16 candlestick patterns you should know to trade successfully

Technical analysis provides us with tools to identify trends and anticipate changes. Japanese candlestick charts stand out among these techniques. They remain crucial for traders, even in 2025.

There are several ways to view the price history. Lines, bars, candles. Most prefer candles. They show more. They reveal patterns.

A candlestick pattern is like a footprint in the price. Traders have noticed something interesting: these patterns tend to repeat. And when they do, the price often behaves similarly. Not always, of course.

What is a candle?

A candlestick chart shows the historical price movement. Each candle represents a period. It can be one minute, one hour, one day. It depends on what you choose.

It seems that it was a Japanese rice trader who invented them. It is not entirely certain. Steve Nison introduced them to the Western world with his book on Japanese candlestick techniques.

The candles are quite intuitive. They have these parts:

Body of the candle

It is the main part. It shows where the price opened and closed. In bullish markets, the close is above. In bearish markets, below.

Highlights or shadows

They are the lines that come out of the body. The upper one shows the maximum. The lower one shows the minimum. Sometimes they are barely visible.

Color of the candle

Green or red, usually. Green: up. Red: down. Simple.

The 16 Best Japanese Candlestick Patterns

There are many patterns. Too many. I will focus on the ones that really work:

Bullish Patterns

1. Hammer pattern

A candle with a short body and a long lower shadow. It appears after declines. It means that buyers are waking up. A green hammer is a better signal than a red one.

Inverted Hammer

Similar to the hammer, but upside down. Long upper shadow. Sellers tried to push down but failed. Kind of surprising how it manages to reverse the trend.

3. Bullish Enveloping

Two candles. First red, small. Second green, large. The green "wraps" around the red. Buyers take control. Quite effective.

4. Drilling line

Two candles at the bottom of a downtrend. A long red one followed by a long green one. There is a gap between them. Buyers are pushing hard.

5. Morning Star

Three candles. One large red, one small in the middle, one large green. The selling pressure is running out. Buyers are starting to dominate.

6. Three white soldiers

Three long green candles in a row. Each one opens and closes higher than the previous one. Very bullish signal.

Bearish Patterns

7. The Hanged Man

Just like the hammer, but at the top of a climb. Bad sign. Sellers are taking control.

8. Shooting star

Opposite of the inverted hammer. A candle with a long upper shadow. The market tried to rise but failed miserably. It's not a good sign.

9. Bearish Envelope

Inverse of the bullish. A small green candle "engulfed" by a large red one. The lower the red, the worse the signal.

10. Evening Star

Like the morning star, but upside down. A long green one, a small one, a long red one.

11. Three black crows

Three long red candles in a row. They open near the previous close and fall significantly. It seems that the sellers have all the power.

12. Dark Cloud

Two candles. One green, then a red one that opens above but closes below. Sellers have arrived with strength.

Continuation or neutral patterns

13. Doji

Tiny body, long shadows. Total indecision. It can mean anything, really. Better to wait and see what happens next.

14. Spinning Top

Similar to the Doji. Equal shadows above and below. The market doesn't know what to do.

15. Three bearish methods

Five candles. One large red, three small green, another large red. The greens fail to surpass the range of the first red. The downtrend continues.

16. Three bullish methods

The opposite. One large green, three small reds, another large green. The rise continues its course.

Important Terms in Candlestick Charts

Some useful concepts:

• Emerging patterns: they are forming. Not complete yet.

• Completed patterns: now formed. You can interpret them.

• Opening: where the price started.

• Closing: where it ended.

• High: the highest point reached.

• Low: the lowest point.

Benefits of Using Japanese Candlestick Patterns

They give you hints about the future. They are not perfect, of course. But they help. They indicate when to buy or sell. Or when it's better not to do anything.

Swing traders love them. They show you trends. They reveal market momentum. They connect you with the overall sentiment.

How to quickly memorize candlestick patterns

Look at them. A lot. Operate with small amounts. Learn one at a time. Don't rush.

Start with simple formations. Then advance to more complex patterns. Practice makes perfect.

Conclusion

Japanese candles work. For stocks, forex, crypto... it doesn't matter. The market is the market.

But don't use them alone. Combine them with other indicators. Not entirely clear why, but together they work better. This way, you will increase your chances of success in this complicated world of trading.