Candlestick Patterns (Definition and Complete list)
Candlestick patterns are probably the most used tool in technical trading and mastering this can make a big difference to your trading account!
These patterns have evolved over a long period of time. They can be used to predict the price direction and sometimes momentum as well.
This is not always true though and even the best of best candlestick patterns do not predict the market with more than 70% certainty. But in trading anything more than 50% is always good and that’s why candlestick patterns have become really popular.
Key takeaways of candlestick patterns.
- Candlestick patterns are formed by 1 or more candles appearing in a certain manner giving a clue about what may happen in future. These patterns give us an understanding about what’s happening in the minds of other traders.
- There are various candlestick patterns, they mainly indicate Bullish or bearish continuation, bullish or bearish reversal or consolidation/indecision.
- As with everything else in trading, there is nothing certain. Candlestick patterns are notorious to give false alarms and must not be used alone to make trade decisions.
- The reliability of candlestick patterns is more relevant for liquid stocks or other trading instruments. The overall reliability has gone down in the electronic trading world.
What is a candlestick pattern?
Candlestick pattern is a combination of different candlesticks appearing one after the other. Large number of candlestick patterns are formed by ..
- The candle body size and color
- top and bottom shadow lengths
- combination of such candles appearing in series
Types of candlestick Patterns
There are 5 main type of candlestick patterns based on their market prediction.
- Bullish continuation: Indicates continuation of uptrend
- Bearish continuation: Indicates continuation of downtrend
- Bullish reversal: Indicates reversal from bearish to bullish market
- Bearish reversal: Indicates reversal from bullish to bearish market
- Consolidation or indecision: Indicates flat or choppy market to continue
Candlestick patterns are also classified based on number of candlesticks used to form the pattern
- Single candlestick pattern: These are generally unreliable and appear too frequently
- 2 Candlestick pattern: These are more reliable & appear less frequently and are more reliable
- 3 and More candlestick pattern: These appear rarely but are generally most reliable.
Most comprehensive list of candlestick patterns (In alphabetical order)
A
- Abandoned Baby, Bearish
- Abandoned Baby, Bullish
- Above the Stomach
- Advance Block
B
- Below the Stomach
- Belt Hold, Bearish
- Belt Hold, Bullish
- Breakaway, Bearish
- Breakaway, Bullish
C
- Candle, Black
- Candle, Short Black
- Candle, Short White
- Candle, White
- Concealing Baby Swallow
D
- Dark Cloud Cover
- Deliberation
- Doji, Dragonfly
- Doji, Gapping Down
- Doji, Gapping Up
- Doji, Gravestone
- Doji, Long-Legged
- Doji, Northern
- Doji, Southern
- Doji Star, Bearish
- Doji Star, Bullish
- Doji Star, Collapsing
- Downside Gap Three Methods
- Downside Tasuki Gap
E / F
- Engulfing, Bearish
- Engulfing, Bullish
- Evening Doji Star
- Evening Star
- Falling Three Methods
H
- Hammer
- Hammer, Inverted
- Hanging Man
- Harami, Bearish
- Harami, Bullish
- Harami Cross, Bearish
- Harami Cross, Bullish
- High Wave
- Homing Pigeon
I / K / L
- Identical Three Crows
- In Neck
- Kicking, Bearish
- Kicking, Bullish
- Ladder Bottom
- Last Engulfing Bottom
- Last Engulfing Top
- Long Black Day
- Long White Day
M
- Marubozu, Black
- Marubozu, Closing Black
- Marubozu, Closing White
- Marubozu, Opening Black
- Marubozu, Opening White
- Marubozu, White
- Mat Hold
- Matching Low
- Meeting Lines, Bearish
- Meeting Lines, Bullish
- Morning Doji Star
- Morning Star
O / P /R
- On Neck
- Piercing Pattern
- Rickshaw Man
- Rising Three Methods
S
- Separating Lines, Bearish
- Separating Lines, Bullish
- Shooting Star, One-Candle
- Shooting Star, Two-Candle
- Side-by-Side White Lines, Bearish
- Side-by-Side White Lines, Bullish
- Spinning Top, Black
- Spinning Top, White
- Stick Sandwich
T
- Takuri Line
- Three Black Crows
- Three Inside Down
- Three Inside Up
- Three-Line Strike, Bearish
- Three-Line Strike, Bullish
- Three Outside Down
- Three Outside Up
- Three Stars in the South
- Three White Soldiers
- Thrusting
- Tri-Star, Bearish
- Tri-Star, Bullish
- Tweezers Bottom
- Tweezers Top
- Two Black Gapping Candles
- Two Crows
U
- Unique Three-River Bottom
- Upside Gap Three Method
Best Candlestick Pattern Books
Following are some of the best books on candlestick patterns
- Japanese candlesticks by Steve Nison
- High Profit Candlestick pattern by Stephen W. Bigalow
- Candlestick charting explained by G. Morris
- Encyclopedia of Candlestick Charts by Thomas N. Bulkowski
Candlestick Patterns FAQ
Which Candlestick Patterns are most reliable?
Following are the most reliable candlestick patterns.
1. Above the stomach
2. Belt hold, bearish and bullish
3. Deliberation
4. Doji star, bearish
5. Engulfing, bearish
6. Last engulfing bottom and top
7. Three outside up and down
8. Two black gapping candles
9. Rising and falling windows
How many candlestick patterns are there?
There are approximately 100+ candlestick patterns which are popular in trading community. Approximately 20 out of these 100 are regularly used in trading.
Do Candlestick Patterns Work?
Candlestick patterns do work when used along with other technical analysis tools. Candlestick on their own have low reliability . Best patterns are able to predict the market around 60% of times. Some candlestick patterns suchj as Doji , Engulfing , two black gapping etc. work better than others.
How do you identify candlestick patterns?
Identifying candlestick patterns needs a trained eye. These days however, most of the trading platforms have automatic identification available for popular candlestick patterns. This makes life simple for traders. Please be careful to select only a few patterns to be plotted on chart as it can get really confusing if you add a lot of patterns.