Every Candlestick Pattern
Fully Explained

The Hammer is one of the most recognizable and trusted patterns in all of technical analysis. It forms at the bottom of a downtrend and looks exactly like a hammer — small head at the top, long handle below.

Here's what happened during this session: The session opened, and sellers immediately took control. They drove the price way down — sometimes 2×, 3×, or more below the opening price. It looked like another catastrophic day.

Then something changed. Buyers stepped in aggressively. They pushed back against the selling — hard. They fought all the way back up, recovering almost all of the ground the sellers had taken. By the close, the price was back near the open.

The long lower wick is the visual proof of that buyer comeback. The bigger the wick relative to the body, the more powerful the signal.

• Buying the Hammer candle itself — always wait for the next candle to confirm.
• Ignoring the trend context. A hammer shape at the top of a rally is a Hanging Man (bearish warning), not a bullish signal.
• Accepting hammers with upper wicks as long as the lower wick. The imbalance is key.
• Not setting a stop-loss below the wick — if the low breaks, the pattern has failed.

A green Hammer means buyers not only fought back — they actually finished the day ahead of where they started (close > open). That's extra confirmation of bullish conviction.

A red Hammer still means buyers fought back strongly (the long wick proves this), but they couldn't quite recover to the open. It's still a valid signal, just slightly weaker. Always look for additional confirmation.

The Inverted Hammer is an upside-down hammer that appears at the bottom of a downtrend. It looks alarming at first — there's a big wick shooting upward from a tiny body at the bottom. That seems bearish, right? Wrong.

Here's the psychology: The market opened low (after a downtrend). Buyers then pushed aggressively upward — driving the price significantly higher during the session (that's the long upper wick). But sellers came back and pushed it back down by the close.

The key insight: For the first time in the downtrend, buyers showed real strength. They didn't win the session — but they put up a serious fight that they hadn't shown before. This is a warning to sellers: the bears may be losing their grip.

Because buyers couldn't fully hold the recovery, this pattern requires stronger confirmation than a regular Hammer before trading it.

Critical context rule: The exact same candle shape appearing at the top of an uptrend is called a Shooting Star — and it's bearish. The candle is identical; only the location changes its meaning entirely.

• Treating it as equally strong as a regular Hammer — it requires more confirmation.
• Confusing it with a Shooting Star (same shape, opposite context and meaning).
• Entering on the Inverted Hammer candle itself without waiting for the next candle to confirm.

The Marubozu is the purest expression of momentum in candlestick analysis. Its defining feature is simple: no wicks on either end.

This means the session opened at the absolute low (bull) or absolute high (bear) — and moved in one direction without ever looking back. There was no intraday pullback significant enough to leave a wick. The winning side had total control from the opening bell to the closing bell.

A Bullish (Green) Marubozu: Open = Low, Close = High. Buyers took control from the very first trade and never once let sellers make a move. The price climbed relentlessly all session.

A Bearish (Red) Marubozu: Open = High, Close = Low. Sellers took over immediately and crushed the price all session without giving buyers a moment's relief.

This isn't just a reversal signal — it's often a trend continuation signal. When you see a Marubozu after a breakout, it tells you the move is real and has strong conviction behind it.

• Chasing a Marubozu by entering too far away from it — the best entries come on small pullbacks to the candle's midpoint or open.
• Ignoring that a Marubozu can signal a trend continuation AND a reversal depending on context.
• Expecting Marubozus to be common — pure full Marubozus are rare. Most are "open" or "close" variants.

The Pin Bar gets its nickname because the market "lies." The long wick — called the "nose" (like Pinocchio's) — shoots out in one direction, trapping traders who follow the fake move. Then the market snaps back violently the other way, trapping and punishing those who followed the false breakout.

Bullish Pin Bar: The nose points downward. Sellers drove price down aggressively, triggering stop-losses below support. Then buyers overwhelmed them completely, driving the price back up. All those sellers got trapped. Buyers now have control.

Bearish Pin Bar: The nose points upward. Buyers drove price up aggressively, triggering buy orders above resistance. Then sellers overwhelmed them, driving the price back down. All those buyers got trapped.

The Pin Bar is especially powerful because it catches trapped traders on the wrong side — their forced exits (stop-loss triggers) fuel the reversal even further.

• Trading Pin Bars not at key levels — a Pin Bar needs a "story" (support, resistance, trend line) to be credible.
• Accepting wicks that are too short — the nose must dominate the candle. Small wicks aren't Pin Bars.
• Trading against the higher-timeframe trend — Pin Bars with the trend are far more reliable than counter-trend ones.

Day 1: A bearish (red) candle — sellers are in control and the downtrend continues as expected.

Day 2: Something dramatic happens. The session opens lower than the previous close — gapping down, which initially seems even more bearish. But then buyers immediately launch a powerful counterattack. They drive the price higher all session — not just recovering the previous day's losses, but surging well past the previous day's open.

The result: a large green candle whose body completely covers (engulfs) the previous red candle's body. The bulls have done two things: reversed the prior day's move AND added new gains on top. This is a total shift in market control.

The pattern is even more powerful when the green candle engulfs not just the body but also the wicks of the prior red candle — showing complete dominance.

• Accepting a pattern where the green candle only partially covers the red — it must fully engulf the body.
• Trading it without a clear prior downtrend — a Bullish Engulfing in a sideways market has far less meaning.
• Ignoring the size relationship — a massive red candle engulfed by a barely-larger green candle is weak. The green should be noticeably larger.

Day 1: A long bearish (red) candle. Sellers are winning convincingly.

Day 2: The session gaps down below Day 1's close — which initially looks even more bearish. But buyers immediately mount a comeback. They drive the price steadily upward all session long, ultimately closing above the 50% midpoint of Day 1's red candle.

The 50% threshold is critical. Crossing it means buyers have recovered more than half of the previous day's selling losses in a single session. That's a dramatic demonstration of bullish buying power.

Think of it like a sports comeback: if your team was down 6-0 and fights back to lead 4-3 by halftime, you'd feel very differently about the second half. The buyers just made that kind of comeback.

• Treating a 49% recovery as a Piercing Line — the 50% rule is strict.
• Confusing it with a Bullish Engulfing (which requires closing above Day 1's open).
• Using it without confirming that a prior downtrend exists — context is essential.

Where an Inside Bar shows volatility contracting, an Outside Bar shows volatility exploding violently. The second candle's range completely engulfs the first — trading above yesterday's high AND below yesterday's low, before closing decisively in one direction.

This tells a story of a market that trapped traders on one side, then violently reversed to trap them. The second candle tests both the high (trapping sellers with short stops) and the low (trapping buyers with long stops) before accelerating in the ultimate closing direction.

The closing direction is everything. An Outside Bar that closes in the upper 25% of its range is strongly bullish. One that closes in the lower 25% is strongly bearish. A close in the middle (near the prior session's range) signals continued confusion.

• Trading an Outside Bar that closes in the middle — no clear winner means no trade.
• Confusing it with a Bearish/Bullish Engulfing — the Outside Bar uses full range (wicks), Engulfing uses bodies only.
• Forgetting that Outside Bars often occur on news events — the high volatility can make stops more difficult to manage.

The Morning Star is one of the most powerful and reliable reversal patterns in candlestick analysis. Each of its three candles plays a distinct, essential role:

Act 1 — The Bearish Day: A large red candle. Sellers are firmly in control. The downtrend continues as expected. Bears feel confident.

Act 2 — The Star: A tiny candle (often a Doji or near-Doji) that gaps down below the first candle's close. This is the moment the downtrend pauses. Sellers tried to push lower but barely moved the price. Selling momentum has stalled. The "star" is suspended below the prior candle, representing the uncertainty and exhaustion at the bottom.

Act 3 — The Bullish Confirmation: A large green candle that surges powerfully upward, closing deeply into the body of Day 1's red candle — ideally above its midpoint. Buyers have definitively taken control. The reversal is confirmed. The "morning" has arrived after the darkness.

Together, these three candles tell a complete, confirmed story: sellers exhausted, buyers energized, trend reversed.

• Accepting a pattern where Day 3 doesn't penetrate at least 50% into Day 1's body — a shallow close reduces the signal's reliability significantly.
• Ignoring the gap between Day 1 and Day 2 — no gap means no star, just a sequence of candles.
• Using this pattern outside of a clear downtrend. The Morning Star only reverses a trend that exists.
• Forgetting to check volume — low volume on Day 3 is a red flag that the reversal may not have institutional support.

A single bullish candle could be a fluke. Two could be a brief relief rally. But three consecutive sessions of strong buying, each following the same discipline? That is a trend change — confirmed.

The Three White Soldiers pattern features three consecutive large green candles, each following a specific disciplined pattern: each one opens within the body of the previous candle (not gapping up wildly — a controlled advance) and closes near its daily high (showing buyers are still pushing at the end of each session with no exhaustion).

This combination — opening within the prior body and closing near the high — is crucial. It shows steady, disciplined accumulation rather than a panic-driven short squeeze. Institutions are systematically buying over three consecutive sessions, and the market is responding methodically.

The pattern is most powerful when it appears after a significant downtrend or at a key support level, signaling that the selling pressure has been completely overwhelmed by new buying demand.

• Any of the three candles has a large upper wick — shows buyers losing steam by the close.
• The candles are getting progressively smaller (exhaustion forming).
• High volume on Day 1-2 but dramatically lower volume on Day 3 — the buying is running out of participants.
• The pattern forms after an already long uptrend (instead of at a bottom) — this signals continuation fatigue, not fresh reversal.