami Line Double Bullish reversal Bottom Of A Downtrend No
22 Piercing Line Patterns Double Bullish reversal Bottom Of A Downtrend No
23 Matching Low Double Bullish reversal Bottom Of A Downtrend No
24 Tweezer Tops Double Bearish reversal Top Of An Uptrend No
Bearish Engulfing
25 Pattern Double Bearish reversal Top Of An Uptrend No
26 Bearish Kicking Pattern Double Bearish reversal Top Of An Uptrend No
27 Bearish Harami Line Double Bearish reversal Top Of An Uptrend No
28 Dark Cloud Cover Double Bearish reversal Top Of An Uptrend No
29 Morning Star Trple Bullish reversal Bottom Of A Downtrend No
30 Morning Star Doji Trple Bullish reversal Bottom Of A Downtrend No
31 Tristar Trple Bullish reversal Bottom Of A Downtrend No
32 Three White Soldiers Trple Bullish reversal Bottom Of A Downtrend No
33 Three Inside Up Trple Bullish reversal Bottom Of A Downtrend No
34 Three Outside Up Trple Bullish reversal Bottom Of A Downtrend No
35 Three River Bottom Trple Bullish reversal Bottom Of A Downtrend No
Bullish Three Gaps
36 Pattern Trple Bullish reversal Bottom Of A Downtrend No
Three Stars in the
37 South Trple Bullish reversal Bottom Of A Downtrend No
38 Bullish Stick Sandwich Trple Bullish reversal Bottom Of A Downtrend No
Bullish Abandoned
39 Baby Trple Bullish reversal Bottom Of A Downtrend No
Bearish Abandoned
40 Baby Trple Bearish reversal Top Of An Uptrend No
41 Evening Star Trple Bearish reversal Top Of An Uptrend No
42 Evening Star Doji Trple Bearish reversal Top Of An Uptrend No
43 Tristar Trple Bearish reversal Top Of An Uptrend No
44 Three Black Crows Trple Bearish reversal Top Of An Uptrend No
45 Three Inside Down Trple Bearish reversal Top Of An Uptrend No
46 Three Outside Down Trple Bearish reversal Top Of An Uptrend No
47 Three Mountain Top Trple Bearish reversal Top Of An Uptrend No
48 Stalled-Deliberation Trple Bearish reversal Top Of An Uptrend No
Bearish Three Gaps
49 Pattern Trple Bearish reversal Top Of An Uptrend No
Three Stars in the
50 North Trple Bearish reversal Top Of An Uptrend No
51 Bearish Stick Sandwich Trple Bearish reversal Top Of An Uptrend No
Weak bullish reversal /
52 Bullish Spinning Top Single indecision Middle Of A Trend Yes
Weak bearish reversal /
53 Bearish Spinning Top Single indecision pattern Middle Of A Trend Yes
54 Long Wicks Single Reversal (context dependent) Middle Of A Trend Yes
Reversal (bullish or bearish
55 Pin Bar Single depending on wick Top Of An Uptrend Yes
56 Bullish Counterattack Double Bullish reversal Bottom Of A Downtrend No
57 Bearish Counterattack Double Bearish reversal Top Of An Uptrend No
58 Rising Three Trple bullish continuation Middle Of A Trend No
59 Falling Three Trple bearish continuation Middle Of A Trend No
60 Mat Hold Trple bullish continuation Middle Of A Trend No
Bullish Belt Hold
61 Pattern Single Bullish reversal Bottom Of A Downtrend Yes
Bearish Belt Hold
62 Pattern Single Bearish reversal Top Of An Uptrend Yes
63 Bullish Doji Star Double Bullish reversal Bottom Of A Downtrend No
Bearish Doji Star
64 Pattern Double Bearish reversal Top Of An Uptrend No
65 Matching High Double Bearish reversal Top Of An Uptrend No
66 Bullish Inside Bars Trple Bullish reversal Bottom Of A Downtrend No
67 Bearish Inside Bars Trple Bearish reversal Top Of An Uptrend No
Three-Line Strike
68 Pattern Four Bearish reversal Top Of An Uptrend No
Bullish Separating Lines
69 Pattern Double bullish continuation Middle Of A Trend No
Bearish Separating
70 Lines Double bearish continuation Middle Of A Trend No
Bearish Meeting Lines
71 Pattern Double Bearish reversal Top Of An Uptrend No
Bullish Meeting Lines
72 Pattern Double Bullish reversal Bottom Of A Downtrend No
73 On-Neck Pattern Double bearish continuation Middle Of A Trend No
74 In-Neck Pattern Double bearish continuation Middle Of A Trend No
75 Thrusting Pattern Double bearish continuation Middle Of A Trend No
Upside Gap Two Crows
76 Pattern Trple Bearish reversal Top Of An Uptrend No
Bottom Of A
77 Bullish Hikkake Pattern Four Continuation or reversal Downtrend/Middle Of A Trend No
Bearish Hikkake Top Of An Uptrend/Middle Of
78 Pattern Four Continuation or reversal A Trend No
79 Ladder Bottom Pattern Four Bullish reversal Bottom Of A Downtrend No
Concealing Baby
80 Swallow Pattern Four Bullish reversal Bottom Of A Downtrend No
Type of Candlestick pattern
A) Based on Formation Candlestick patterns are classified based on the number of
candlesticks involved in their formation.
Single candlestick patterns
Two candlestick patterns
Three candlestick patterns
Four candlestick patterns
B) Based on Reversal Candlestick patterns are classified based on whether they indicate a
reversal of the prevailing trend
Bullish reversal patterns
Bearish reversal patterns
Bullish Continuation patterns
Bearish Continuation patterns
Neutral indecision patterns
Extreme indecision patterns
Weak Bullish reversal patterns
1) Bullish Reversal Pattern
Bullish reversal candlestick is classified based on the number of candlestick involved in their
formation
Single candlestick patterns
Two candlestick patterns
Three candlestick patterns
Four candlestick patterns
A) Single Candlestick Bullish Reversal Pattern
The main bullish reversal patterns formed by a single candlestick and appear after a
downtrend and signal potential upward momentum if confirmed by subsequent candlestick
which are given below as
Dragonfly Doji
Hammer
Inverted Hammer
Takuri Line
Shaven Head
Bullish Belt Hold Pattern
1) Dragonfly Doji
1) Pattern Name
Dragonfly Doji
2) Definition
A Doji candlestick shaped like the letter “T.”
Formed when open, high, and close are nearly equal, with a long lower shadow
Indicates potential bullish reversal after a downtrend
It signals rejection of lower prices and potential upward reversal.
3) Number of Candle Required For Formation
One candle is sufficient for formation.
Requires confirmation from the following candle.
4) Confirmation Required for Following Candle
A bullish candle closing above the Dragonfly Doji’s high is required for confirmation
Without confirmation, the pattern is unreliable
Next candle should be bullish and close above the Dragonfly Doji’s high
Without confirmation, the signal is weak
5) Structure
T-shaped candle
Body: Very small or nonexistent.
Upper shadow: None or minimal.
Lower shadow: Long, at least 2× the body
Color: Irrelevant (tiny body).
6) Picture
7) Place of Formation
Most reliable when formed:
At support zones.
Near Fibonacci retracement levels
In oversold conditions (e.g., RSI < 30)
8) Market Psychology
Sellers push price down → buyers regain control → close near high.
Reflects rejection of lower prices and shift in sentiment toward bullishness.
9) Identification Rules
Appears after a downtrend
Long lower shadow at least 2–3x body size
Open, high, and close clustered at the top.
Volume spike adds credibility
10) Classification
Bullish reversal candlestick pattern.
Part of Doji family (neutral candles with strong contextual meaning).
11) Signal Strength
Stronger when:
Formed at major support.
Confirmed by high volume
Supported by other indicators (RSI divergence, MACD crossover).
Weak if formed in sideways or uptrend markets
12) Trading Strategy
Identify Dragonfly Doji after a downtrend.
Confirm with bullish candle closing above Doji’s high.
Enter Long above confirmation candle
Stop-Loss below Doji’s low.
Target next resistance or 1:2 risk/reward ratio.
Optional: Trail stop-loss as price rises.
13) Case Study
Example: Nifty 50 index forms Dragonfly Doji at 61.8% Fibonacci retracement.
Next candle closes bullish above Doji’s high
Entry above confirmation → Stop-loss below Doji’s low → Target at next resistance
Trade yields 2x risk/reward.
14) Notes & Variations
Aggressive traders may enter early but risk false signals.
Works best when combined with trendiness, moving averages, or RSI divergence.
Avoid trading in isolation; always confirm with broader market context.
Bearish counterpart: Gravestone Doji.
2) Hammer
1) Pattern Name-Hammer
2) Definition
A bullish reversal candlestick pattern that appears after a downtrend.
Indicates rejection of lower prices and potential trend reversal.
3) Number of Candles Required for Formation
Single candle formation
Needs confirmation from the next session
4) Confirmation Required for Following Candle
Next candle should be bullish and close above the Hammer’s high.
Without confirmation, reliability decreases.
5) Structure
Small real body near the top of the range.
Long lower shadow (at least 2–3× body size)
Little or no upper shadow.
Can be green (stronger) or red (weaker but valid).
6) Picture
7) Place of Formation
Most effective when formed:
At support zones.
Near Fibonacci retracement levels.
After prolonged downtrends or corrections.
8) Market Psychology
Sellers drive price lower.
Buyers absorb selling pressure and push price back up.
Close near the high signals shift from bearish to bullish sentiment
9) Identification Rules
Appears after a downtrend
Lower shadow ≥ 2–3× body size
Close near session high
Works best with volume confirmation.
10) Classification
Bullish reversal single-candle pattern.
11) Signal Strength
Stronger when:
Formed at major support
Confirmed by high volume
Supported by other indicators (RSI divergence, MACD crossover).
Moderate if formed in sideways markets
12) Trading Strategy
Identify Hammer after downtrend.
Confirm with bullish candle closing above Hammer’s high.
Enter Long above confirmation candle.
Stop-Loss below Hammer’s low.
Target next resistance or use Fibonacci extensions.
Optional: Trail stop-loss for extended moves.
13) Case Study
Example: Reliance Industries stock forms Hammer at 50% Fibonacci retracement.
Next candle closes bullish above Hammer’s high.
Entry above confirmation → Stop-loss below Hammer’s low → Target at next resistance.
Trade yields 1:2 risk/reward
14) Notes & Variations
Green Hammer: Stronger bullish signal.
Red Hammer: Weaker, needs stronger confirmation.
Inverted Hammer: Similar but with long upper shadow, also bullish reversal.
Bearish counterparts: Hanging Man and Shooting Star.