What Are Candlesticks in Trading?
Candlesticks are a cornerstone of technical analysis, offering a visual snapshot of price movement during a specific time frame. Each candlestick represents four key data points — the open, close, high, and low — within that period.
A candlestick’s body shows the distance between the open and close prices, while its wicks (also called shadows) indicate the highest and lowest prices reached.
- If the closing price is higher than the opening, the candlestick is bullish (often green).
- If the closing price is lower than the opening, it’s bearish (often red).
By reading patterns formed by one or more candlesticks, traders can interpret market psychology and forecast potential price movements.
Different Kinds of Candlesticks
Candlestick patterns fall into three broad categories based on their role in market behavior:
- Neutral Candlesticks – Indecision or balance between buyers and sellers.
- Bullish Candlesticks – Indicate potential upward movement.
- Bearish Candlesticks – Signal a possible downward reversal or continuation.
Let’s explore each kind in detail.
1. Neutral Candlestick Patterns
Neutral candlesticks often appear when the market shows indecision—neither bulls nor bears are in clear control. They frequently precede major reversals or consolidation phases.
Doji
A Doji forms when the opening and closing prices are nearly identical. The candle has a thin or nonexistent body with long wicks.
Types include:
- Gravestone Doji: Long upper wick, no lower wick—signals potential bearish reversal at the top of an uptrend.
- Dragonfly Doji: Long lower wick, no upper wick—bullish reversal at the bottom of a downtrend.
- Long-Legged Doji: Long wicks on both sides—strong market indecision.
- Four-Price Doji: No wicks at all—rare and indicates total price equilibrium.
Spinning Top
Similar to a Doji but with a slightly larger body, a Spinning Top shows high volatility with minimal net progress. It signals weakening momentum and possible trend exhaustion.
2. Bullish Candlestick Patterns
Bullish candlesticks appear when buyers dominate, signaling upward pressure or the end of a downtrend.
Hammer
A Hammer has a small body and a long lower wick, appearing at the bottom of a downtrend.
It shows that sellers pushed prices lower, but buyers regained control, hinting at an upcoming bullish reversal.
Inverse Hammer
Looks like an upside-down hammer. The long upper wick shows early bullish attempts, while a failure to sustain higher prices indicates that a reversal may be forming soon.
Bullish Engulfing
A two-candle pattern where a large green candle completely engulfs the previous red candle. It reflects a strong shift from selling to buying sentiment.
Piercing Line
Also a two-candle reversal pattern. The second candle opens lower than the previous close but closes above the midpoint of the first candle’s body, showing that bulls have regained momentum.
Tweezer Bottoms
Two nearly identical candles—first red, then green—sharing a common low. They signify that sellers failed twice to push prices lower, and buyers are gaining strength.
Morning Star
A three-candle pattern marking a reversal from bearish to bullish sentiment:
- A long red candle
- A small-bodied candle (Doji or Spinning Top) showing indecision
- A long green candle confirming the new uptrend
Three White Soldiers
A strong bullish reversal made of three consecutive green candles, each closing progressively higher. It indicates sustained buying pressure and trend reversal strength.
Bullish Continuation Patterns
- Bullish Marubozu: A long green candle with no wicks—buyers had complete control.
- Bullish Harami: A small green candle contained within the previous red one—signals possible upward continuation.
- Rising Three Methods: Five candles—one large green, followed by three smaller red within its range, then another large green continuing the trend.
3. Bearish Candlestick Patterns
Bearish candlesticks indicate downward pressure or potential reversals from bullish trends.
Hanging Man
Appears at the top of an uptrend, resembling a hammer. It signals weakening buying momentum and possible reversal.
Shooting Star
An inverted hammer that appears after an uptrend. The long upper wick shows that bulls pushed prices up, but sellers quickly regained control.
Bearish Engulfing
A large red candle that completely engulfs the previous green candle—strong bearish signal marking trend reversal.
Dark Cloud Cover
A two-candle pattern where the second red candle opens above the previous close and closes below the midpoint of the previous green candle—implying bearish dominance.
Tweezer Tops
Two similar candles—first green, then red—at the top of an uptrend. They show repeated failure to sustain higher prices.
Evening Star
The bearish counterpart of the Morning Star:
- A long green candle continues the uptrend
- A small indecisive candle
- A long red candle confirms the reversal downward
Three Black Crows
Three consecutive long red candles, each closing lower than the last, signal strong selling pressure and the beginning of a bearish phase.
Bearish Continuation Patterns
- Bearish Marubozu: Long red candle without wicks—intense bearish control.
- Bearish Harami: Small red candle inside a previous green body—trend may continue downward.
- Falling Three Methods: Long red, three small green, and another long red candle—shows pause before continuing the downtrend.
4. How to Use Different Kinds of Candlesticks in Trading
Recognizing candlestick types is only part of the equation. Successful traders confirm signals using additional indicators like RSI, moving averages, and volume.
Here’s a smart approach:
- Identify: Spot key patterns near support or resistance levels.
- Confirm: Wait for the next candle or technical signal.
- Act: Open a trade with a stop loss just beyond the pattern’s extreme.
Backtesting your candlestick strategies on demo accounts can refine your accuracy before committing real capital.
5. FAQs on Candlestick Types
Q1. What are the most reliable candlestick patterns?
Patterns like Three White Soldiers and Three Black Crows are considered highly reliable due to their multi-session confirmation and strong trend momentum.
Q2. Do candlestick patterns work in all markets?
Yes. They can be applied across forex, stocks, crypto, and commodities, though reliability varies with volume and volatility.
Q3. How many kinds of candlestick patterns exist?
There are over 50 recognized patterns, but traders commonly focus on 20–25 high-probability setups.
Q4. Can beginners trade using candlesticks alone?
Candlesticks are a great visual tool, but beginners should combine them with other analysis methods for better risk management.
Conclusion
Understanding the kinds of candlesticks empowers traders to decode market psychology with precision. Each candle tells a story of the battle between bulls and bears, offering insight into who’s in control.
By combining candlestick reading with sound risk management and confirmation indicators, traders can make more informed, confident decisions—turning simple chart patterns into powerful trading strategies.
