Candlestick Patterns – Quick Guide (Level 2)
A practical trader’s reference: context + confirmation + execution rules
How to use this guide
Candlestick patterns are signals, not guarantees. Their edge increases when you combine them with trend, key
levels, volume/volatility, and time-of-day/session context.
• Always mark context: trend direction, range vs breakout, support/resistance, supply/demand/OB, VWAP,
previous day high/low.
• Wait for confirmation: close beyond a level, follow-through candle, volume expansion, or rejection wick with
displacement.
• Use risk rules: stop beyond the pattern invalidation, not inside noise. Target nearest liquidity/structure first.
• Avoid patterns in the middle of nowhere. Best patterns form at extremes: major support/resistance or after
exhaustion.
Legend (terms used)
Body Open ↔ Close portion of candle.
Wick/Shadow High/Low extremes beyond the body.
Bull candle Close > Open
Bear candle Close < Open
Displacement Strong expansion candle breaking structure/level with momentum.
Location Where it forms (level/zone) – most important filter.
1) Single-Candle Patterns (High probability only with
location)
Pin Bar / Hammer / Shooting Star
Meaning: Rejection candle with long wick and small body. Hammer at lows (bull bias). Shooting star at highs
(bear bias).
Best context: At key support/resistance, after liquidity sweep, at demand/supply zones.
Execution rules: Entry: break of pin bar high (bull) / low (bear). Stop: beyond wick extreme. Confirm: next
candle follow-through.
Avoid when: Weak if wick is not at extreme or forms inside tight chop.
Doji
Meaning: Indecision: open ≈ close. Signals pause/transition.
Best context: Only meaningful at major levels or after strong trend move.
Execution rules: Trade only after confirmation candle closes beyond doji range.
Avoid when: Avoid as standalone entry trigger.
Marubozu (Full Body)
Meaning: Strong momentum candle with little/no wicks.
Best context: Best for breakout continuation or reversal after sweep + displacement.
Execution rules: Use as confirmation candle. Enter on pullback (30–50%) or on next break.
Avoid when: Avoid chasing into nearby resistance/support.
Spinning Top
Meaning: Small body + wicks both sides = uncertainty.
Best context: Works as a warning near reversal zones.
Execution rules: Wait for direction confirmation before trading.
Avoid when: Often noise in mid-range.
2) Two-Candle Reversal Patterns
Bullish Engulfing
Meaning: Second candle fully engulfs previous bear body; indicates buyers taking control.
Best context: After down-move into support/demand; ideally after sweep of lows.
Execution rules: Entry: break/close above engulfing high. Stop: below engulfing low. Target: nearest swing
high/liquidity.
Avoid when: If engulfing happens inside resistance or with low range/volume.
Bearish Engulfing
Meaning: Second candle engulfs previous bull body; sellers take control.
Best context: After up-move into resistance/supply; ideally after sweep of highs.
Execution rules: Entry: break/close below engulfing low. Stop: above engulfing high. Target: nearest swing
low/liquidity.
Avoid when: If happens in chop or far from levels.
Piercing Line
Meaning: Bear candle then bull candle closes > 50% into prior body.
Best context: Near support with exhaustion.
Execution rules: Entry above 2nd candle high; stop below pattern low.
Avoid when: Weak if 2nd candle closes below midpoint.
Dark Cloud Cover
Meaning: Bull candle then bear candle closes > 50% into prior body.
Best context: Near resistance with exhaustion.
Execution rules: Entry below 2nd candle low; stop above pattern high.
Avoid when: Weak if 2nd candle closes above midpoint.
Tweezer Bottom / Top
Meaning: Two candles with matching lows (bottom) or highs (top) showing defense.
Best context: At clear swing extremes & levels.
Execution rules: Entry on break of second candle in direction of reversal; stop beyond equal high/low.
Avoid when: Not reliable in messy ranges without level confluence.
3) Three-Candle Patterns (Structure + Momentum)
Morning Star
Meaning: Bear candle → small body (pause) → strong bull close into first candle.
Best context: At support after sell-off; best with sweep + displacement on 3rd candle.
Execution rules: Entry above 3rd candle high; stop below pattern low.
Avoid when: Weak if 3rd candle cannot reclaim key level.
Evening Star
Meaning: Bull candle → small body → strong bear close into first candle.
Best context: At resistance after rally.
Execution rules: Entry below 3rd candle low; stop above pattern high.
Avoid when: Weak if 3rd candle closes shallow.
Three White Soldiers
Meaning: 3 strong bull candles with higher closes; controlled momentum.
Best context: Breakout continuation or reversal from support (after base).
Execution rules: Entry on pullback to 1st/2nd candle midpoint; stop below 2nd candle low.
Avoid when: Avoid if last candle hits resistance (late entry).
Three Black Crows
Meaning: 3 strong bear candles with lower closes.
Best context: Breakdown continuation or reversal from resistance.
Execution rules: Entry on pullback; stop above 2nd candle high.
Avoid when: Avoid if last candle hits major support.
4) Continuation Patterns (Trade with the trend)
Rising/Falling Three Methods
Meaning: Strong impulse candle → small counter candles → continuation candle.
Best context: In strong trends after breakout; use with moving structure and liquidity.
Execution rules: Entry on break of continuation candle; stop beyond consolidation low/high.
Avoid when: Avoid if consolidation breaks key level against trend.
Inside Bar Breakout
Meaning: Candle range inside previous candle range (compression).
Best context: Best near key levels or in trending pullbacks.
Execution rules: Entry: break of mother bar high/low with confirmation. Stop: other side of mother bar.
Avoid when: Avoid inside bars during low-liquidity chop.
Flag / Pennant (candlestick view)
Meaning: Tight pullback after strong displacement; volatility contraction.
Best context: After a breakout with volume expansion.
Execution rules: Entry on flag break; stop behind last swing; take partial at next liquidity pool.
Avoid when: Avoid when pole is weak or flag forms into resistance.
5) Level-2 Filters (turn patterns into a system)
Filter Rule
Location Filter (must-have) Only take patterns at: PDH/PDL, weekly highs/lows, key swing points, OB/supply-demand zones,
Trend Filter Prefer reversal patterns only after trend exhaustion; prefer continuation patterns in the trend direc
Range Filter In ranges: buy near range low, sell near range high. Ignore signals in middle.
Volatility Filter If candle ranges are tiny, patterns are unreliable. Wait for expansion/displacement.
Time Filter First 30–60 mins of session & major news times can cause fake-outs. Wait for confirmation close
Confluence Filter Best trades = pattern + level + liquidity sweep + displacement + structure break.
Simple execution checklist (printable)
1 Is the pattern at a key level (support/resistance / swing / liquidity)?
2 Is the higher timeframe bias supportive (trend/range context)?
3 Do we have a clear invalidation point (stop location)?
4 Do we have confirmation (close/break + follow-through candle)?
5 Is reward ≥ 1.5R to first target? If not, skip.
Made for quick study + chart practice. For mastery: screenshot 20 examples of each pattern and note the context.