Knowledge Base
Master the fundamentals of professional trading
Candlestick Patterns
Reading price action through single, double, and triple candle patterns
Candlestick Basics
Each candlestick contains four price points: Open, High, Low, Close (OHLC). The body shows the range between open and close, while wicks show price rejection.
Single Candle Patterns
Open and close are virtually identical—represents pure indecision between buyers and sellers.
Small body at top, long lower wick (2×+ body length). Sellers pushed price down but buyers recovered it.
Best at: Bottom of downtrend or support levels
Confirmation: Wait for next candle to close higher
Small body at bottom, long upper wick (2×+ body length). Buyers pushed price up but sellers recovered it.
Best at: Top of uptrend or resistance levels
Confirmation: Wait for next candle to close lower
Large body with little/no wicks—extreme conviction in one direction.
Bullish Marubozu: Opened at low, closed at high
Bearish Marubozu: Opened at high, closed at low
Small body with long equal wicks—indecision, similar to doji but with small visible body.
After strong trends: possible exhaustion signal
Two-Candle Patterns
Formation: Small bearish candle followed by large bullish candle that completely engulfs the first.
Context: After downtrend or at support
Interpretation: Buyers completely overwhelmed sellers—strong reversal signal
Formation: Small bullish candle followed by large bearish candle that completely engulfs the first.
Context: After uptrend or at resistance
Interpretation: Sellers completely overwhelmed buyers—strong reversal signal
Opposite of engulfing—second candle is contained within the first candle's body.
Bullish Harami: Large bearish, then small candle inside = sellers losing control
Bearish Harami: Large bullish, then small candle inside = buyers losing control
Less aggressive than engulfing—requires confirmation
Piercing Line (Bullish): Bearish candle, then bullish candle gaps down but closes above midpoint of first candle.
Dark Cloud Cover (Bearish): Bullish candle, then bearish candle gaps up but closes below midpoint of first candle.
Three-Candle Patterns
Formation:
- Large bearish candle (downtrend continues)
- Small-bodied candle/doji (indecision, "the star")
- Large bullish candle (buyers take control)
One of the most reliable bullish reversal patterns.
Formation:
- Large bullish candle (uptrend continues)
- Small-bodied candle/doji (indecision, "the star")
- Large bearish candle (sellers take control)
Highly reliable bearish reversal pattern.
Three White Soldiers: Three consecutive bullish candles, each opening within prior body and closing progressively higher. Strong bullish continuation.
Three Black Crows: Three consecutive bearish candles, each opening within prior body and closing progressively lower. Strong bearish continuation.
Context and Confirmation
A pattern at a random price level is just a candle. A pattern at a key support/resistance level is a trading signal.
- Location: Patterns at S/R carry more weight
- Trend: Reversal patterns need prior trend to reverse
- Volume: High volume confirms conviction
- Next Candle: Wait for follow-through in expected direction
- S/R Confluence: Pattern at PDH/PDL, POC, round numbers
- Volume: Higher than average confirms legitimacy
- Multiple Timeframe: Check higher timeframes for alignment
- Indicators: RSI oversold/overbought, CVD divergence