Recently, someone asked me about chart patterns and K-line combination diagrams, which made me realize that many retail investors still have only a shallow understanding of this area. To be honest, we’ve been using candlestick charts since the stock market opened in 1990, but over the years, not many have studied them systematically. Most still just copy the Japanese theories, looking at single K, double K, without forming a complete cognitive framework.

Actually, the power of candlestick charts is much greater than many people think. They originated from rice market trading in Edo Japan, used to track rice price fluctuations. Later, they were introduced into the stock market, and now they have become a standard tool for Southeast Asian investors. Why are they so popular? Because they are intuitive, three-dimensional, and can more accurately predict future market directions, as well as clearly judge the balance of bullish and bearish forces.

But here’s an honest word: indicators and candlestick charts are just reference tools, not the Bible. Many people jump to conclusions based on a classic candlestick pattern or commonly used indicator, which can easily lead to mistakes. In actual trading, specific problems need specific analysis; one-size-fits-all approaches don’t work.

Let’s start with the basics of candlesticks. There are 48 types of candlesticks: 24 bullish (positive) and 24 bearish (negative). They are mainly divided into small, medium, and large, plus doji stars. The larger the bullish candlestick body, the stronger the buying pressure, and generally the market will rise afterward; the longer the lower shadow, the stronger the buying pressure; the longer the upper shadow, the stronger the selling pressure. For bearish candlesticks, the opposite applies: larger bodies indicate stronger selling, and the market usually declines.

Knowing the basics isn’t enough; the key is to master some classic combinations in candlestick pattern diagrams. I’ll tell you five of the most common:

Morning Star appears at the end of a downtrend. First, there is a long bearish candlestick, indicating continued decline; the second day, it gaps down and forms a doji or hammer pattern, showing a contraction of the downward momentum; on the third day, a long bullish candlestick reverses the situation. This is a typical bottom reversal signal, and it’s clearer when combined with volume analysis.

Evening Star is the opposite of Morning Star. In an uptrend, it first shows a long bullish candlestick, then gaps up and forms a doji or hammer, and finally closes bearish. This is a warning of a trend reversal during an uptrend, and when it appears, special attention should be paid—it could be a good selling point or an exit signal.

The Three White Soldiers is a bullish signal. It occurs when three consecutive days close higher than the previous day, with the opening price within the previous day’s bullish body, and the closing price near the day’s high. When this pattern appears, the outlook is often bullish, although the definition is somewhat fuzzy. In practice, it’s quite useful.

Three Black Crows is the opposite of Three White Soldiers. In an uptrend, three consecutive long bearish candlesticks appear, each closing below the previous day’s low, forming a stair-step decline. This indicates the stock price may be near a top or has been at a high level for some time, and the trend is likely to further decline.

The Gap Up with Double Crows is more subtle and easy to overlook. After a period of rising prices, a long bullish candlestick appears, followed by a gap up that closes bearish the next day, and then another gap up that also closes bearish, swallowing the previous day’s bearish candle. This indicates that the bulls’ momentum has weakened over two days, and the probability of an island reversal increases, so alertness is needed.

Ultimately, understanding candlestick pattern diagrams requires combining them with actual market trends; rote memorization alone isn’t enough. The market is always more complex than theory. My advice is to observe more, practice more, think more, and engrain these patterns into your mind. Then, in actual trading, you can apply them flexibly. Sometimes, a pattern may morph, and you need to learn to adapt rather than rigidly stick to the textbook. When combined with volume and other indicators, the accuracy of judgment will be much higher.