Candle Patterns
The QuantiX platform enables you to incorporate candlestick patterns into your analysis. Each pattern listed below adds a column to your market data, which can contain one of two values:
0 – The pattern is not present.
100 – The pattern is present.
Hammer
A Hammer is a single candlestick pattern that appears at the bottom of a downtrend. It has a small body with a long lower wick (shadow) that is at least twice the size of the body. The upper wick is either very small or nonexistent.
Characteristics:
Small real body (can be bullish or bearish)
Long lower shadow (at least twice the size of the body)
Little to no upper shadow
Appears after a downtrend
Interpretation and Usage
The Hammer pattern suggests a potential reversal in a downtrend. It indicates that sellers pushed the price lower, but buyers regained control and closed the price near or above the opening price.
How to Use the Hammer Pattern:
Confirm with Volume: A higher trading volume during the Hammer formation strengthens the reversal signal.
Wait for Confirmation: Traders usually wait for a bullish candle after the Hammer to confirm the trend reversal.
Combine with Other Indicators: Support levels, RSI (Relative Strength Index), and MACD (Moving Average Convergence Divergence) can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed below the low of the Hammer candlestick.
Inverted Hammer
An Inverted Hammer is a single candlestick pattern that appears at the bottom of a downtrend. It has a small body with a long upper wick (shadow) that is at least twice the size of the body. The lower wick is either very small or nonexistent.
Characteristics:
Small real body (can be bullish or bearish)
Long upper shadow (at least twice the size of the body)
Little to no lower shadow
Appears after a downtrend
Interpretation and Usage
The Inverted Hammer pattern suggests a potential reversal in a downtrend. It indicates that buyers attempted to push the price higher, but sellers initially resisted. However, if the next candle confirms a bullish move, it signals that buyers have gained control.
How to Use the Inverted Hammer Pattern:
Confirm with Volume: A higher trading volume during the Inverted Hammer formation strengthens the reversal signal.
Wait for Confirmation: Traders usually wait for a bullish candle after the Inverted Hammer to confirm the trend reversal.
Combine with Other Indicators: Support levels, RSI (Relative Strength Index), and MACD (Moving Average Convergence Divergence) can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed below the low of the Inverted Hammer candlestick.
Harami
A Harami is a two-candlestick pattern that signals a potential trend reversal. It consists of a large candlestick followed by a smaller candlestick that is completely contained within the body of the previous candle. The pattern can be bullish or bearish, depending on its location in the trend.
Characteristics:
Two-candlestick pattern
First candle: Large body, representing strong momentum.
Second candle: Small body, completely inside the first candle's body.
Can appear in uptrends (Bearish Harami) or downtrends (Bullish Harami).
Interpretation and Usage
The Harami pattern suggests market indecision and a possible reversal. The second, smaller candle indicates that momentum is slowing down, and a reversal might be coming.
Bullish Harami: Found in a downtrend, signaling a potential reversal to the upside.
Bearish Harami: Found in an uptrend, signaling a potential reversal to the downside.
How to Use the Harami Pattern:
Confirm with Volume: A decrease in volume during the second candle indicates weakening momentum.
Wait for Confirmation: Traders look for the next candle to confirm the reversal (a bullish candle after a Bullish Harami or a bearish candle after a Bearish Harami).
Combine with Other Indicators: RSI, MACD, and moving averages can help validate the reversal.
Stop-Loss Placement: A stop-loss is typically placed beyond the high (for Bearish Harami) or low (for Bullish Harami) of the first candle.
Hanging Man
A Hanging Man is a single candlestick pattern that appears at the top of an uptrend and suggests a potential reversal to the downside. It has a small body with a long lower wick (shadow) that is at least twice the size of the body. The upper wick is either very small or nonexistent.
Characteristics:
Small real body (can be bullish or bearish).
Long lower shadow (at least twice the size of the body).
Little to no upper shadow.
Appears after an uptrend.
Interpretation and Usage
The Hanging Man pattern signals a potential bearish reversal. It indicates that, during the trading period, sellers pushed the price significantly lower, but buyers were able to recover and close near the opening price. However, the presence of the long lower shadow suggests that selling pressure is increasing, and the trend may soon reverse.
How to Use the Hanging Man Pattern:
Confirm with Volume: A higher volume during the formation of the Hanging Man can strengthen the bearish signal.
Wait for Confirmation: Traders typically wait for a bearish candle following the Hanging Man to confirm the trend reversal.
Combine with Other Indicators: Support levels, RSI (Relative Strength Index), and MACD (Moving Average Convergence Divergence) can be used to confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the Hanging Man candlestick.
Engulfing
An Engulfing pattern is a two-candlestick pattern that signals a potential trend reversal. The first candle is a small candle, followed by a larger candle that completely engulfs the body of the previous candle. This pattern can be either Bullish Engulfing or Bearish Engulfing, depending on the trend and direction.
Characteristics:
Two-candlestick pattern.
First candle: Small body (either bullish or bearish).
Second candle: Larger body that completely engulfs the first candle’s body.
Can appear in an uptrend (Bearish Engulfing) or downtrend (Bullish Engulfing).
Interpretation and Usage
Bullish Engulfing: This pattern occurs in a downtrend and indicates that buyers have overpowered the sellers, suggesting a potential reversal to the upside.
Bearish Engulfing: This pattern occurs in an uptrend and indicates that sellers have overpowered the buyers, suggesting a potential reversal to the downside.
How to Use the Engulfing Pattern:
Confirm with Volume: A higher volume during the second candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for the next candle to confirm the trend reversal (a bullish candle after a Bearish Engulfing or a bearish candle after a Bullish Engulfing).
Combine with Other Indicators: RSI, MACD, and support/resistance levels can be used to further confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed just beyond the high (for Bearish Engulfing) or low (for Bullish Engulfing) of the engulfing candle.
Three-line Strike
The Three-line Strike is a four-candlestick pattern that suggests a strong reversal in trend, typically following a series of three candles in the same direction. It consists of three candles moving in one direction, followed by a fourth candle that moves in the opposite direction and completely engulfs the previous three candles.
Characteristics:
Four-candlestick pattern.
First three candles: Must be in the same direction (either bullish or bearish).
Fourth candle: A large candle that completely engulfs the previous three candles.
Appears at the end of an established trend (uptrend or downtrend).
Interpretation and Usage
Bullish Three-line Strike: If the three preceding candles are bearish (in a downtrend), the fourth candle is bullish and suggests a reversal to the upside.
Bearish Three-line Strike: If the three preceding candles are bullish (in an uptrend), the fourth candle is bearish and suggests a reversal to the downside
Doji Star
A Doji Star is a two-candlestick pattern that suggests market indecision and a potential reversal. It occurs when a Doji candlestick appears after a large candlestick, either bullish or bearish. The Doji Star indicates that neither buyers nor sellers are in control, often signaling a change in market direction.
Characteristics:
Two-candlestick pattern.
First candle: A large bullish or bearish candle, indicating strong momentum.
Second candle: A Doji candlestick, which has an open and close at nearly the same price, indicating indecision in the market.
Can appear in an uptrend (Bearish Doji Star) or downtrend (Bullish Doji Star).
Interpretation and Usage
Bullish Doji Star: Appears in a downtrend and suggests that after a period of selling, the market is now indecisive, and a reversal to the upside may occur.
Bearish Doji Star: Appears in an uptrend and suggests that after a period of buying, the market is now indecisive, and a reversal to the downside may occur.
How to Use the Doji Star Pattern:
Confirm with Volume: Higher volume during the formation of the Doji can confirm the potential reversal.
Wait for Confirmation: Traders often wait for the next candle after the Doji to confirm the reversal (a bullish candle after a Bearish Doji Star or a bearish candle after a Bullish Doji Star).
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed below the low (for Bullish Doji Star) or above the high (for Bearish Doji Star) of the Doji candle.
Evening Star
An Evening Star is a three-candlestick pattern that signals a potential reversal at the top of an uptrend. The pattern consists of a large bullish candlestick, followed by a small-bodied candlestick (which can be a Doji or a small candle), and finally a large bearish candlestick that confirms the reversal to the downside.
Characteristics:
Three-candlestick pattern.
First candle: A large bullish candlestick, indicating strong upward momentum.
Second candle: A small-bodied candlestick, which can be a Doji, representing indecision in the market.
Third candle: A large bearish candlestick, confirming a shift in momentum and signaling a reversal to the downside.
Occurs after an uptrend.
Interpretation and Usage
The Evening Star pattern suggests that the bullish trend is losing momentum, and a reversal to a downtrend may occur. The large bearish candle at the end of the pattern confirms that sellers have gained control of the market.
How to Use the Evening Star Pattern:
Confirm with Volume: A higher volume during the third (bearish) candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for the next candle after the Evening Star to confirm the trend reversal.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the third (bearish) candle.
Evening Doji Star
An Evening Doji Star is a three-candlestick pattern that signals a potential reversal at the top of an uptrend. It is similar to the Evening Star pattern, but the middle candlestick is specifically a Doji. This Doji represents indecision in the market and suggests that the bullish momentum is weakening before a bearish reversal occurs.
Characteristics:
Three-candlestick pattern.
First candle: A large bullish candlestick, indicating strong upward momentum.
Second candle: A Doji candlestick, representing market indecision.
Third candle: A large bearish candlestick, confirming the reversal to the downside.
Occurs after an uptrend.
Interpretation and Usage
The Evening Doji Star pattern suggests that the buying momentum is losing strength, and the market may be preparing for a bearish reversal. The Doji in the middle shows that neither buyers nor sellers are in control, followed by the large bearish candle which confirms the shift in direction.
How to Use the Evening Doji Star Pattern:
Confirm with Volume: A higher volume during the third (bearish) candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for the next candle after the Evening Doji Star to confirm the trend reversal.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the third (bearish) candle.
Dragonfly Doji Star
A Dragonfly Doji is a single candlestick pattern that signals potential trend reversals. It has a long lower shadow and little to no upper shadow, with the open, close, and high prices being nearly the same. This pattern suggests that sellers pushed the price lower during the session, but buyers regained control and pushed it back near the opening level.
Characteristics:
Single-candlestick pattern.
Open, close, and high are nearly the same.
Long lower shadow, little to no upper shadow.
Can appear in an uptrend or downtrend.
Interpretation and Usage
The Dragonfly Doji indicates market indecision and potential reversal:
When it appears in a downtrend, it suggests a potential bullish reversal as buyers regain control.
When it appears in an uptrend, it may signal a bearish reversal if followed by confirmation.
How to Use the Dragonfly Doji Pattern:
Confirm with Volume: A higher volume during the Dragonfly Doji formation strengthens the reversal signal.
Wait for Confirmation: Traders look for the next candle to confirm the trend reversal (a bullish candle after a downtrend or a bearish candle after an uptrend).
Combine with Other Indicators: RSI, MACD, and support/resistance levels can provide additional confirmation.
Stop-Loss Placement: A stop-loss is typically placed below the low of the Dragonfly Doji candlestick.
Gravestone Doji
A Gravestone Doji is a single candlestick pattern that signals potential trend reversals. It has a long upper shadow and little to no lower shadow, with the open, close, and low prices being nearly the same. This pattern suggests that buyers pushed the price higher during the session, but sellers regained control and pushed it back near the opening level.
Characteristics:
Single-candlestick pattern.
Open, close, and low are nearly the same.
Long upper shadow, little to no lower shadow.
Can appear in an uptrend or downtrend.
Interpretation and Usage
The Gravestone Doji indicates market indecision and potential reversal:
When it appears in an uptrend, it suggests a potential bearish reversal as sellers take control.
When it appears in a downtrend, it may signal a bullish reversal if followed by confirmation.
How to Use the Gravestone Doji Pattern:
Confirm with Volume: A higher volume during the Gravestone Doji formation strengthens the reversal signal.
Wait for Confirmation: Traders look for the next candle to confirm the trend reversal (a bearish candle after an uptrend or a bullish candle after a downtrend).
Combine with Other Indicators: RSI, MACD, and support/resistance levels can provide additional confirmation.
Stop-Loss Placement: A stop-loss is typically placed above the high of the Gravestone Doji candlestick.
Spinning Top
A Spinning Top is a single candlestick pattern that signals market indecision. It has a small real body with long upper and lower shadows, indicating that both buyers and sellers were active, but neither could gain full control.
Characteristics:
Single-candlestick pattern.
Small real body (can be bullish or bearish).
Long upper and lower shadows, showing price movement in both directions.
Can appear in an uptrend or downtrend.
Interpretation and Usage
The Spinning Top suggests that the market is uncertain about the next move:
When it appears in an uptrend, it may signal weakening momentum and a possible bearish reversal.
When it appears in a downtrend, it may indicate that selling pressure is fading, potentially leading to a bullish reversal.
How to Use the Spinning Top Pattern:
Confirm with Volume: A higher volume during the Spinning Top formation strengthens its significance.
Wait for Confirmation: Traders look for the next candle to confirm the trend direction (a bullish candle after a downtrend or a bearish candle after an uptrend).
Combine with Other Indicators: RSI, MACD, and support/resistance levels can provide additional confirmation.
Stop-Loss Placement: A stop-loss is typically placed beyond the high or low of the Spinning Top candlestick.
Shooting Star
A Shooting Star is a single candlestick pattern that signals a potential bearish reversal at the top of an uptrend. It has a small real body near the low of the candle, a long upper shadow, and little to no lower shadow, indicating that buyers attempted to push the price higher but failed, allowing sellers to take control.
Characteristics:
Single-candlestick pattern.
Small real body (can be bullish or bearish).
Long upper shadow, at least twice the size of the body.
Little to no lower shadow.
Appears after an uptrend.
Interpretation and Usage
The Shooting Star pattern suggests that buying pressure is weakening, and a bearish reversal may occur. The long upper shadow shows that buyers attempted to push the price higher, but selling pressure brought it back near the opening level.
How to Use the Shooting Star Pattern:
Confirm with Volume: A higher volume during the Shooting Star formation strengthens the bearish reversal signal.
Wait for Confirmation: Traders typically wait for a
Morning Star
A Morning Star is a three-candlestick pattern that signals a potential bullish reversal at the bottom of a downtrend. It consists of a large bearish candlestick, followed by a small-bodied candlestick (which can be a Doji or a small candle), and finally a large bullish candlestick that confirms the reversal to the upside.
Characteristics:
Three-candlestick pattern.
First candle: A large bearish candlestick, indicating strong downward momentum.
Second candle: A small-bodied candlestick, which can be a Doji, representing market indecision.
Third candle: A large bullish candlestick, confirming the shift in momentum and signaling a reversal to the upside.
Occurs after a downtrend.
Interpretation and Usage
The Morning Star pattern suggests that the selling pressure is weakening, and a reversal to an uptrend may occur. The small-bodied second candle indicates indecision, while the third bullish candle confirms that buyers have taken control.
How to Use the Morning Star Pattern:
Confirm with Volume: A higher volume during the third (bullish) candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for the next candle after the Morning Star to confirm the trend reversal.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed below the low of the third (bullish) candle.
Morning Doji Star
A Morning Doji Star is a three-candlestick pattern that signals a potential bullish reversal at the bottom of a downtrend. It is similar to the Morning Star, but the middle candlestick is specifically a Doji, which represents a stronger level of market indecision before a reversal.
Characteristics:
Three-candlestick pattern.
First candle: A large bearish candlestick, indicating strong downward momentum.
Second candle: A Doji candlestick, representing market indecision.
Third candle: A large bullish candlestick, confirming the shift in momentum and signaling a reversal to the upside.
Occurs after a downtrend.
Interpretation and Usage
The Morning Doji Star suggests that selling pressure is fading, and a reversal to an uptrend is likely. The Doji in the middle highlights a strong market indecision phase, followed by a bullish confirmation candle indicating buyer control.
How to Use the Morning Doji Star Pattern:
Confirm with Volume: A higher volume during the third (bullish) candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for the next candle after the Morning Do
Two Crows
The Two Crows is a three-candlestick bearish reversal pattern that appears in an uptrend. It consists of a large bullish candle, followed by two smaller bearish candles that open within the previous candle’s body and close lower. This pattern suggests that bullish momentum is weakening, and a potential downtrend may begin.
Characteristics:
Three-candlestick pattern.
First candle: A large bullish candlestick, confirming the existing uptrend.
Second candle: A small bearish candlestick that opens within the body of the first candle but does not close below it.
Third candle: Another bearish candlestick that opens within the body of the second candle and closes below it.
Appears after an uptrend.
Interpretation and Usage
The Two Crows pattern signals that buying pressure is weakening, and sellers are gradually taking control. The first bearish candle raises caution, while the second bearish candle confirms increasing selling pressure, making a bearish reversal more likely.
How to Use the Two Crows Pattern:
Confirm with Volume: A higher volume during the third (bearish) candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for another bearish candle after the pattern to confirm the downtrend.
Combine with Other Indicators: RSI, MACD, and resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the first bullish candle.
Three Black Crows
The Three Black Crows is a three-candlestick bearish reversal pattern that appears after an uptrend. It consists of three consecutive long bearish candles, each opening within the previous candle’s body and closing lower, signaling a shift from bullish to bearish momentum.
Characteristics:
Three-candlestick pattern.
All three candles are bearish (red or black).
Each candle opens within the body of the previous candle but closes lower.
Occurs after an uptrend, indicating a strong potential reversal.
Interpretation and Usage
The Three Black Crows pattern suggests that buyers are losing control, and sellers are taking over. Each bearish candle confirms growing selling pressure, making a trend reversal more likely.
How to Use the Three Black Crows Pattern:
Confirm with Volume: A higher volume during the three bearish candles strengthens the reversal signal.
Wait for Confirmation: Traders may wait for additional bearish candles or a failed bullish recovery before confirming the downtrend.
Combine with Other Indicators: RSI, MACD, and resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the first bearish candle.
Three Inside
The Three Inside is a three-candlestick pattern that signals a potential trend reversal. It can be either bullish or bearish, depending on its placement within a trend. The pattern consists of a large initial candle, followed by a smaller candle inside its body, and a third candle that confirms the reversal.
Characteristics:
Three-candlestick pattern.
First candle: A large candle that follows the prevailing trend.
Second candle: A smaller candle that remains within the body of the first candle.
Third candle: A candle that breaks out in the opposite direction, confirming the reversal.
Can appear in an uptrend (bearish reversal) or downtrend (bullish reversal).
Interpretation and Usage
Bullish Three Inside: Appears after a downtrend, where the second candle is a small bullish candle inside the first bearish candle, followed by a third bullish candle confirming the uptrend.
Bearish Three Inside: Appears after an uptrend, where the second candle is a small bearish candle inside the first bullish candle, followed by a third bearish candle confirming the downtrend.
How to Use the Three Inside Pattern:
Confirm with Volume: A higher volume during the third candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for an additional candle in the direction of the reversal before taking action.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed beyond the high (for bearish Three Inside) or low (for bullish Three Inside) of the first candle.
Three Outside
The Three Outside is a three-candlestick pattern that signals a potential trend reversal or continuation, depending on its placement within a trend. It can be bullish or bearish, depending on the market direction. The pattern consists of a second candle that completely engulfs the first candle, followed by a third candle confirming the new trend.
Characteristics:
Three-candlestick pattern.
First candle: A small candle following the prevailing trend.
Second candle: A larger candle that completely engulfs the first candle, signaling a shift in momentum.
Third candle: A candle that continues in the direction of the second candle, confirming the reversal or continuation.
Can appear in an uptrend (bearish reversal) or downtrend (bullish reversal).
Interpretation and Usage
Bullish Three Outside: Appears after a downtrend, where the second candle is a large bullish candle engulfing a smaller bearish first candle, followed by a third bullish candle confirming the uptrend.
Bearish Three Outside: Appears after an uptrend, where the second candle is a large bearish candle engulfing a smaller bullish first candle, followed by a third bearish candle confirming the downtrend.
How to Use the Three Outside Pattern:
Confirm with Volume: A higher volume during the second and third candles strengthens the reversal signal.
Wait for Confirmation: Traders often wait for another candle in the direction of the new trend before taking action.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed beyond the high (for bearish Three Outside) or low (for bullish Three Outside) of the second candle.
Three Stars in the South
The Three Stars in the South is a rare three-candlestick bullish reversal pattern that appears after a downtrend. It signifies a gradual shift from bearish to bullish sentiment as selling pressure weakens over three consecutive candles.
Characteristics:
Three-candlestick pattern.
First candle: A long bearish candle, indicating strong selling pressure.
Second candle: A smaller bearish candle with a higher low, showing reduced selling pressure.
Third candle: An even smaller bearish candle with a higher low and a small real body, confirming the loss of bearish momentum.
Occurs after a downtrend.
Interpretation and Usage
The Three Stars in the South pattern suggests that sellers are losing control, and a bullish reversal may be imminent. The progressively smaller bearish candles with higher lows indicate that the downtrend is weakening, paving the way for potential upside movement.
How to Use the Three Stars in the South Pattern:
Confirm with Volume: A decreasing volume during the three candles followed by an increase in bullish volume strengthens the reversal signal.
Wait for Confirmation: Traders often wait for a bullish candle after the pattern to confirm the trend reversal.
Combine with Other Indicators: RSI, MACD, and support levels can help confirm the bullish reversal.
Stop-Loss Placement: A stop-loss is typically placed below the low of the first (largest bearish) candle.
Three White Soldiers
The Three White Soldiers is a three-candlestick bullish reversal pattern that appears after a downtrend. It consists of three consecutive long bullish candles, each opening within the previous candle’s body and closing higher, signaling a strong shift from bearish to bullish momentum.
Characteristics:
Three-candlestick pattern.
All three candles are bullish (green or white).
Each candle opens within the body of the previous candle but closes higher.
Occurs after a downtrend, indicating a strong potential reversal.
Interpretation and Usage
The Three White Soldiers pattern suggests that sellers are losing control, and buyers are taking over. Each bullish candle confirms growing buying pressure, making a trend reversal more likely.
How to Use the Three White Soldiers Pattern:
Confirm with Volume: A higher volume during the three bullish candles strengthens the reversal signal.
Wait for Confirmation: Traders may wait for additional bullish candles or a minor pullback before confirming the uptrend.
Combine with Other Indicators: RSI, MACD, and support levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed below the low of the first bullish candle.
Abandoned Baby
The Abandoned Baby is a rare three-candlestick reversal pattern that can be bullish or bearish, depending on its placement in the trend. It is characterized by a gap between the second candle (a Doji) and the surrounding candles, indicating a sharp shift in market sentiment.
Characteristics:
Three-candlestick pattern.
First candle: A strong trend-following candle (bullish in an uptrend, bearish in a downtrend).
Second candle: A Doji that gaps away from the first candle, showing market indecision.
Third candle: A strong reversal candle that gaps in the opposite direction, confirming the reversal.
Occurs after an uptrend (bearish) or a downtrend (bullish).
Interpretation and Usage
Bullish Abandoned Baby: Appears after a downtrend, where the first candle is bearish, the second is a Doji that gaps down, and the third is a strong bullish candle that gaps up, signaling a bullish reversal.
Bearish Abandoned Baby: Appears after an uptrend, where the first candle is bullish, the second is a Doji that gaps up, and the third is a strong bearish candle that gaps down, signaling a bearish reversal.
How to Use the Abandoned Baby Pattern:
Confirm with Volume: A significant increase in volume during the third candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for an additional candle in the direction of the reversal before entering a trade.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed beyond the high (for bearish Abandoned Baby) or low (for bullish Abandoned Baby) of the Doji candle.
Advance Block
The Advance Block is a three-candlestick bearish reversal pattern that appears in an uptrend. It consists of three consecutive bullish candles, each with decreasing body size and increasing upper wicks, indicating that buying pressure is weakening and a potential reversal may occur.
Characteristics:
Three-candlestick pattern.
All three candles are bullish (green or white).
Each candle has a smaller body than the previous one, showing slowing momentum.
Upper shadows (wicks) increase in length, suggesting selling pressure.
Occurs after an uptrend, signaling a potential reversal.
Interpretation and Usage
The Advance Block pattern suggests that buyers are losing strength, and sellers are starting to push back. The progressively smaller candle bodies and longer upper wicks indicate hesitation in the uptrend, making a bearish reversal more likely.
How to Use the Advance Block Pattern:
Confirm with Volume: A declining volume during the three bullish candles strengthens the bearish reversal signal.
Wait for Confirmation: Traders often wait for a bearish candle after the pattern to confirm the trend reversal.
Combine with Other Indicators: RSI, MACD, and resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the third bullish candle.
Belt Hold
The Belt Hold is a single candlestick pattern that signals a potential trend reversal. It can be either bullish or bearish, depending on its direction. The pattern is characterized by a long candlestick (either bullish or bearish) that opens near the low (for bullish) or high (for bearish) of the day and closes near the high (for bullish) or low (for bearish), with little to no shadows.
Characteristics:
Single-candlestick pattern.
Bullish Belt Hold: A long bullish candlestick that opens near the low and closes near the high, with little to no upper shadow.
Bearish Belt Hold: A long bearish candlestick that opens near the high and closes near the low, with little to no lower shadow.
Indicates a strong move in one direction with little opposition from the opposite side.
Interpretation and Usage
Bullish Belt Hold: Appears after a downtrend, suggesting that the bulls have taken control of the market, and a reversal to the upside may occur.
Bearish Belt Hold: Appears after an uptrend, indicating that the bears have taken control, and a reversal to the downside may be imminent.
How to Use the Belt Hold Pattern:
Confirm with Volume: A higher volume during the Belt Hold candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for additional candles to confirm the direction of the reversal (a bullish candle after a Bearish Belt Hold or vice versa).
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the trend reversal.
Stop-Loss Placement: A stop-loss is typically placed below the low (for Bullish Belt Hold) or above the high (for Bearish Belt Hold) of the candlestick.
Break Away
The Break Away is a strong, multi-candlestick reversal pattern that signals the beginning of a new trend. It consists of a series of candlesticks that occur after a period of consolidation, typically showing a breakout from a range or previous trend. The pattern can be bullish or bearish, depending on the direction of the breakout.
Characteristics:
Multi-candlestick pattern (typically five or more candles).
First candle: A consolidation phase, where the price is moving within a narrow range.
Middle candles: Small-bodied candles indicating indecision or a continuation of the consolidation.
Last candle: A large, directional candle that breaks out of the range and signals the new trend (either bullish or bearish).
Occurs after a period of consolidation or a trend, indicating a shift in market sentiment.
Interpretation and Usage
Bullish Break Away: Appears after a period of consolidation or a downtrend, signaling that buyers have gained control and the price will likely move higher.
Bearish Break Away: Appears after a period of consolidation or an uptrend, indicating that sellers have taken control and the price will likely move lower.
How to Use the Break Away Pattern:
Confirm with Volume: A higher volume during the breakout candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for a follow-up candle in the breakout direction to confirm the new trend.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the direction and strength of the new trend.
Stop-Loss Placement: A stop-loss is typically placed below the low of the breakout candle (for bullish Break Away) or above the high (for bearish Break Away).
Closing Marubozu
The Closing Marubozu is a single candlestick pattern that signals strong market sentiment and potential trend continuation. This pattern occurs when a candlestick has no shadow (wick) on one side, and the close is at the extreme of the candle's range, either the highest or the lowest point. It can be either bullish or bearish.
Characteristics:
Single-candlestick pattern.
Bullish Closing Marubozu: A long green or white candlestick with no upper shadow, opening near the low of the day and closing at or near the high.
Bearish Closing Marubozu: A long red or black candlestick with no lower shadow, opening near the high of the day and closing at or near the low.
The candlestick closes at the extreme of its range, signaling strong control by either buyers or sellers.
Interpretation and Usage
Bullish Closing Marubozu: Appears in an uptrend or at the end of a downtrend, indicating strong buying pressure and a continuation of the bullish trend.
Bearish Closing Marubozu: Appears in a downtrend or at the end of an uptrend, indicating strong selling pressure and a continuation of the bearish trend.
How to Use the Closing Marubozu Pattern:
Confirm with Volume: A higher volume during the formation of the Closing Marubozu strengthens the continuation signal.
Wait for Confirmation: Traders may look for further continuation in the next candle to confirm the trend.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the strength of the trend.
Stop-Loss Placement: A stop-loss is typically placed beyond the high (for bearish Closing Marubozu) or low (for bullish Closing Marubozu) of the candlestick.
Conceal Baby's Wall
The Conceal Baby's Wall is a rare three-candlestick reversal pattern that appears in an uptrend and signals a potential trend reversal to the downside. The pattern consists of a large bullish candle, followed by a small bearish candle, and then a third large bearish candle. It suggests that the buying pressure is losing strength, and a bearish reversal may occur.
Characteristics:
Three-candlestick pattern.
First candle: A large bullish candlestick, indicating strong upward momentum.
Second candle: A small bearish candlestick that opens within the body of the first candle, showing a pause in upward momentum.
Third candle: A large bearish candlestick that closes below the low of the second candle, confirming the bearish reversal.
Occurs after an uptrend.
Interpretation and Usage
The Conceal Baby's Wall pattern suggests that despite the previous bullish movement, the sellers are starting to take control, signaling a potential shift to a bearish trend. The second candlestick (small bearish) within the first bullish candle indicates hesitation, and the third large bearish candle confirms the reversal.
How to Use the Conceal Baby's Wall Pattern:
Confirm with Volume: A higher volume during the third (bearish) candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for additional bearish candles or a pullback before entering a trade.
Combine with Other Indicators: RSI, MACD, and resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the first bullish candle.
Counter Attack
The Counter Attack is a two-candlestick reversal pattern that signals a potential trend reversal, typically occurring after an uptrend or downtrend. This pattern consists of two candles: the first candle represents the prevailing trend, and the second candle completely reverses the first candle's price action, closing at or near the opposite extreme. It can be either bullish or bearish, depending on the direction of the trend.
Characteristics:
Two-candlestick pattern.
First candle: A large candlestick that continues the prevailing trend (bullish in an uptrend or bearish in a downtrend).
Second candle: A candlestick that opens in the opposite direction of the first and closes near or beyond the opposite extreme of the first candle, indicating a reversal.
Appears after an uptrend (bearish reversal) or a downtrend (bullish reversal).
Interpretation and Usage
Bullish Counter Attack: Appears after a downtrend, where the first candle is bearish, and the second is a bullish candle that closes near or above the first candle's open, signaling a reversal to the upside.
Bearish Counter Attack: Appears after an uptrend, where the first candle is bullish, and the second is a bearish candle that closes near or below the first candle's close, signaling a reversal to the downside.
How to Use the Counter Attack Pattern:
Confirm with Volume: A higher volume during the second candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for an additional candle to confirm the reversal direction before taking action.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed above the high (for bearish Counter Attack) or below the low (for bullish Counter Attack) of the first candle.
Dark Cloud Cover
The Dark Cloud Cover is a two-candlestick bearish reversal pattern that appears after an uptrend. The pattern consists of a strong bullish candle followed by a bearish candle that opens above the high of the previous candle but closes well into the body of the first candle, signaling a potential reversal to the downside.
Characteristics:
Two-candlestick pattern.
First candle: A large bullish candle, indicating strong buying pressure.
Second candle: A bearish candle that opens above the high of the first candle but closes below the midpoint of the first candle, indicating a shift from buying to selling pressure.
Occurs after an uptrend, signaling a potential bearish reversal.
Interpretation and Usage
The Dark Cloud Cover pattern suggests that after a period of bullish momentum, sellers are starting to take control. The second candle's bearish close into the body of the first candle signals a weakening of the uptrend and the potential for a reversal to the downside.
How to Use the Dark Cloud Cover Pattern:
Confirm with Volume: A higher volume during the second (bearish) candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for additional bearish candles or a continuation of the downtrend after the pattern to confirm the reversal.
Combine with Other Indicators: RSI, MACD, and resistance levels can help confirm the bearish reversal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the first bullish candle.
Doji
The Doji is a single candlestick pattern that signals market indecision. It is formed when the opening and closing prices are nearly the same, resulting in a very small body. The candlestick typically has long upper and lower wicks (shadows), which indicate that price moved significantly in both directions but ended up closing near the open.
Characteristics:
Single-candlestick pattern.
Small real body: The open and close prices are very close to each other, showing little net price movement.
Long upper and lower shadows: These indicate that prices moved significantly in both directions during the period but closed near the opening level.
Indecision in the market: A Doji represents a balance between buying and selling pressure, and can signal a potential reversal or continuation, depending on its context.
Interpretation and Usage
The Doji pattern suggests indecision in the market, where neither buyers nor sellers have full control. It is often seen as a signal of a potential reversal, but it depends on the surrounding candlesticks and market context.
Bullish Reversal: If a Doji appears after a downtrend, it can indicate a potential reversal to the upside if followed by a bullish candle.
Bearish Reversal: If a Doji appears after an uptrend, it can signal a potential reversal to the downside if followed by a bearish candle.
How to Use the Doji Pattern:
Confirm with Volume: Higher volume during the Doji formation or subsequent candles can confirm the potential reversal.
Wait for Confirmation: Traders usually wait for the next candle to confirm the reversal direction (a bullish or bearish candle following the Doji).
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal or continuation.
Stop-Loss Placement: A stop-loss is often placed beyond the high or low of the Doji candle, depending on the expected direction of the trend.
Gap Side by Side White
The Gap Side by Side White pattern is a three-candlestick continuation pattern that can appear in both bullish and bearish configurations. It consists of a gap followed by two consecutive candles of the same color, indicating a continuation of the current trend.
Characteristics:
Three-candlestick pattern.
First candle: A strong candlestick in the direction of the trend.
Second candle: A candlestick that gaps in the same direction, confirming momentum.
Third candle: Another candlestick of the same color that opens near the second candle and closes in the trend’s direction.
Occurs in an uptrend (bullish) or a downtrend (bearish), reinforcing the existing trend.
Interpretation and Usage
Bullish Gap Side by Side White: Appears in an uptrend with three consecutive bullish candles. The pattern suggests that after a gap, buying pressure remains strong, signaling a continuation of the uptrend.
Bearish Gap Side by Side White: Appears in a downtrend with three consecutive bearish candles. The pattern suggests that after a gap down, selling pressure remains strong, confirming the continuation of the downtrend.
How to Use the Gap Side by Side White Pattern:
Confirm with Volume: Higher volume during the pattern formation strengthens the continuation signal.
Wait for Confirmation: Traders often wait for an additional candle in the direction of the trend before entering a position.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the trend’s strength.
Stop-Loss Placement:
For bullish setups, place a stop-loss below the low of the first candle.
For bearish setups, place a stop-loss above the high of the first candle.
Harami Cross
The Harami Cross is a two-candlestick reversal pattern that signals market indecision and a potential trend reversal. It is a variation of the Harami pattern, where the second candle is a Doji (a candle with little to no real body), indicating strong hesitation in the market.
Characteristics:
Two-candlestick pattern.
First candle: A large candlestick in the direction of the prevailing trend (bullish in an uptrend or bearish in a downtrend).
Second candle: A Doji that is completely contained within the body of the first candle, showing market indecision.
Occurs after an uptrend (bearish reversal) or a downtrend (bullish reversal).
Interpretation and Usage
The Harami Cross pattern suggests that the existing trend is losing strength and that a reversal may be imminent. The presence of the Doji indicates indecision between buyers and sellers, increasing the likelihood of a trend change.
Bullish Harami Cross: Appears after a downtrend, signaling that selling pressure is weakening, and a potential bullish reversal may occur.
Bearish Harami Cross: Appears after an uptrend, indicating that buying momentum is fading, and a bearish reversal may follow.
How to Use the Harami Cross Pattern:
Confirm with Volume: A decrease in volume during the Doji candle strengthens the reversal signal.
Wait for Confirmation: Traders usually wait for the next candle to confirm the trend reversal (a bullish candle after a Bullish Harami Cross or a bearish candle after a Bearish Harami Cross).
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed beyond the high (for a bearish setup) or the low (for a bullish setup) of the first candle.
High Wave
The High Wave is a single-candlestick pattern that signals market indecision and potential trend reversal or continuation. It is characterized by a small real body with long upper and lower wicks, indicating that the price moved significantly in both directions but closed near its opening level.
Characteristics:
Single-candlestick pattern.
Small real body, showing minimal difference between opening and closing prices.
Long upper and lower shadows, indicating significant price swings in both directions.
Occurs in both uptrends and downtrends, signaling uncertainty.
Interpretation and Usage
The High Wave pattern suggests that neither buyers nor sellers have full control of the market, leading to uncertainty. Depending on the market context, this pattern can either indicate a potential reversal or a continuation of the current trend.
Reversal Signal: If the pattern appears after a strong uptrend or downtrend, it may indicate a loss of momentum and a possible trend reversal.
Continuation Signal: If the pattern appears within a trend without breaking key support or resistance levels, it may indicate a temporary pause before the trend resumes.
How to Use the High Wave Pattern:
Confirm with Volume: A spike in volume during the High Wave pattern can indicate increased uncertainty.
Wait for Confirmation: Traders typically wait for the next candlestick to determine whether the trend will continue or reverse.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help assess the pattern's significance.
Stop-Loss Placement: A stop-loss is typically placed beyond the high or low of the High Wave candle, depending on the expected direction.
Hikkake
The Hikkake pattern is a short-term candlestick pattern that signals a potential trend continuation or reversal, depending on market conditions. It is a trap-like pattern that first appears to break in one direction but then reverses, catching traders on the wrong side.
Characteristics:
Two or more candlesticks forming a false breakout.
First candle: A small-range candlestick, often an inside bar (where the high and low are within the previous candle’s range).
Second candle: A breakout candle that moves slightly above or below the first candle’s range, tricking traders into believing a breakout is occurring.
Third candle and beyond: A reversal candle that moves in the opposite direction, confirming the false breakout.
Can appear in both uptrends and downtrends, depending on market conditions.
Interpretation and Usage
The Hikkake pattern is often used to trap traders who assume the initial breakout will continue. When the price reverses back into the previous range, it forces those traders to exit their positions, increasing the momentum in the opposite direction.
Bullish Hikkake: A false downside breakout is followed by a reversal to the upside, signaling a potential bullish move.
Bearish Hikkake: A false upside breakout is followed by a reversal to the downside, signaling a potential bearish move.
How to Use the Hikkake Pattern:
Confirm with Volume: Increased volume during the reversal strengthens the validity of the pattern.
Wait for Confirmation: Traders often wait for a strong candlestick in the direction of the reversal before entering a trade.
Combine with Other Indicators: Support/resistance levels, RSI, and MACD can help confirm the pattern's effectiveness.
Stop-Loss Placement: A stop-loss is typically placed beyond the false breakout high (for bearish Hikkake) or low (for bullish Hikkake).
Hikkake Modified
The Hikkake Modified is an enhanced version of the traditional Hikkake pattern, designed to improve the accuracy of detecting false breakouts and trend reversals. This variation introduces an additional confirmation step, reducing the chances of false signals.
Characteristics:
Two or more candlesticks forming a false breakout.
First candle: A small-range candlestick, often an inside bar, where the high and low are within the previous candle’s range.
Second candle: A breakout candle that moves slightly above or below the first candle’s range, suggesting a potential breakout.
Third candle and beyond: Instead of immediately reversing, the price consolidates briefly before confirming the reversal.
Occurs in both uptrends and downtrends, signaling a possible reversal or continuation.
Interpretation and Usage
The Hikkake Modified pattern refines the original Hikkake by delaying the confirmation. Instead of instantly reversing, the price consolidates for a short period before making the final move. This reduces the likelihood of reacting to a premature or weak signal.
Bullish Hikkake Modified: A false downside breakout is followed by a brief consolidation before the price moves upward.
Bearish Hikkake Modified: A false upside breakout is followed by a short period of hesitation before the price moves downward.
How to Use the Hikkake Modified Pattern:
Confirm with Volume: Increased volume during the final breakout strengthens the reliability of the pattern.
Wait for Consolidation: Unlike the traditional Hikkake, traders should look for a brief period of sideways movement before the true breakout.
Combine with Other Indicators: Support/resistance levels, RSI, and MACD can help validate the pattern’s strength.
Stop-Loss Placement: A stop-loss is typically placed beyond the false breakout high (for bearish Hikkake Modified) or low (for bullish Hikkake Modified).
Homing Pigeon
The Homing Pigeon is a two-candlestick bullish reversal pattern that appears during a downtrend. It is similar to the Bullish Harami but consists of two consecutive bearish candles, with the second candle being completely contained within the body of the first.
Characteristics:
Two-candlestick pattern.
First candle: A large bearish candlestick, confirming the ongoing downtrend.
Second candle: A smaller bearish candlestick that is completely within the body of the first candle, showing decreased selling pressure.
Occurs in a downtrend, suggesting a potential bullish reversal.
Interpretation and Usage
The Homing Pigeon pattern indicates that selling pressure is weakening, and buyers may start gaining control. The second candle’s smaller body suggests that bearish momentum is fading, increasing the possibility of a trend reversal.
How to Use the Homing Pigeon Pattern:
Confirm with Volume: A decline in volume during the second candle suggests weakening selling pressure, while an increase in volume on a bullish confirmation candle strengthens the signal.
Wait for Confirmation: Traders often wait for a bullish candle after the pattern to confirm the reversal.
Combine with Other Indicators: RSI, MACD, and support levels can help confirm the potential bullish move.
Stop-Loss Placement: A stop-loss is typically placed below the low of the first bearish candle to limit risk in case the downtrend continues.
Identical Three Crows
The Identical Three Crows is a bearish reversal pattern consisting of three consecutive strong bearish candlesticks. It appears after an uptrend and signals a shift in market sentiment from bullish to bearish.
Characteristics:
Three-candlestick pattern.
All three candles are bearish (red or black).
Each candle opens near or at the previous candle’s close and closes lower, indicating strong selling pressure.
Occurs after an uptrend, suggesting a potential bearish reversal.
Interpretation and Usage
The Identical Three Crows pattern signals that sellers have taken control of the market, and the uptrend is losing strength. The fact that each candle opens near the previous close and continues downward shows that bulls are unable to push prices higher.
How to Use the Identical Three Crows Pattern:
Confirm with Volume: A high trading volume during the pattern strengthens the bearish signal.
Wait for Confirmation: Traders often wait for further bearish price action or a confirmation candle before entering a short position.
Combine with Other Indicators: RSI (showing overbought conditions), MACD, and resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the first bearish candle to manage risk.
In Neck
The In Neck pattern is a bearish continuation candlestick pattern that appears in a downtrend. It consists of two candles: a strong bearish candle followed by a smaller bullish candle that closes near the low of the first candle but does not break below it.
Characteristics:
Two-candlestick pattern.
First candle: A large bearish candlestick, confirming the ongoing downtrend.
Second candle: A small bullish candlestick that opens below the first candle’s close but closes near or slightly above it.
Occurs in a downtrend, signaling a continuation of bearish momentum.
Interpretation and Usage
The In Neck pattern suggests that after a strong bearish move, buyers attempt to push prices up but fail to break above the previous candle’s body. This lack of bullish strength indicates that sellers remain in control and that the downtrend is likely to continue.
How to Use the In Neck Pattern:
Confirm with Volume: Higher volume on the first bearish candle strengthens the continuation signal.
Wait for Confirmation: Traders look for another bearish candle after the pattern to confirm that the downtrend will continue.
Combine with Other Indicators: RSI, MACD, and trend line analysis can help confirm the continuation of bearish momentum.
Stop-Loss Placement: A stop-loss is typically placed above the high of the second (bullish) candle to manage risk in case of a reversal.
Kicking
The Kicking pattern is a strong reversal candlestick pattern that signals a sudden shift in market sentiment. It consists of two Marubozu candles (candlesticks with no shadows), indicating a sharp change in trend direction.
Characteristics:
Two-candlestick pattern.
First candle: A large Marubozu (either bullish or bearish), showing strong momentum.
Second candle: An opposite-colored Marubozu that gaps in the opposite direction, signaling a strong shift in sentiment.
Occurs after a trend, either uptrend or downtrend, indicating a sharp reversal.
Interpretation and Usage
The Kicking pattern shows an abrupt rejection of the previous trend, often driven by unexpected news or a shift in market sentiment. The gap between the two candles highlights the strong momentum behind the reversal.
Bullish Kicking: A bearish Marubozu is followed by a bullish Marubozu that gaps up, signaling a strong upward reversal.
Bearish Kicking: A bullish Marubozu is followed by a bearish Marubozu that gaps down, signaling a strong downward reversal.
How to Use the Kicking Pattern:
Confirm with Volume: High volume on the second candle strengthens the reversal signal.
Wait for Confirmation: Traders often look for additional price action in the new trend’s direction before entering a trade.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed below the low (for a bullish setup) or above the high (for a bearish setup) of the second candle.
Kicking by Length
The Kicking by Length pattern is a variation of the Kicking candlestick pattern, where the size (length) of the Marubozu candles plays a crucial role in determining the strength of the reversal. It signals an abrupt and forceful shift in market sentiment.
Characteristics:
Two-candlestick pattern.
First candle: A large Marubozu (either bullish or bearish), indicating strong momentum.
Second candle: An opposite-colored Marubozu that gaps in the opposite direction, with a longer body than the first candle, reinforcing the strength of the reversal.
Occurs after a trend, either uptrend or downtrend, suggesting a sharp market reversal.
Interpretation and Usage
The Kicking by Length pattern is considered more reliable than the standard Kicking pattern because the second candle is not only opposite in color but also significantly larger, demonstrating greater force in the reversal.
Bullish Kicking by Length: A bearish Marubozu is followed by an even larger bullish Marubozu that gaps up, signaling an exceptionally strong bullish reversal.
Bearish Kicking by Length: A bullish Marubozu is followed by an even larger bearish Marubozu that gaps down, signaling an intense bearish reversal.
How to Use the Kicking by Length Pattern:
Confirm with Volume: Higher volume on the second candle strengthens the reversal signal.
Wait for Confirmation: Traders often look for follow-through price action in the new trend direction before entering a trade.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the reversal’s strength.
Stop-Loss Placement: A stop-loss is typically placed below the low (
Ladder Bottom
The Ladder Bottom is a bullish reversal candlestick pattern that appears after a downtrend. It consists of five candles and signals a gradual shift in market sentiment from bearish to bullish.
Characteristics:
Five-candlestick pattern.
First three candles: Consecutive bearish candles with lower closes, confirming the ongoing downtrend.
Fourth candle: A smaller bearish candle, indicating weakening selling pressure.
Fifth candle: A strong bullish candle that closes above the previous candle's high, confirming the reversal.
Occurs after a downtrend, signaling a potential bullish reversal.
Interpretation and Usage
The Ladder Bottom pattern suggests that the sellers are gradually losing control, and buyers are starting to gain strength. The presence of a strong bullish candle at the end confirms the shift in momentum.
How to Use the Ladder Bottom Pattern:
Confirm with Volume: An increase in volume on the fifth candle strengthens the bullish reversal signal.
Wait for Confirmation: Traders often look for an additional bullish candle after the pattern to confirm the reversal.
Combine with Other Indicators: RSI, MACD, and support levels can help validate the bullish trend shift.
Stop-Loss Placement: A stop-loss is typically placed below the low of the fourth or fifth candle to manage risk.
Long-Legged Doji
The Long-Legged Doji is a single-candlestick pattern that signals market indecision and a potential trend reversal or continuation, depending on the context. It is characterized by a small or non-existent real body with long upper and lower shadows, showing significant price movement in both directions before closing near the opening price.
Characteristics:
Single-candlestick pattern.
Small or non-existent real body, indicating little difference between the opening and closing price.
Long upper and lower shadows, showing strong price swings in both directions.
Occurs in both uptrends and downtrends, signaling uncertainty.
Interpretation and Usage
The Long-Legged Doji suggests that neither buyers nor sellers are in control, creating market indecision. The pattern's meaning depends on its position within the trend:
At the top of an uptrend: Can indicate bullish exhaustion and a potential bearish reversal.
At the bottom of a downtrend: Can signal seller weakness and a potential bullish reversal.
In the middle of a trend: Suggests temporary indecision before the trend continues.
How to Use the Long-Legged Doji Pattern:
Confirm with Volume: High volume during the Doji formation strengthens the significance of the pattern.
Wait for Confirmation: Traders often look for the next candle to determine whether the market will reverse or continue in the previous trend.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help assess the pattern’s strength.
Stop-Loss Placement: A stop-loss is typically placed above the high (for bearish setups) or below the low (for bullish setups) of the Doji.
Long Line
The Long Line is a single-candlestick pattern that signifies strong market momentum. It features a large real body with little to no shadows, indicating a decisive move in one direction. This pattern can be bullish or bearish, depending on its color and context within the trend.
Characteristics:
Single-candlestick pattern.
Large real body, showing a significant price movement.
Minimal or no upper and lower shadows, indicating strong momentum.
Can appear in both uptrends and downtrends, acting as a continuation or reversal signal depending on context.
Interpretation and Usage
The Long Line pattern indicates strong control by either buyers (bullish Long Line) or sellers (bearish Long Line). Its significance depends on where it appears:
In an uptrend: A bullish Long Line suggests a continuation of the uptrend, while a bearish Long Line may signal a reversal.
In a downtrend: A bearish Long Line reinforces the downtrend, whereas a bullish Long Line may indicate a reversal.
After consolidation: A Long Line breaking out of a sideways range suggests the beginning of a new trend.
How to Use the Long Line Pattern:
Confirm with Volume: High volume on the Long Line candle strengthens its validity.
Wait for Confirmation: Traders often look at the next few candles to see if the momentum continues or reverses.
Combine with Other Indicators: RSI, MACD, and moving averages can help confirm trend strength.
Stop-Loss Placement: A stop-loss is typically placed below the low (for bullish setups) or above the high (for bearish setups) of the Long Line candle.
Marubozu
The Marubozu is a single-candlestick pattern that represents strong market conviction in either direction. It has a large real body with no shadows (or very minimal shadows), indicating that the price moved decisively in one direction from open to close.
Characteristics:
Single-candlestick pattern.
Large real body, showing strong momentum.
No upper or lower shadows (or very small ones).
Can be bullish or bearish, depending on the color of the candlestick.
Interpretation and Usage
The Marubozu pattern signals strong dominance by buyers (bullish Marubozu) or sellers (bearish Marubozu). Its significance depends on the trend and market context:
Bullish Marubozu:
The price opens at the low and closes at the high.
Signals strong buying pressure and bullish momentum.
In an uptrend, it confirms continuation; in a downtrend, it may indicate a reversal.
Bearish Marubozu:
The price opens at the high and closes at the low.
Signals strong selling pressure and bearish momentum.
In a downtrend, it confirms continuation; in an uptrend, it may signal a reversal.
How to Use the Marubozu Pattern:
Confirm with Volume: High volume on a Marubozu candle strengthens the reliability of the trend.
Wait for Confirmation: Traders often look at the next few candles to confirm if the trend continues or reverses.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help validate the pattern’s significance.
Stop-Loss Placement: A stop-loss is typically placed below the low (for bullish setups) or above the high (for bearish setups) of the Marubozu candle.
Matching Low
The Matching Low is a bullish reversal candlestick pattern that appears at the end of a downtrend. It consists of two bearish candles that close at the same or nearly the same price, suggesting a potential bottom in the market.
Characteristics:
Two-candlestick pattern.
First candle: A strong bearish candle, confirming the downtrend.
Second candle: Another bearish candle that closes at or near the same level as the first candle.
Occurs in a downtrend, signaling a possible reversal.
Interpretation and Usage
The Matching Low pattern suggests that selling pressure is weakening as the price finds strong support at the same closing level. While both candles are bearish, the inability to close lower on the second day indicates potential buying interest and a possible shift in momentum.
How to Use the Matching Low Pattern:
Confirm with Volume: An increase in volume on the second candle or a bullish confirmation candle strengthens the reversal signal.
Wait for Confirmation: Traders often look for a bullish candle after the pattern to confirm the reversal.
Combine with Other Indicators: RSI (showing oversold conditions), MACD, and support levels can help validate the pattern.
Stop-Loss Placement: A stop-loss is typically placed below the lowest point of the two candles to manage risk.
Mat Hold
The Mat Hold is a bullish continuation candlestick pattern that appears during an uptrend, indicating a brief consolidation before the trend resumes. It consists of five candles and signals strong buying pressure despite a temporary pullback.
Characteristics:
Five-candlestick pattern.
First candle: A large bullish candle, confirming the uptrend.
Second to fourth candles: Smaller bearish or neutral candles that remain within the range of the first candle, indicating a temporary pause.
Fifth candle: A strong bullish candle that closes above the first candle’s high, confirming the continuation of the uptrend.
Occurs in an uptrend, signaling a continuation of bullish momentum.
Interpretation and Usage
The Mat Hold pattern indicates that buyers are still in control, despite a brief consolidation. The small bearish or neutral candles represent a minor pullback, but the final strong bullish candle confirms that the uptrend remains intact.
How to Use the Mat Hold Pattern:
Confirm with Volume: Higher volume on the fifth candle strengthens the continuation signal.
Wait for Confirmation: Traders often look for additional bullish candles to confirm the uptrend.
Combine with Other Indicators: RSI, MACD, and moving averages can help validate the continuation of the trend.
Stop-Loss Placement: A stop-loss is typically placed below the lowest point of the consolidation candles to manage risk.
On Neck
The On Neck pattern is a bearish continuation candlestick pattern that appears during a downtrend. It consists of two candles and signals that sellers remain in control, despite a minor bullish attempt.
Characteristics:
Two-candlestick pattern.
First candle: A strong bearish candlestick, confirming the ongoing downtrend.
Second candle: A small bullish candlestick that opens below the first candle’s close and closes near or at the same level as the first candle’s close.
Occurs in a downtrend, suggesting that the bearish trend is likely to continue.
Interpretation and Usage
The On Neck pattern suggests that, after a strong bearish move, buyers attempt a slight recovery but fail to push prices significantly higher. Since the second candle closes at or near the first candle’s close, it signals that sellers are still in control, and the downtrend is likely to resume.
How to Use the On Neck Pattern:
Confirm with Volume: Higher volume on the first bearish candle strengthens the continuation signal.
Wait for Confirmation: Traders look for another bearish candle after the pattern to confirm that the downtrend will continue.
Combine with Other Indicators: RSI, MACD, and trend line analysis can help confirm the continuation of bearish momentum.
Stop-Loss Placement: A stop-loss is typically placed above the high of the second (bullish) candle to manage risk.
Piercing
The Piercing pattern is a bullish reversal candlestick pattern that appears in a downtrend. It consists of two candles and signals a potential shift from bearish to bullish sentiment.
Characteristics:
Two-candlestick pattern.
First candle: A large bearish candlestick, confirming the downtrend.
Second candle: A bullish candlestick that opens below the first candle’s low and closes at least halfway up the body of the first candle, signaling a reversal.
Occurs in a downtrend, suggesting that the market may reverse to the upside.
Interpretation and Usage
The Piercing pattern indicates that after a strong bearish move, buyers have stepped in with significant buying pressure. The second candle’s close above the halfway point of the first candle shows that the bulls are gaining strength, potentially signaling the start of an uptrend.
How to Use the Piercing Pattern:
Confirm with Volume: Higher volume on the second bullish candle strengthens the reversal signal.
Wait for Confirmation: Traders often wait for the next candle to confirm the bullish reversal before entering a trade.
Combine with Other Indicators: RSI (indicating oversold conditions), MACD, and support levels can help confirm the reversal.
Stop-Loss Placement: A stop-loss is typically placed below the low of the first bearish candle to manage risk.
Rickshawman
The Rickshawman is a reversal candlestick pattern that indicates market indecision and a potential shift in trend. It appears after a strong price move, showing that buyers or sellers have lost momentum and that the market could be at a turning point. The pattern consists of a single candlestick with a small body and long upper and lower shadows.
Characteristics:
Single-candlestick pattern.
Small real body, indicating that the opening and closing prices are close to each other.
Long upper and lower shadows, showing significant price movement in both directions before closing near the open.
Occurs after a strong price move, signaling indecision and a possible reversal.
Interpretation and Usage
The Rickshawman pattern suggests that neither buyers nor sellers were able to gain control during the trading session. It is a sign of indecision and can signal a trend reversal or pause. The pattern's significance is enhanced if it appears after a strong uptrend or downtrend.
After an uptrend: The Rickshawman indicates that the buyers are losing momentum, and a potential bearish reversal could occur.
After a downtrend: The pattern suggests that the sellers are losing strength, and a bullish reversal may follow.
How to Use the Rickshawman Pattern:
Confirm with Volume: Higher volume on the Rickshawman candle strengthens the indecision signal.
Wait for Confirmation: Traders typically wait for a follow-up candle to confirm a reversal or continuation.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help validate the trend change.
Stop-Loss Placement: A stop-loss is typically placed above the high or below the low of the Rickshawman candle, depending on the anticipated reversal direction.
Rise Fall Three Methods
The Rise Fall Three Methods is a bullish continuation candlestick pattern that occurs during an uptrend. It consists of a five-candle formation and signals that the trend is likely to continue after a brief consolidation or pullback.
Characteristics:
Five-candlestick pattern.
First candle: A large bullish candle, confirming the ongoing uptrend.
Second to fourth candles: Smaller bearish or neutral candles that fall within the range of the first bullish candle, indicating a brief period of consolidation or pullback.
Fifth candle: A large bullish candle that closes above the first candle’s high, confirming the continuation of the uptrend.
Occurs in an uptrend, suggesting that the market will resume its bullish direction.
Interpretation and Usage
The Rise Fall Three Methods pattern suggests that after a strong bullish move, there is a temporary pullback or consolidation that is short-lived. The pattern reflects that the market is taking a brief rest, and buyers remain in control. The final bullish candle indicates that the trend will continue in the upward direction.
How to Use the Rise Fall Three Methods Pattern:
Confirm with Volume: Higher volume on the fifth candle strengthens the continuation signal.
Wait for Confirmation: Traders often look for additional bullish candles after the pattern to confirm the trend continuation.
Combine with Other Indicators: RSI, MACD, and support levels can help validate the continuation of the bullish trend.
Stop-Loss Placement: A stop-loss is typically placed below the low of the smaller consolidation candles (second to fourth candles) to manage risk.
Separating Lines
The Separating Lines is a bullish or bearish continuation candlestick pattern that appears after a strong trend. It consists of two candles, and its interpretation depends on the direction of the trend preceding the pattern. It shows that the market is pausing before continuing in the same direction.
Characteristics:
Two-candlestick pattern.
First candle: A large candle in the direction of the prevailing trend (bullish or bearish).
Second candle: A small candle that opens within the range of the first candle and closes in the same direction, without overlapping the first candle completely.
Occurs after a strong trend, suggesting that the market is likely to continue in the direction of the trend.
Interpretation and Usage
The Separating Lines pattern suggests that the market is experiencing a temporary pause or consolidation, but the prevailing trend remains intact. The second candle doesn't completely reverse the first candle's move, showing that the market is still leaning in the same direction as the prior trend.
Bullish Separating Lines: After a strong uptrend, the first candle is bullish, and the second candle is a small bullish candle that continues the uptrend.
Bearish Separating Lines: After a strong downtrend, the first candle is bearish, and the second candle is a small bearish candle that continues the downtrend.
How to Use the Separating Lines Pattern:
Confirm with Volume: Volume should be higher on the first candle and consistent on the second candle for a stronger continuation signal.
Wait for Confirmation: Traders may wait for the next few candles to confirm that the trend is continuing in the direction of the prevailing trend.
Combine with Other Indicators: RSI, MACD, and trend lines can help validate the continuation.
Stop-Loss Placement: A stop-loss is typically placed below the low (for bullish setups) or above the high (for bearish setups) of the second candle to manage risk.
Short Line
The Short Line is a bearish continuation candlestick pattern that signals the market is likely to resume its downward direction after a brief pause or consolidation. It consists of a single candlestick with a small real body and minimal shadows, indicating a period of indecision before the trend continues.
Characteristics:
Single-candlestick pattern.
Small real body, showing little difference between the opening and closing prices.
Minimal upper and lower shadows, indicating little price movement within the candle's time frame.
Occurs after a strong downtrend, signaling a continuation of the bearish trend.
Interpretation and Usage
The Short Line pattern suggests that after a strong bearish move, the market is pausing or consolidating briefly before resuming the downward movement. The small body and minimal shadows reflect indecision, but the market is still showing signs of continuing the downtrend.
How to Use the Short Line Pattern:
Confirm with Volume: Low volume on the Short Line candle strengthens the pattern's indication of indecision before the continuation of the trend.
Wait for Confirmation: Traders often wait for a bearish candle after the Short Line to confirm the continuation of the downtrend.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help confirm the continuation of the bearish trend.
Stop-Loss Placement: A stop-loss is typically placed above the high of the Short Line candle to manage risk if the trend does not continue.
Stalled Pattern
The Stalled Pattern is a bearish reversal candlestick pattern that occurs during an uptrend. It signals that the bullish momentum has weakened, and a potential reversal to the downside may be imminent. The pattern typically consists of a single candlestick with a small real body and long upper shadow, showing that despite the price rising during the session, the buyers lost control and the price retraced towards the opening level.
Characteristics:
Single-candlestick pattern.
Small real body, indicating a narrow range between the open and close.
Long upper shadow, showing that the price moved significantly higher but failed to hold onto the gains.
Occurs after an uptrend, suggesting a potential reversal to the downside.
Interpretation and Usage
The Stalled Pattern suggests that while buyers were initially in control, they lost momentum as the session progressed, and sellers were able to push the price back towards the opening level. This creates a potential bearish reversal signal, particularly if it appears at the top of an uptrend.
How to Use the Stalled Pattern:
Confirm with Volume: A high volume on the candlestick strengthens the reversal signal. A higher volume on the following bearish candle will further confirm the trend change.
Wait for Confirmation: Traders should wait for a bearish candle following the Stalled Pattern to confirm the reversal.
Combine with Other Indicators: RSI, MACD, and resistance levels can help validate the bearish reversal signal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the Stalled candle to manage risk if the uptrend resumes.
Stick Sandwich
The Stick Sandwich is a bullish reversal candlestick pattern that appears after a downtrend. It consists of three candles: a strong bearish candle, followed by a small bullish or neutral candle, and then another strong bullish candle. This pattern indicates that selling pressure has weakened and the buyers are taking control, potentially signaling a reversal in the market.
Characteristics:
Three-candlestick pattern.
First candle: A strong bearish candlestick, indicating the continuation of the downtrend.
Second candle: A small bullish or neutral candle that opens within the range of the first candle and closes near the middle of the first candle's body.
Third candle: A large bullish candlestick that closes above the high of the first candle, confirming the reversal.
Occurs after a downtrend, signaling a potential reversal to the upside.
Interpretation and Usage
The Stick Sandwich pattern suggests that after a strong downtrend, the market experienced a brief pause or consolidation, but the bullish momentum is now gaining strength. The second candle represents the market’s indecision, while the third candle confirms that the buyers have taken control.
How to Use the Stick Sandwich Pattern:
Confirm with Volume: Higher volume on the third candle strengthens the bullish reversal signal.
Wait for Confirmation: Traders often wait for additional bullish candles after the pattern to confirm the trend reversal.
Combine with Other Indicators: RSI, MACD, and support levels can help validate the reversal signal.
Stop-Loss Placement: A stop-loss is typically placed below the low of the first bearish candle to manage risk if the reversal doesn't occur.
Takuri
The Takuri is a bullish reversal candlestick pattern that appears at the bottom of a downtrend. It consists of a single candlestick with a small body, a long lower shadow, and a very small or nonexistent upper shadow. The pattern suggests that although sellers tried to push the price lower during the session, buyers regained control, closing near or above the opening price.
Characteristics:
Single-candlestick pattern.
Small real body, indicating little difference between the open and close prices.
Long lower shadow, which should be at least twice the length of the body, showing that sellers pushed the price lower during the session.
Little to no upper shadow, indicating that the price stayed near the session’s closing price.
Occurs after a downtrend, signaling a potential reversal to the upside.
Interpretation and Usage
The Takuri pattern suggests a potential reversal at the bottom of a downtrend. It indicates that even though sellers dominated early in the session, buyers regained control and closed the price higher. This shift in momentum signals that the market may be ready to move higher.
How to Use the Takuri Pattern:
Confirm with Volume: A higher volume on the Takuri candlestick strengthens the bullish reversal signal.
Wait for Confirmation: Traders usually wait for a bullish candle following the Takuri pattern to confirm the reversal.
Combine with Other Indicators: RSI, MACD, and support levels can help validate the reversal signal.
Stop-Loss Placement: A stop-loss is typically placed below the low of the Takuri candlestick to manage risk if the market does not reverse as expected.
Tasuki Gap
The Tasuki Gap is a bullish or bearish continuation candlestick pattern that appears after a strong price move, either upwards or downwards. It consists of three candles: a gap, a continuation candle, and a third candle that closes in the direction of the prevailing trend, confirming the trend continuation. The pattern is seen as a sign that the current trend will likely continue in the same direction.
Characteristics:
Three-candlestick pattern.
First candle: A large candlestick in the direction of the prevailing trend (bullish or bearish).
Second candle: A gap in price (either bullish or bearish gap) that opens in the direction of the trend and continues the momentum.
Third candle: A candlestick that opens within the range of the second candle but closes in the same direction as the first candle, confirming the continuation of the trend.
Occurs during a trend, either in an uptrend or downtrend.
Interpretation and Usage
The Tasuki Gap pattern suggests that the market is experiencing a brief pause or consolidation within an existing trend, but the overall trend is expected to continue. The gap between the first and second candles shows momentum, and the third candle reinforces that the trend is still intact.
Bullish Tasuki Gap: Occurs after a strong uptrend, with the first two candles being bullish, and the third candle confirms the continuation of the uptrend.
Bearish Tasuki Gap: Occurs after a strong downtrend, with the first two candles being bearish, and the third candle confirms the continuation of the downtrend.
How to Use the Tasuki Gap Pattern:
Confirm with Volume: Higher volume on the second and third candles strengthens the continuation signal.
Wait for Confirmation: Traders usually wait for the third candle to close in the same direction as the first to confirm that the trend is continuing.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help validate the continuation of the trend.
Stop-Loss Placement: A stop-loss is typically placed below the low of the second (bullish) or the high of the second (bearish) candle to manage risk if the trend does not continue.
Thrusting
The Thrusting pattern is a bullish reversal or bearish continuation candlestick pattern, depending on its position in the market. It typically occurs when the market experiences a temporary pullback or consolidation, but the overall trend remains intact, signaling a continuation or reversal of the price movement. The pattern consists of two candles, where the second candle "thrusts" into the range of the previous candlestick, indicating a strong market reaction.
Characteristics:
Two-candlestick pattern.
First candle: A large candlestick in the direction of the prevailing trend (bullish or bearish).
Second candle: A smaller candlestick that opens below (for a bullish reversal) or above (for a bearish continuation) the first candle's close and closes within the range of the first candle.
Occurs after a pullback or consolidation, signaling a continuation of the trend.
Interpretation and Usage
The Thrusting pattern suggests that after a temporary pause in the trend (either due to consolidation or pullback), the price is likely to continue in the direction of the prevailing trend. The second candlestick’s thrust into the first candle's range shows strong buying or selling pressure, confirming that the momentum is still intact.
Bullish Thrusting: Occurs after a downtrend, with the first candle being bearish, and the second candle thrusting upward to close within the range of the first candle, signaling a potential reversal to the upside.
Bearish Thrusting: Occurs after an uptrend, with the first candle being bullish, and the second candle thrusting downward to close within the range of the first candle, indicating that the downtrend will likely continue.
How to Use the Thrusting Pattern:
Confirm with Volume: Higher volume on the second candle reinforces the strength of the continuation or reversal signal.
Wait for Confirmation: Traders typically wait for a follow-up candle to confirm that the trend is resuming in the expected direction.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can help validate the reversal or continuation signal.
Stop-Loss Placement: A stop-loss is typically placed below (for bullish) or above (for bearish) the low/high of the second candle to manage risk if the pattern does not result in the expected price movement.
Tri Star
The Tri Star is a bullish reversal candlestick pattern that appears at the bottom of a downtrend. It consists of three candles: a large bearish candle, followed by a small-bodied candlestick (often a Doji), and then another large bullish candlestick. This pattern suggests that after a period of selling pressure, the market has reached a point of indecision, and buyers are starting to take control, signaling a potential reversal to the upside.
Characteristics:
Three-candlestick pattern.
First candle: A large bearish candle, indicating the continuation of the downtrend.
Second candle: A small-bodied candlestick (often a Doji), showing indecision in the market as neither buyers nor sellers dominate.
Third candle: A large bullish candle, confirming the reversal as the price closes significantly higher, breaking above the high of the first candle.
Occurs at the bottom of a downtrend, signaling a potential reversal to the upside.
Interpretation and Usage
The Tri Star pattern indicates a potential trend reversal from bearish to bullish. The first large bearish candle suggests strong selling, but the second small-bodied candle shows that the selling pressure has slowed down, and the third large bullish candle confirms the shift in momentum. The pattern indicates that the sellers have lost control, and buyers are taking over, signaling a possible bullish trend.
How to Use the Tri Star Pattern:
Confirm with Volume: Higher volume on the third candle strengthens the bullish reversal signal.
Wait for Confirmation: Traders typically wait for additional bullish candles after the third candle to confirm the trend reversal.
Combine with Other Indicators: RSI, MACD, and support levels can help validate the reversal signal.
Stop-Loss Placement: A stop-loss is typically placed below the low of the second candle (the Doji or small-bodied candle) to manage risk if the reversal does not occur.
Unique Three River
The Unique Three River is a bullish reversal candlestick pattern that appears at the bottom of a downtrend. It consists of three candles: a large bearish candle followed by a smaller bullish candle and a third bullish candle that closes above the high of the first candle. The pattern indicates that although there has been strong selling pressure, buying momentum is now taking over, signaling a potential trend reversal to the upside.
Characteristics:
Three-candlestick pattern.
First candle: A large bearish candle, continuing the downtrend.
Second candle: A small bullish candlestick that opens within the range of the first candle and closes above its midpoint, indicating that buyers are starting to regain control.
Third candle: A bullish candlestick that closes above the high of the first candle, confirming the reversal and indicating that the buyers are in control.
Occurs after a downtrend, signaling a potential bullish reversal.
Interpretation and Usage
The Unique Three River pattern suggests that after a period of strong selling, the market is undergoing a shift in sentiment. The first candle confirms the bearish sentiment, but the second candle represents a small shift towards bullishness, and the third candle confirms the reversal. This pattern shows that the bears have lost control, and the bulls are likely to take over, signaling a possible move to the upside.
How to Use the Unique Three River Pattern:
Confirm with Volume: Higher volume on the third candle reinforces the strength of the bullish reversal.
Wait for Confirmation: Traders typically wait for additional bullish candles after the third one to confirm the trend reversal.
Combine with Other Indicators: RSI, MACD, and support levels can help validate the reversal signal.
Stop-Loss Placement: A stop-loss is typically placed below the low of the second candle to manage risk if the reversal does not materialize.
Upside Gap Two Crows
The Upside Gap Two Crows is a bearish reversal candlestick pattern that appears at the top of an uptrend. It consists of three candles: the first is a large bullish candle, the second is a smaller bearish candle that opens with a gap above the first candle's close, and the third is a bearish candle that opens within the range of the second candle and closes below the first candle's midpoint. This pattern indicates that after strong bullish movement, the market is beginning to show signs of weakness, signaling a potential reversal to the downside.
Characteristics:
Three-candlestick pattern.
First candle: A large bullish candle, indicating the continuation of the uptrend.
Second candle: A smaller bearish candlestick that opens with a gap above the first candle’s close, signaling a pause in the bullish momentum.
Third candle: A bearish candlestick that opens within the range of the second candle and closes below the first candle’s midpoint, confirming the reversal.
Occurs after a strong uptrend, signaling a potential bearish reversal.
Interpretation and Usage
The Upside Gap Two Crows pattern suggests that the bulls may have exhausted their strength, and the sellers are starting to take control. The second candle, with the gap above the first, shows that there is a brief pause in the uptrend, and the third candle confirms the bearish reversal, indicating that the market is likely to move lower from here.
How to Use the Upside Gap Two Crows Pattern:
Confirm with Volume: Higher volume on the third bearish candle strengthens the reversal signal.
Wait for Confirmation: Traders usually wait for additional bearish candles after the third candle to confirm the trend reversal.
Combine with Other Indicators: RSI, MACD, and resistance levels can help validate the reversal signal.
Stop-Loss Placement: A stop-loss is typically placed above the high of the second candle to manage risk if the uptrend continues.
Xside Gap Three Methods
The Xside Gap Three Methods is a combined concept of both the Upside Gap Three Methods and Downside Gap Three Methods patterns. These are continuation patterns that occur during an established trend and involve a gap between candles. The Xside Gap Three Methods can either signal the continuation of a bullish trend (Upside Gap) or a bearish trend (Downside Gap).
Upside Gap Three Methods (Bullish Continuation)
The Upside Gap Three Methods pattern is a bullish continuation pattern that occurs in an uptrend. It consists of five candles and suggests that after a brief consolidation or retracement, the uptrend is likely to continue.
Characteristics:
First candle: A large bullish candle, confirming the uptrend.
Second candle: A small bullish candle that opens with a gap above the first candle’s close.
Third, fourth, and fifth candles: Small candles that trade within the range of the first candle.
Occurs during an uptrend, indicating that the bullish trend will likely continue.
How to Use the Upside Gap Three Methods Pattern:
Confirm with Volume: Increased volume during the first and last candles strengthens the continuation signal.
Wait for Confirmation: Look for a breakout above the first candle’s high to confirm the trend continuation.
Combine with Other Indicators: Use RSI, MACD, and support levels to validate the signal.
Stop-Loss Placement: Place a stop-loss below the low of the consolidation candles if the trend continues.
Downside Gap Three Methods (Bearish Continuation)
The Downside Gap Three Methods pattern is a bearish continuation pattern that appears in a downtrend. It consists of five candles and suggests that after a brief consolidation or retracement, the downtrend is likely to continue.
Characteristics:
First candle: A large bearish candle, confirming the downtrend.
Second candle: A small bullish candle that opens with a gap above the first candle’s close, indicating a brief consolidation.
Third, fourth, and fifth candles: Small bearish candles that trade within the range of the first candle.
Occurs during a downtrend, signaling that the bearish trend will likely continue.
How to Use the Downside Gap Three Methods Pattern:
Confirm with Volume: Increased volume during the first and last candles strengthens the continuation signal.
Wait for Confirmation: Look for a breakdown below the first candle’s low to confirm the trend continuation.
Combine with Other Indicators: Use RSI, MACD, and resistance levels to validate the signal.
Stop-Loss Placement: Place a stop-loss above the high of the consolidation candles if the trend continues.
Interpretation and Usage
The Xside Gap Three Methods pattern combines the bullish (Upside Gap) and bearish (Downside Gap) continuation patterns into one comprehensive concept. It shows that:
For a bullish continuation: The pattern suggests that after a brief pause, the uptrend is likely to continue, with buyers remaining in control.
For a bearish continuation: The pattern indicates that after a short retracement or consolidation, the downtrend is likely to resume, with sellers continuing to dominate.
How to Use the Xside Gap Three Methods:
Confirm with Volume: Higher volume during the first and last candles in the pattern reinforces the trend continuation signal.
Wait for Confirmation: Traders often wait for a breakout (for bullish) or breakdown (for bearish) to confirm the continuation.
Combine with Other Indicators: RSI, MACD, and support/resistance levels can provide additional confirmation for the pattern.
Stop-Loss Placement: Place a stop-loss beyond the consolidation candles to limit risk if the price moves against the expected trend.