Candlestick patterns
Single- and multi-bar price shapes that summarise the battle between buyers and sellers.
Technical indicators
What is Candlestick patterns?
A candlestick shows a session's open, high, low and close. Its body (open to close) and wicks (the extremes) reveal who controlled the session. Patterns such as the hammer, engulfing and morning star were catalogued by Japanese rice traders and popularised by Steve Nison. Context matters more than the shape: a hammer after a long decline at support means something; the same shape in the middle of a range does not.
Formula
Examples:
Hammer: small body near the high, lower wick ≥ 2× the body, after a decline
Bullish engulfing: a green body that fully covers the previous red body
Doji: open ≈ close (body tiny relative to the day's range)
How to read it
- Reversal patterns need a prior trend to reverse. We check the preceding move before flagging one.
- Volume and location (near support or resistance) separate meaningful candles from noise.
- Confirmation, meaning the next session moving in the pattern's direction, reduces false signals.
Common mistakes
- Trading patterns in isolation on illiquid stocks, where one trade can paint a candle.
Use it on Flash Finance
Related concepts
Support and resistancePrice zones where buying (support) or selling (resistance) has repeatedly stepped in.Bullish and bearish divergencePrice and an indicator disagreeing about the trend's strength.RSI (Relative Strength Index)A 0-100 momentum oscillator: how strong recent up-moves are compared with down-moves.
