Candlestick Patterns

Candlestick patterns are trading signals that indicate price movement of securities. There are a variety of candlestick patterns (over 40) that can reliably indicate the price movement of a security. Below, we have identified and explained the top 9 candlestick patterns that we believe every investor should memorize and be able to identify when trading.

Candlestick Pattern #1: The Doji

The doji candlestick pattern is an indication that the market is neither bullish nor bearish. The doji serves primarily as an indicator that the market is at odds with itself. The doji is formed when the open and close are very similar.
Candlestick Pattern #2: The Gravestone Doji

The gravestone doji candlestick pattern occurs when the open and close occur at the low of the day and serves to indicate market tops and sometimes a market bottom.
Candlestick Pattern #3: The Long Legged Doji

The long legged doji candlestick pattern is an indicator of a market top.
Candlestick Pattern #4: The Dark Cloud Cover

The dark cloud cover candlestick pattern is an indication of a two day bearish market found either at the end of an upturn or during a congested up turn.
Candlestick Pattern #5: The Bullish Engulfing Pattern
The bullish engulfing candlestick pattern indicates the near end of a downturn when buying pressure overcomes selling pressure.

Candlestick Pattern #6: The Piercing Pattern

The piercing pattern indicates when a market bottom is reversed.

Candlestick Pattern #7: Morning Star

This three day pattern is a good indication that prices will increase.
Candlestick Pattern #8: Evening Star

This three day pattern indicates that prices will decrease.
Candlestick Pattern #9: Shooting Star

This pattern is a good indication that the top of a market is near.

The Importance of Candlestick Patterns

Candlestick patterns are a great indicator of market price movements. They should be committed to memory by all serious future traders.