Candlestick Chart Patterns
As you probably have noticed already I am a big fan of candlestick charting. Candlestick charts are one of the most popular graphical charts because when dealing with a volatile market information is key. A candlestick will quite simply, give you more important Intel then a common tick will.
No single candlestick tells the whole story. However, understanding how to read a single candlestick within a candlestick chart is essential to understanding how the candlesticks within a candlestick chart interact with each other. Thus it is vital in providing a complete picture of the underlying market.
Reading a Single Candlestick
Candlestick charts consist of many individual candlesticks, with each candlestick representing the trading information for the chart time frame. The time frame can be as little as a few minutes or as long as a week or month, or longer. For a trader the the more compressed the time frame the better. If we look at a fifteen minute candlestick chart, for example, each candlestick represents fifteen minutes of trading information.
The trading information that is shown includes the opening price of the candlestick (or time frame), the high and low prices of the candlestick, the closing (or last) price of the candlestick, the direction of the candlestick, and the range of the candlestick. This is brilliant, because the complete trading information is contained within the candlestick. The graphics tell the whole story and there is no need for any other calculations. Thus the information is available visually almost instantly.
Opening Price
The opening price of the candlestick is shown by the wide part of the graphic which forms “the candle”. This in combination with the color of the candlestick gives us an instant picture of the direction. 
If the candlestick is an upward candlestick, the opening price is shown by the bottom of the wide part of the candlestick. Conversely, if the candlestick is a downward candlestick, the opening price is shown by the top of the wide part of the candlestick. The opening price is the first price that was traded during the time frame represented by the candlestick.
Closing Price
The closing price of the candlestick is also shown by the wide part of the candlestick, in combination with the color of the candlestick. If the candlestick is an upward candlestick, the closing price is shown by the top of the wide part of the candlestick. Conversely, if the candlestick is a downward candlestick, the closing price is shown by the bottom of the wide part of the candlestick. The closing price is the last price that was traded during the time frame represented by the candlestick.
High and Low Prices
The “wick” of the candle forms the high and low prices of the candlestick and are shown by the top and bottom of the thin vertical line . The high price is the highest price that was traded during the time frame represented by the candlestick, and the low price is the lowest price that was traded during the same time frame.
Direction of the candlestick
The direction of the candlestick is shown by the color of the candlestick. Candlesticks have to be a different color to depict a bullish or bearish move. For example, an upward candlestick might be colored green on some charts, and a downward candlestick might be colored red. The direction represents whether the price moved up or down during the time frame represented by the candlestick.
Range of the Candlestick
The range of the candlestick is determined by the wick’s length, a the thin vertical line. The range of the candlestick represents the volatility of the price during the time frame represented by the candlestick. Volatility decreases if the thin vertical line is shorter than the previous candlesticks. If the thin vertical line is longer than the previous candlesticks, volatility has increased and thus the range has increased. The range of the candlestick is the same as the high price of the candlestick minus the low price of the candlestick.
The interpretation of candlestick charts is based primarily on patterns
Below you find listed many of the more popular patterns. By no means is it a complete list and the candlestick patterns explained here are intended to inform and educate only. The choice is totally at your discretion whether or not to implement them in your investment decisions. Candlesticks are only one element of technical analysis, but as you will come to realize, a major part. As with all charting methods, candlestick chart patterns are subject to interpretation by the user. You will gain confidence the more you use the charts, and as you gain experience in candlestick techniques, you will discover which candlestick combinations work best in your market.
day swing traders time frame.
Doji
Doji form when a security’s open and close are virtually equal. The length of the upper and lower shadows can vary, and the resulting candlestick looks like, either, a cross, inverted cross, or plus sign. Doji convey a sense of indecision or tug-of-war between buyers and sellers. Prices move above and below the opening level during the session, but close at or near the opening level.
The Four Price Doji
The Four Price Doji is a single passive candlestick pattern. It is simply a horizontal line that has no upper or lower shadows. The Four Price Doji usually occurs when a stock is very illiquid, has low volume, or the data source do not report any other price other than the closing price.
Doji
If a security has virtually equal opening and closing prices, this leads to a Doji. The length of the upper and lower shadows of a Doji can vary and consequently the resulting candlestick may look like a cross, inverted cross or a plus sign. Doji, taken alone, is a neutral pattern.
Dragonfly Doji
A Doji where the open and close price are at the high of the day. Like other Doji days, this one normally appears at market turning points.
Gravestone Doji
A doji line that develops when the Doji is at, or very near, the low of the day.
Long Legged Doji
A doji characterized by very long shadows. It shows the indecision of the buyers and sellers and it is an important reversal signal
Evening Doji Star
A three day bearish reversal pattern similar to the Evening Star. The uptrend continues with a large white body. The next day opens higher, trades in a small range, then closes at its open (Doji). The next day closes below the midpoint of the body of the first day.
Morning Doji Star
A three day bullish reversal pattern that is very similar to the Morning Star. The first day is in a downtrend with a long red body. The next day opens lower with a Doji that has a small trading range. The last day closes above the midpoint of the first day.
Bullish Doji Star
A short candlestick pattern, a spinning top, a highwave or a doji, which gaps from a long red candlestick during a downtrend.
Stars
A candlestick that gaps away from the previous candlestick is said to be in star position. Depending on the previous candlestick, the star position candlestick gaps up or down and appears isolated from previous price action.
The Bearish Tri Star
A very rare but significant top reversal pattern. It is formed by three Dojis. The middle Doji is a Doji Star.
The Bullish Tri Star
A very rare but significant bottom reversal pattern. Three Dojis form this pattern. The middle Doji is a Doji Star.
Bearish Shooting Star
This pattern suggests that prices may be approaching the top. It looks like its name, a shooting star. The shooting star is a small real body characterized by a long upper shadow, which gaps away from the prior real body.
Morning Star
A three day bullish reversal pattern consisting of three candlesticks – a long-bodied red candle extending the current downtrend, a short middle candle that gapped down on the open, and a long-bodied green candle that gapped up on the open and closed above the midpoint of the body of the first day. The third candlestick shows that the market is turning bullish because it did break the downward resistance.
Evening Star
A bearish reversal pattern that continues an uptrend with a long green body day followed by a gapped up small body day, then a down close with the close below the midpoint of the first day. The red candlestick shows a closing price well within first session green real body. This pattern clearly shows that the market is turning bearish.
Three Stars in the South
Three consecutive red candlesticks during a downtrend. These candlesticks show that each day is consecutively weaker in a bearish sense and possibly some buying is occurring. Daily small rallies keep the market lows from reaching that of the first day. These indications suggest that the market is now trending upward in a bullish direction.
Popular Patterns
Spinning Top
Candlestick lines that have small bodies with upper and lower shadows that exceed the length of the body. Spinning tops signal indecision and can be both bullish and bearish
Hanging Man
Hanging Man candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intra-day low. The resulting candlestick shows us the tide is turning bearish and looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer.
Hammer
Hammer candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intra-day low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during an advance, then it is called a Hanging Man.
Inverted Hammer
A one day bullish reversal pattern. In a downtrend, the open is lower, then it trades higher, but closes near its open, therefore looking like an inverted lollipop.
Stick Sandwich
A bullish reversal pattern with two red bodies surrounding a green body. The closing prices of the two red bodies must be equal. A support prices is apparent and the opportunity for prices to reverse is quite good.
Bullish Abandoned Baby
A rare reversal pattern characterized by a gap followed by a Doji, which is then followed by another gap in the opposite direction. The shadows on the Doji must completely gap below or above the shadows of the first and third day.
Bearish Abandoned Baby
This pattern is a very rare top reversal signal. It is basically composed of a Doji Star, which shows gaps (including shadows) from the prior and following session candlesticks.
Dark Cloud Cover
A bearish reversal pattern that continues the uptrend with a long green body. The next day opens at a new high then closes below the midpoint of the body of the first day.
Bullish Homing Pigeon
A small red real body contained by a prior relatively long red real body.This is an indication that the downward movement has been stalled.
Piercing Line
A bullish two day reversal pattern. The first day, in a downtrend, is a long red day. The next day opens at a new low, then closes above the midpoint of the body of the first day.
Engulfing Pattern
A reversal pattern that can be bearish or bullish, depending upon whether it appears at the end of an uptrend (bearish engulfing pattern) or a downtrend (bullish engulfing pattern). The first day is characterized by a small body, followed by a day whose body completely engulfs the previous day’s body
Bullish Engulfing Pattern
Pattern is characterized by a large green real body engulfing a preceding small red real body, which appears during a downtrend. The green body does not necessarily engulf the shadows of the red body but totally engulfs the body itself. The Bullish Engulfing Pattern is an important bottom reversal signal.
Bearish Engulfing Pattern
This pattern consists of a large black real body, which engulfs a small white real body in an uptrend (it need not engulf the shadows). The Bearish Engulfing Pattern is an important top reversal signal.
Harami
A two day pattern that has a small body day completely contained within the range of the previous body, and is the opposite color.
Bearish Harami
This is a two-candlestick pattern composed of a small red real body contained within a prior relatively long green real body. “Harami” is an old Japanese word for “pregnant”. The long green candlestick is “the mother” and the small candlestick is “the baby”.
Bullish Harami
This pattern is characterized by a small green real body contained within a prior relatively long red real body. Remember, the long red candlestick is “the mother” and the small candlestick is “the baby”.
Bearish Harami Cross
This reversal pattern is a doji preceded by a long green real body. The Bearish Harami Cross Pattern is a major reversal pattern and is more significant than a regular Bearish Harami Pattern.
Bullish Harami Cross
A doji preceded by a long red real body. The Bullish Harami Cross Pattern is a major bullish reversal pattern. It is more significant than a regular Bullish Harami Pattern.
Three Methods
Rising Three Methods
A bullish continuation pattern in which a long green body is followed by three small body days, each fully contained within the range of the high and low of the first day. The fifth day closes at a new high.
Bearish Falling Three Methods
A continuation pattern, which shows a temporary break in the trend of prices without causing a reversal. The pattern is characterized by a long red candlestick during a downtrend, which is then followed by small consecutive small bodies that look like a short uptrend.
Upside Gap Three Methods
This bullish pattern is characterized by two long green candlesticks with a gap upward between them during an uptrend. The third day is a red candlestick, which closes the gap between the first two. A support for uptrend may be forming caused by temporary profit taking.
Tasuki Gap
Upside Tasuki Gap
A continuation pattern with a long green body followed by another green body that has a gap above the first one. The third day is red and opens within the body of the second day, then closes in the gap between the first two days, but does not close the gap.
Downside Tasuki Gap
The pattern involves two long red candlesticks with a downward gap between them during a downtrend. Pattern is completed by a third day green candlestick partially closing the gap between the first two. The green candlestick may be the result of investors temporarily taking advantage of the low buying price. The trend should, however, continue in the downward direction.
I hope that this gives you an idea of just how powerful candlestick charting can be. If you are feeling overwhelmed, keep in mind that these patterns don’t occur that often. When reading a chart you can always refer to a competent source, so learning as you trade is very possible. I have found a complete source for everything candlestick, and believe me the investment will comeback to you ten-fold.
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