16 Must-Know Candlestick Patterns in Trading & Investing

Candlestick patterns are visual signals that reflect market psychology. They help traders understand who is in control, how conviction is shifting, and whether price movement is being accepted or rejected.

These patterns do not predict outcomes with certainty. Instead, they provide context about momentum and sentiment that becomes useful when combined with trend, structure, and risk management.

Candlestick Patterns

Below are 16 must-know candlestick patterns, explained with practical context.

Hammer

A hammer has a small body and a long lower wick, usually appearing after a decline. It shows that sellers pushed price lower, but buyers stepped in aggressively and rejected those lower levels.

Inverted Hammer

An inverted hammer has a small body and a long upper wick after a downtrend. It suggests buyers are testing higher prices, even if they have not yet gained full control.

Bullish Engulfing

A bullish engulfing pattern occurs when a strong bullish candle fully covers the previous bearish candle. It reflects a sharp shift in control from sellers to buyers, often signaling improving sentiment.

Bearish Engulfing

A bearish engulfing pattern appears when a large bearish candle engulfs a prior bullish candle. It indicates sellers have overwhelmed buyers, often near resistance or after an extended rise.

Doji

A doji forms when the opening and closing prices are nearly identical. It represents balance and indecision, signaling that momentum may be slowing or shifting.

Morning Star

The morning star is a three-candle pattern that appears after a downtrend. It shows selling pressure weakening and buyers gradually regaining control.

Evening Star

The evening star forms after an uptrend and consists of three candles. It reflects fading buying strength and increasing selling pressure.

Shooting Star

A shooting star has a small body and a long upper wick near highs. It shows rejection of higher prices and often appears near resistance levels.

Hanging Man

The hanging man resembles a hammer but forms after an uptrend. It warns that selling pressure is emerging, even if price has not yet fallen.

Spinning Top

A spinning top has a small body with upper and lower wicks. It reflects uncertainty and a temporary balance between buyers and sellers.

Piercing Pattern

A piercing pattern occurs when a bullish candle closes above the midpoint of a previous bearish candle. It signals that sellers are losing control and buyers are stepping in.

Dark Cloud Cover

Dark cloud cover is the bearish counterpart to the piercing pattern. It shows sellers pushing price down after an optimistic open, weakening bullish momentum.

Three White Soldiers

This pattern consists of three consecutive strong bullish candles. It indicates sustained buying pressure and often confirms trend continuation.

Three Black Crows

Three black crows are three strong bearish candles in a row. They signal strong downside momentum and growing selling conviction.

Inside Bar

An inside bar forms when a candle’s range is fully contained within the previous candle. It reflects consolidation and often precedes a sharp expansion in price.

Marubozu

A marubozu candle has little or no wick. It shows strong conviction, with buyers or sellers in control throughout the entire session.

How to Use Candlestick Patterns in Trading & Investing

Candlestick patterns are most effective when used as part of a broader market framework.

• Align patterns with the prevailing trend
  Bullish patterns are more reliable in uptrends, while bearish patterns carry more weight in downtrends. Trading patterns against the dominant trend lowers probability.

• Pay attention to location on the chart
  Patterns that form near key support or resistance levels are more meaningful than those that appear in the middle of a range.

• Use higher timeframes for confirmation
  Patterns on daily or weekly charts tend to be more reliable than those on very short timeframes, which contain more noise.

• Combine patterns with volume
  Higher-than-average volume strengthens the validity of a pattern. Low-volume patterns often lack follow-through.

• Look for confluence, not perfection
  A pattern becomes stronger when it aligns with trend structure, key levels, or momentum conditions. No single pattern works in isolation.

• Treat patterns as signals, not triggers
  Candlestick patterns suggest potential behavior shifts, but entries should still be planned with clear risk management.

• Always define risk before acting
  Even strong patterns can fail. Stop-loss placement and position sizing matter more than pattern accuracy.

Used this way, candlestick patterns become tools for interpretation and decision support rather than prediction.

Conclusion

Candlestick patterns provide a structured way to read market psychology and price behavior. By understanding these 16 must-know candlestick patterns, traders gain insight into momentum shifts, rejection, and conviction without relying on complex tools.

Candlestick patterns are not guarantees, but they offer valuable context when combined with trend, structure, and disciplined risk management.

When analyzing charts in the Gotrade app, recognizing candlestick patterns can help you better understand price reactions and make more informed trading or investing decisions.

FAQ

Are candlestick patterns reliable on their own?
No. They work best when combined with trend and context.

Do candlestick patterns work on all timeframes?
Yes, but higher timeframes generally provide more reliable signals.

Should beginners memorize all patterns?
No. Focus on understanding behavior rather than memorization.

Can candlestick patterns fail?
Yes. They reflect probability, not certainty.

Reference:

• Investopedia, 16 Candlestick Patterns Every Traders Should Know, 2026.

• StockCharts, Candlestick Pattern Guide, 2026.