Master 12 Most Powerful Candlestick Patterns Before Trading

Master 12 Most Powerful Candlestick Patterns Before Trading

There are many candlestick patterns that work and most of them are the different shapes of the same concept. Here we have compiled a list of 12 of the most powerful candlestick patterns. These are not in any preferential order but all recover confirmation signal that we will cover during the post.

 

  1. Hammer Candlestick Pattern
  2. Inverted Hammer Candlestick Pattern
  3. Piercing Candlestick Pattern
  4. Bullish Engulfing Candlestick Pattern
  5. Dragonfly Doji Candlestick Pattern
  6. Bullish Harami Candlestick Pattern
  7. Shooting Star Candlestick Pattern
  8. Hanging man Candlestick Pattern
  9. Dark Cloud Candlestick Pattern
  10. Bearish Engulfing Candlestick Pattern
  11. Gravestone Doji Candlestick Pattern
  12. Bearish Harami Candlestick Pattern

Bullish Reversal Candlestick Patterns

1. Hammer Candlestick Pattern

The bullish hammer appears in a strong downward move with a long tale and price closing at the top of the price. It is one of the most powerful candlestick patterns as shown in the picture below.

It’s obvious to see the long tail at the bottom that shows the buyer momentum pushed the price all the way to the top.

bullish hammer formation

The following picture shows GBPUSD currency pair. As the market rally down (sold), the market pushed the price down but buyers took control and push the price all the way up. As you can see the long wick at the bottom shows significant buyer momentum. After that bullish hammer,

Bullish hammer GBPUSD example

learn more about hammer candlestick and how to trade it in my detail post.

2. Inverted Hammer Candlestick Pattern

Bullish Inverted hammer appears once the market has a strong downtrend move and then the buyer takes control of the market. Bullish Inverted hammer will have a long wick upward and price closing near to the bottom of the candle. After an inverted hammer, the price usually changes the direction.

Bearish hammer Candle formation

The following picture shows bullish inverted hammer example. As we can see the market had a strong downtrend move and then a bullish inverted hammer formed. Bear pushed the market down and created a long wick. This suggests strong seller momentum and prices are going low.

As we can see in the picture, the market changed its direction and moved up once the next day price closed above the previous day close.

GBPUSD Bullish Inverted Hammer

learn more about Inverted hammer candlestick and how to trade it in my detail post.

3. The Piercing Candlestick Pattern

The Piercing candlestick pattern is a bullish reversal pattern. It forms once the market has a strong bearish move. The next day market open with a gap down and the price closed within the previous day’s body. It shows that market has downward momentum but couldn’t hold the price down to the previous candle.

It shows the seller strength is weaker and the buyer has taken control of the market.

The piercing candlestick pattern

With advance candlestick calculation, if we combine the piercing candle with the previous day candle, it gives us result as hammer candle. The below example shows, how a piercing candle is actually a hammer candle but we can only figure this out if we know the advanced candlestick calculation.

piercing candle is hammer

GBPUSD daily chart. the market opened with a gap down the price of 1.33112. The previous day’s candle closing price was 1.33175. This candle was closed as a bullish Green candle and formed a piercing candle. As we can see the market changes its direction to bullish and prices started moving up.

GBPUSD the piercing candle example

learn more about Piercing Candle and how to trade it in my detail post.

4. Dragonfly Doji Candlestick Pattern

Dragonfly Doji is a rare phenomena, it’s also called bullish doji and use as bullish reversal pattern. It forms when a price open and close it at the same point. It explains the market indecision and whole day trading range.

Dragonfly Doji

n 19th Feb 2019, the Facebook daily chart created a dragonfly doji candle. The following picture shows the during the downtrend a dragonfly doji is formed.  As we can see the low price of this candle is 160.41. We want to see price closed above to this candle to consider it as confirmation of change in trend.

Facebook dragonfly candle example

learn more about Dragonfly Doji Candle and how to trade it in my detail post.

5. Bullish Engulfing Candlestick Pattern

Bullish Engulfing Candle looks like a Green candle fully covers the body of previous day red candle. As shown in the picture below, the green candle can start with gap down. Also it can open at the same price of previous day close but it must cover the full body of previous day candle.

Bullish Engulfing Candle
bullish engulging candle

Is Bullish Engulfing pattern is Hammer candle?

Yes a bullish engulfing pattern is hammer candle. When we combined both candles with help of blending candle approach, we get a hammer formation as shown in the picture below.

bullish engulfing hammer

The following picture shows bullish engulfing pattern on GBPNZD daily chart. As you can see the market opened with gap down but closed above the previous day candle body. Therefore it triggered the sentiment of bullishness and market went towards north.

bullish engulfing gpbusd example

learn more about Bullish Engulfing Candle and how to trade it in my detail post.

6. Bullish Harami Candlestick Pattern

Harami candle formation can be small red body or green body. It’s a small candle that appears in a middle of previous long body candle. The following picture shows a bullish harami formation. As you can see the harami candle is a small candle that reside within previous day long Red candle.

Bullish harami formation

Is Bullish harami is a Hammer candle?

Yes a bullish harami  is a hammer candle when we use blending candle approach. We can see in the following picture that if we add both candles the result will be hammer candle.

bullish harami formation is harami

The following example shows bullish harami on BBC Daily Chart. As we can see a bullish harami appeared in the middle of long red candle on 1st October 2019. The price probed once below the black line, and then a strong bullish trend started.

Bullish harami BBC Chart Example

Bearish Reversal Candlestick Patterns

7. The Shooting Star Candlestick Pattern

The shooting star Candlestick a bearish reversal pattern and appears after a strong up trend. It shows the market is losing its esteem and reversal can take place any time. If the same pattern appears in down trend, this pattern is called inverted hammer and bullish move can be expected as reversal.

Shooting Start bearish Formation

Shooting star usually triggers Bearish reversal after an upward loses its strength and then seller take control of the market. It has long wick upward and price closing near to the bottom of the candle. To understand it fully, let’s take a look at recent GBPUSD move and identify shooting star.

Shooting Star Bearish Formation

learn more about Shooting Star Candlestick and how to trade it in my detail post.

8. Hanging Man Candlestick Pattern

The Hanging Man Candlestick a reversal candlestick pattern and appears after a strong trend. It shows the market is losing its esteem and reversal could be imminent. This pattern is frequently seen in commoditiesstocks, and indexes.

bullish hanging man candlestick will appear once the market has strong down trend. Similarly the Bearish hanging man candlestick will appear after a strong up trend.

Bearish Hanging Man Candle

Now let’s recognise the pattern with the help of a LIVE BBC Chart. The following picture shows BBC stock price and as the market rally up, we see a hanging man candle at the top. Long wick at the bottom and price closed to the top of the candle with small body. After hanging man candle we saw the market changes its direction towards down.

Bearish hanging man candle

learn more about Hanging Man Candlestick and how to trade it in my detail post.

9. Dark Cloud Candlestick Pattern

The Dark Cloud cover candlestick pattern is a bearish reversal pattern. It forms once the market has the strong bullish move, the next day market opens with a gap up, and the price close within the previous day’s body. It shows that market has upward momentum but couldn’t hold the price above the previous candle.

It shows the buyer strength is weaker and seller has taken control of the market.

Dark Cloud Cover pattern

With advance candlestick calculation, if we combine the dark cloud cover with previous day candle, it gives us result as shooting star candle. The below example shows, how cloud cover is actually a shooting star but we can only figure this out, if we know the advance candlestick calculation.

dark cloud is shooting star

On 19th July 2018, GBPUSD pair created a dark cloud candle. The market opened with gap up and closed within 50% of previous day candle. As we can see the market changes its direction to bearish and prices started moving down. We have notice shooting star candle after 4 days and it triggers strong bearish move.

GBPUSD Dark Cloud Cover Pattern

learn more about Dark Cloud Candle and how to trade it in my detail post.

10. Gravestone Doji Candlestick Pattern

Gravestone Doji is a unique phenomenon and it’s a bearish reversal indication in forex, stocks, or any trading instrument. It forms when a price opens and closes at the same point but the full-day trading was more towards the long side. It shows market indecision and whole-day trading range.

Gravestone Doji Candlestick pattern

We can see in the following picture strong bullish momentum. We have seen a gravestone Doji and that confirmed the market bearish moment is about to start. In this USDCAD chart, we have seen the price start and ending value was the same with a long tail at the top.

The occurrence of gravestone doji is rare but it is always traded with following day confirmation candle. Let’s have a look on how to trade doji.

how to trade gravestone doji candle

learn more about Gravestone Doji Candle and how to trade it in my detail post.

11. Bearish Engulfing Candlestick Pattern

Bearish engulfing candle formation looks like a red candle opened with a gap up. In addition to this, it is fully covered the body of the previous day’s Green candle and closes below the body of the previous day’s candle. Bearish engulfing can also start with the previous day’s closed price but it must engulf the full body of the previous day’s red candle.

The following picture shows both with gap up and at price formation.

Bearish Engulfing Candle
Bearish Engulfing Candle

Is Bearish engulfing is Shooting Star candle?

Yes a bearish engulfing candle is shooting star candle when we use blending candle approach. As shown in the picture below, both candles are added and resulted candle was shooting star.

Bearish Engulfing Shooting Star

The following picture shows an example of a Bearish engulfing pattern. As you can see the price opened with a gap up and it fully covered the previous day’s candle body. Also, it closed below the previous day’s candle body. The red lines show the previous day’s candle body.

bearish engulfing pattern

learn more about Bearish Engulfing Candle and How to Trade it.

12. Bearish Harami Candlestick Pattern

Bearish Harami is opposite to what we discussed above. Bearish Hamari is a candle that appears in a middle of a long green candle with a small body. we must see an upward move before harami appears. It shows the market is weaker and the price sentiment can change towards the downside.

Bearish harami Formation

Is Bearish harami is a Shooting Star candle?

Yes, a bearish harami is a shooting star candle when we use a blending candle approach. As shown in the picture below, both candles are added and the resulted candle was shooting star.

Bearish harami Formation

For instance the following picture shows an example of Bearish harami pattern on BBC Daily Chart. We can see the harami pattern appeared within the previous Green candle. It is shown in the red line. We saw the market closed below the harami and it triggers the bearish momentum.

Bearish harami BBC Daily Chart

learn more about Bearish harami Candle and How to Trade it.

Which candlestick pattern is most reliable?

Hammer candlestick for bullish momentum and shooting star candlestick for bearish momentum is the ultimate patterns that appear over and over. In addition to this, you will also notice with the above blog post, most advanced patterns turn up into these two patterns as we perform the candlestick addition method.

Do candlestick patterns work?

Yes, all candlestick patterns work. The higher the time frame is, the better the signal will react. In addition to this, it is also important to view that where the candlestick pattern is formed. candlestick pattern near divergence or support and resistance tends to work very well.

Which candlestick pattern is bullish?

There are six most important bullish candlestick patterns. In addition to these, there are other patterns as well but most of them end up into these patterns only after the candlestick addition technique.