Winning with Candle Charts

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The Candle signals are broken down into two main sections, Candles and Patterns. The signal descriptions and images are all listed below. However, if you know the Candle or Pattern that you are looking for, click on the links below:

Candles

Two Candle Patterns

Three Candle Patterns

Four Candle Patterns

Five Candle Patterns

Candle - Descriptions

Green Candle:
Signifies a period where the closing price was above the opening price, the body can be long or short.

Green candle image

Red Candle:
Signifies a period where the closing price was below the opening price, the body can be long or short.

Red candle image

Green/Red Spinning Top:
Representative of indecision in the market; the period was neither won by the bulls nor by the bears. It may occur during points of consolidation in the market.

green red spinning top image

Doji:
There are several types of Doji including the Gravestone, Dragonfly, Long-legged Doji and many others (further descriptions are provided later), however the common feature among them all is that the open and closing price are the same or almost the same (within a few ticks of each other).

Doji image

Hammer:
This indicates a bullish trend reversal when at the bottom of a downtrend. The small body can be green or red and indicates that the bears did not have full control of the market (or lost some control if a green body). The long lower shadow shows that the market tested lower price levels but subsequently rose to the close. The body should be three times the size of the lower shadow.

Hammer image

Hanging Man:
Similar to the Hammer this candlestick indicates a potential reversal when at the top of an uptrend. The small body can be red or green and indicates that the bulls did not have full control of the market (or lost some control if a red body). The long lower shadow shows that the market tested lower price levels, which it may return to in subsequent periods. Again the body should be three times the size of the lower shadow.

Hanging man image

Stars:
A Star is a candle with a small body that gaps significantly away from the candle preceding it. Sometimes the body of the star may even be a Doji and have an open and close that are nearly identical. The body of the Star cannot overlap with the body of the preceding candle however it can overlap with the shadow of the preceding candle. The signal is taken to mean that a reversal is likely if it occurs in a trending market, as the small body indicates that neither the bulls nor the bears have full control and that the market may be vulnerable to change. A star in an uptrend or downtrend can be red or green and will still have the same meaning.

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Shooting Star:
A bearish signal that indicates a reversal from an up-trending market. This candle must have a long upper shadow and ideally like the other Star patterns it must gap away from the previous candle with no overlap of the bodies.

Shooting star image

Long Legged Doji:
This candle is also known as the rickshaw man and indicates a period of high volatility and confusion as prices swing from highs to lows before settling at the same place it started the period. It is therefore an indication that there is going to be a change of market trend.

Long legged doji image

Gravestone Doji:
A strongly bearish signal this candlestick forms when the open and close are near the low of the period and indicates that despite earlier rising prices the market was not able to sustain the highs and became more bearish.

Gravestone doji image

Inverted Hammer:
A bullish pattern that indicates a reversal from a down-trending market. This pattern can be seen as similar to a Shooting Star at the bottom of a downtrend but without the requirement that the candle gap away from the candle preceding it.

Inverted hammer image

Bullish Belt-Hold Line:
A simple bullish signal that is made at the end of a downtrend when the open of the period is very near to the low and rises continually throughout the period to close near the top of the period.
The greater the height of the Bullish Belt-Hold Line the greater its significance as it is only when a subsequent period closes below the Belt-Hold Line that a downtrend could be considered to be continuing.

Bullish belt-hold line image

Bearish Belt-Hold Line:
A simple bearish signal that is made at the end of an uptrend when the open of the period is very near to the top and falls continually throughout the period to close near the bottom of the period.
The greater the height of the Bearish Belt-Hold Line the great its significance as it is only when a subsequent period closes below the Belt-Hold Line that an uptrend could be considered to be continuing.

Bearish belt-hold line image

Dragonfly Doji:
This candlestick is the inverse of the Gravestone Doji and is a bullish signal. The open and close are both near to the top of the candle showing that the market tested much lower levels before coming to a stop near its opening position.

Dragonfly doji image

Marubozu:
A Shaven Head candle (also known as a ‘shaven-head’) is a candle that indicates that the market moved almost exclusively in one direction throughout the period. In the case of a green Marubozu the open will be very near to or the same as the low and the close will be very near to or the same as the high. The red Marubozu is the inverse of this.

Marubozu image

 

Pattern - Descriptions

Bullish Engulfing:
When seen at the bottom of a downtrend this is a bullish signal. The green body must exceed in range, or engulf, the previous down period’s red body. This shows that buying pressure has rapidly exceeded the selling pressure of the period.

Bullish engulfing pattern image

Bearish Engulfing:
When seen at the top of an uptrend this is a bearish signal. The red body must exceed the range, or engulf, the previous up period’s green body. This shows that selling pressure has rapidly exceeded the buying pressure of the period.

Bearish engulfing pattern image

Dark Cloud Cover:
This bearish signal appears following a strong green body in an uptrend, when the market opens higher in the next period but then is forced down deeply into the range of the previous green body. The deeper the drop the stronger the signal.

Dark cloud cover pattern image

Piercing Pattern:
This signal is the opposite to the Dark Cloud Cover. Following a strong red body in a downtrend the market opens lower in the next period but then rises up into the range of the previous red body. Again the further the rise into the previous body the stronger the signal.

Piercing pattern image

On-Neck, In-Neck & Thrusting Pattern:
This is a group of bullish signals that are also considered to be the opposite of the Dark Cloud Cover and have varying degrees of penetration into the previous period’s body. The On-Neck will close near the low of the previous period. The In-Neck will close above the close of the previous period. The Thrusting Pattern will close well inside the body of the previous period but may not exceed half way between the previous open and close.

On neck, in neck, thrusting pattern image

Morning Star:
A bullish Star pattern indicating a reversal from a down-trending market. This pattern occurs over three periods and is started with a long red body followed by a star, followed by a green body that penetrates deeply into the body of the first period candle. If the body of the star is a Doji this is pattern is known as a Doji Morning Star.

Morning star pattern image

Morning Doji star pattern image

Evening Star:
A bearish Star pattern indicating a reversal from an up-trending market. This pattern occurs over three periods and is started with a long green body followed by a Star, followed by a red body that penetrates deeply into the body of the first period candle. If the body of the star is a Doji this is pattern is known as a Doji Evening Star.

Evening star pattern image

Evening doji star pattern image

Abandoned Baby Top/Bottom:
An extremely rare pattern; it is formed when a Doji that would ordinarily form a Evening Doji Star or Morning Doji Star gaps above or below the preceding candle to the extent that no part of Doji overlaps with either the preceding candle or the following candle. The Abandoned Baby Top is a bearish reversal pattern and the Abandoned Baby Bottom is a bullish reversal pattern.

Abandoned baby pattern image

Harami:
This old Japanese word for pregnant is comparable to the well known Western bar pattern of an ‘inside period’. The Harami shows that a market is running out of breath, it is not a definite reversal signal but does show a change in the power balance between the bulls and bears. The requirement of a Harami is that the open and close of the period are contained within the body of the previous period and that the body of the previous period was exceptionally large. The Harami can be either red or green as the focus is on the body of the Harami being contained by that of the previous period.

Bearish Harami

Bullish Harami

Harami Cross:
The Harami Cross is made up of a large body followed by a Doji contained within the body of the previous period.

Bearish harami cross pattern image

Bullish harami cross pattern image

Upside Gap Two Crows:
A rare three period bearish pattern that occurs when there is a large green body followed by a small red body that gaps up above it, which is then followed by another red body which again gaps up. In this pattern the market has twice bullishly opened higher only to be beaten back down again by the end of the period.

Upside gap two crow pattern image

Three Black Crows:
This bearish pattern is made up of three consecutive red candles and is more useful for longer term trading as after three consecutive down periods the market may have already fallen significantly.

Three black crows pattern image

Three White Soldiers:
This bullish pattern is made up of three consecutive green candles that rise with consecutively higher closes and close at or near the high of the period.

Three white soldiers pattern image

Advance Block:
This pattern shows that the bulls may be running out of breath near the top of a rally. It is made up of three green candles that show increasing signs of weakness such as having smaller bodies, larger top shadows, or smaller increases in price from close to close.

Advance block pattern image

Stalled Pattern:
This pattern also shows that the bulls may be running out o breath near the top of a rally. In this case the pattern is made up of two long green candles followed by a small green candle, showing that the strength of the bulls has moved from being large to being small.

Stalled pattern image

Three Mountain Top:
This is similar to the well known ‘Triple Top’ pattern and indicates that the market tried on three successive occasions to breach a resistance level and failed. This bearish signal shows that when the market fails a third time a significant drop is to be expected.

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Bullish Counterattack Line:
Formed when a long red candle is followed by a long green candle with a lower opening and the same closing as the preceding period’s red candle. This is similar to the piercing pattern however the bullish green candle must only move to match the close of the previous period.

Bullish counterattack line pattern image

Bearish Counterattack Line:
This is the reverse of the Bullish Counterattack Line and is formed when a long green candle is followed by a long red candle with a higher opening and the same closing price.

Bearish counterattack pattern image

Dumpling Top:
An uptrend reversal pattern that is formed as a market begins to ‘top out’ and decline or level out briefly. The market will gap down from near its high and continue falling throughout that period. This shows that the bears have gained strength enough to not only cause a gap in the price but to keep the price falling.

Dumpling top pattern image

Frypan Bottom:
This pattern is the inverse of the Dumpling Top. As the market begins to level out or rise following a decline there may be a upwards gap between periods with the gapping period continuing to rise. This shows that the bulls have strengthened enough to take control of the market as selling abated.

Frypan bottom pattern image

Tower Top:
This bearish pattern forms the shape similar to the top of a tower or skyscraper, and what goes up on one side must go down on the other side. It is characterised by relatively rapid upward price movement (the left wall) followed by a brief period of small horizontal price changes (the roof) and then a subsequent collapse (the right wall). 

Tower top pattern image

Tower Bottom:
This bullish pattern is the inverse of the Tower Top and works in the same way (it may also be called the ‘Cradle’). Starting with a rapid decline in price, moving into a brief period of sideways or limited price movement and then finishing with a long green candle on the other side.

Tower bottom pattern image

Rising Window:
A Rising Window is a term for the upward gap that is sometimes created between price periods. This is a bullish continuation signal as it shows that there are enough bulls in the market to create price jumps and it is also a support signal as the window that is created will often act as a support level for future retracements.

Rising window pattern image

Falling Window:
A falling window is a term for the downward gap that is sometimes created between price periods. This is a bearish continuation signal and shows that there are enough bears in the market to create price jumps. It is also a support signal as the window that is created will often act as a resistance level for future retracements.

Falling window pattern image

Island Top:
An Island Top is created when the price gaps up during one period and then gaps down again in the next period leaving a small island candle near the top of the chart. This pattern is bearish and the Island Top can act as a resistance level.

Island top pattern image

Island Bottom:
An Island Bottom is created when the price gaps down during one period and then gaps up again in the next period leaving a small island candle at the bottom of the chart. This pattern is bearish and the Island Bottom can act as a support level.

Island bottom pattern image

Upward Gapping Tasuki:
Using the support created by an upward window in the market creates a good buying opportunity for this bullish signal. Traditionally following the upward gap there should be one green candle and then one red candle with neither closing below the window.

Upward gapping tasuki pattern image

Downward Gapping Tasuki:
Using the resistance created by a downward window in the market creates a good selling opportunity for this bearish signal. Traditionally following the downward gap there should be one red candle and then one green candle with neither closing above the window.

Downward gapping tasuki pattern image

High Price Gapping Play:
This continuation pattern can be recognised in periods when the market is recouping or consolidating following a bull run. A series of small market movements near the top of bull run marking the consolidation is then followed by an upward gapping green candle, showing that the buyers have taken some time to check their positions and are now jumping back into the market. The rising window can be used as a support level and for this continuation pattern to hold true prices must not close below the window.

High price gapping play pattern image

Low Price Gapping Play:
This continuations pattern is the reverse of the High Price Gapping Play and occurs when markets are recouping or consolidating after a bear run. A series of small market movements near the bottom of a bear run marking the consolidation is then followed by an downward gapping red candle, showing that the market has paused to take some time to check positions and is now resuming the downward pressure. The falling window can be used as a resistance level and for this continuation pattern to hold true prices must not close above the window.

Low price gapping play pattern image

Upgap Side-by-Side Green Candles In an Uptrend:
This pattern is similar to the High Price Gapping Play in that it relies on a rising window to create a support level, however it does not require there to be a series of smaller candles preceding it. This is a bullish continuation signal.

Upgap side by side green candles in an uptrend pattern image

Downgap Side-by-Side Green Candles In a Downtrend:
This pattern is similar to the Low Price Gapping Play in that it relies on a falling window to create a resistance level, however it does not require there to be a series of smaller candles preceding it. This is a bearish continuation signal.

Downward side by side green candles in a downtrend pattern image

Rising Three Method:
Similar in appearance to the Tower Top this pattern is formed during an uptrending market and signals a continuation. The pattern is started with a large green candle followed by a group of smaller red candles that do not close below the bottom of the first green candle. The ideal number of smaller candles is three but typically anything from 2-4 can be expected. Finally the pattern ends with another large green candle that closes above the first period’s close.

Rising three method pattern image

Falling Three Method:
This pattern is the inverse of the Rising Three Method and is formed during a downtrending market signalling a continuation. The pattern is started with a large red candle followed by a group of smaller green candles that do not close above the top of the first green candle. The ideal number of smaller candles is three but typically anything from 2-4 can be expected. Finally the pattern ends with another large red candle that closes below the first period’s close.

Falling three method pattern image

Bullish Separating Line:
A continuation pattern that is formed in an uptrend when a market falls significantly in one period only to open in the next period at or near the open of the first period and then rise significantly. The large gap between the close of the red candle and the open of the green candle shows that for a very short time the bears were in control, (perhaps as a result of low volume or a particularly large order) but the balance was then rapidly put back in the bulls’ favour.

Bullish separting line pattern image

Bearish Separating Line:
A continuation pattern that is formed in a downtrend when a market rises significantly in one period only to open in the next period at or near the open of the first period and then falls significantly. The large gap between the close of the green candle and the open of the red candle shows that for a very short time the bulls were in control, (perhaps as a result of low volume or a particularly large order) but the balance was then rapidly put back in the bears’ favour.

Bearish separating line pattern image

Northern Doji:
This simple pattern occurs when a Doji appears near the top of a bull run. The signal is not immediately bearish but does show that there may be a change in the trend of the market, indicating a good place to close out a long position or watch for further signals to go short.

Northern doji pattern image

Southern Doji:
This simple pattern is the inverse of the Northern Dojiand occurs when a Doji appears near the bottom of a bear run. The signal is not immediately bullish but does show that there may be a change in the trend of the market, indicating a good place to close out a short position or watch for further signals to go long.

Southern doji pattern image

Doji After a Tall Green Candle:
This can be seen as a derivation of the Northern Doji pattern however it does not specifically require a prior bull run. The signal is bearish as it shows that the balance of buyers and sellers in the market has moved to neutral from being bullish.

Doji after a tall green candle pattern image

Tri Star Top:
This bearish reversal pattern is formed of three Doji at the top of a market preferably with the middle Doji having a higher open and close than those on either side of it.

Tri star top pattern image

Tri Star Bottom:
This bullish reversal pattern is formed of three Doji at the bottom of a market preferably with the middle Doji having a lower open and close than those on either side of it.

Tri star bottom pattern image

Bullish Kicker:
This bullish reversal pattern marks an area of high volatility that may have just experienced a reversal. Following a series of long red candles a long green candle gaps up at the open and rises to close above the open of two periods prior.

Bullish Kicker pattern image

Bearish Kicker:
This is the inverse of the Bullish Kicker and marks an area of high volatility that may have just experienced a reversal. Following a series of long green candles a long red candle gaps down at the open and falls to close below the open of two periods prior.

Bearish kicker pattern image

Descending Hawk:
This three part bearish pattern can be seen as a sharper and faster version of the Tower Top. The market first launches up rapidly as the bulls take hold leading to a series of large green candles. At the top there is one last large green candle followed by a moment of indecision characterised by a small green candle that is within the range of the one prior. Following this the market rapidly drops and will continue to drop provided that the first red candle closes below the open of the first green candle in the pattern.

Descending hawk pattern image

Homing Pigeon:
The inverse of the Descending Hawk this three part bullish pattern can be seen as a sharper and faster version of the Tower Bottom. The market first falls rapidly as the bears take hold leading to a series of large red candles. At the bottom there is one last large red candle followed by a moment of indecision characterised by a small red candle that is within the range of the one prior. Following this the market rapidly rises and will continue to rise provided that the first green candle closes below the open of the first red candle in the pattern.

Homing pigeon pattern image

One Black Crow:
A bearish pattern created in an uptrend when a long red candle closes below the open of a long green candle that preceded it.

one black crow pattern image

Downside Gap Two Rabbits:
A bullish reversal pattern created in a downtrend. The first candlestick is red but then gaps down in the next period to open much lower. From this lower open the market turns more bullish and makes up some of the distance of the gap without actually closing it. In the third period the market again opens lower than in the second period and closes above the second period close.

Downside gap two rabbits pattern image

Bearish Stick Sandwich:
A bearish pattern that is highly volatile and quite rare. The pattern starts with a large green candlestick followed by a large red candlestick which opens lower than the prior close and closes lower than the prior open. The red candlestick is then followed by another large green candle which opens lower and closes at the same price as the first green candlestick’s close.

Bearish stick sandwich pattern image

Bullish Stick Sandwich:
The inverse of the Bearish Stick Sandwich this pattern starts with a large red candle followed by a large green candle that opens higher than the prior close and higher than the prior open. The green candle is then followed by another large red candle which opens higher than the prior close and closes at same price as the first red candlestick’s close.

Bullish stick sandwich pattern image

Bullish Three Inside Up:
This is a bullish reversal pattern that is created in three parts. The first part is a large red candle at the bottom of a downtrend followed in the second period by a green candle that closes near the half way point of the body of the red candle. The third period is another green candle that closes above the open of the first red candle. The first two periods of this pattern may be similar to the Harami causing traders to buy into the market and create the third stage of the pattern.

Bullish three inside up pattern image

One White Soldier:
The reverse of One Black Crow this pattern is created in two periods by a long red candlestick followed by a green candle that opens above the close and closes above the open of the prior period.

One white soldier pattern image

Ladder Bottom:
This bullish reversal pattern combines other patterns to create a reversal signal. The pattern starts with three large red candles (Three Black Crows) followed by a red Inverted Hammer. The pattern ends with a large green candle that opens above the body of the Inverted Hammer and closes above the open of the third red day (the third of the Three Black Crows).

Ladder bottom pattern image

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