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Candlestick Patterns

Candlestick patterns are the language of the market. Each candle tells a story about the battle between buyers and sellers. Learn to read them and you can predict price movement.

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Anatomy of a Candlestick

Every candlestick has 4 data points: Open (where price started), Close (where price ended), High (highest point reached) and Low (lowest point reached).

Green/White candle: Close is ABOVE open — buyers won (bullish)
Red/Black candle: Close is BELOW open — sellers won (bearish)

The body is the rectangle between open and close. The wicks (shadows) extend to the high and low.

Top Candlestick Patterns

The Engulfing Pattern — Most Reliable

  • A bullish engulfing occurs when a large green candle completely engulfs the previous red candle
  • This shows buyers overwhelmed sellers in a single session
  • For bearish: a large red candle fully engulfs the previous green candle — sellers took control
  • Best location: at key support (bullish) or resistance (bearish) levels
  • Entry: open of the candle after the engulfing candle
  • Stop Loss: below the low of the engulfing pattern

Pro Tip: The bigger the engulfing candle relative to the previous one, the stronger the signal. A 2x or 3x size engulfing is extremely powerful.

Common Candlestick Mistakes

  • Trading patterns without checking the trend direction — always trade WITH the trend
  • Entering on the pattern itself rather than waiting for confirmation
  • Ignoring the location — a hammer in the middle of a range is meaningless
  • Using patterns on M1 or M5 — stick to M15 and above for reliability
  • Not placing a proper SL — every pattern can fail; always protect your capital
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Basic of Trading
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Support & Resistance

Key Takeaways

  • Each candle = Open, High, Low, Close
  • Long body = strong momentum
  • Long wick = rejection of a price level
  • Doji = indecision between buyers/sellers
  • Engulfing pattern = powerful reversal signal
  • Always confirm with the next candle
  • Location matters more than the pattern alone
  • Combine with S/R for best results

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