Recently, I was organizing my notes on stock market technical analysis and remembered an interesting topic. Our country started using K-line charts directly when the stock market opened in 1990, but honestly, over the years, most research on K-line charts has still largely relied on old Japanese results. It’s basically just scattered statistics such as single-candlestick, double-candlestick, and multi-candlestick patterns, without forming any particularly systematic framework. That’s why you’ll find that people’s understanding of candlestick (K-bar) formations in the market is actually not fully accurate.

That said, indicators and candlestick chart analysis are definitely essential lessons for stock trading, but these technical tools are, in essence, only references. Conclusions drawn from a classic candlestick formation or a commonly used indicator are not necessarily 100% accurate. In real trading, you still need to analyze the specific situation case by case—you can’t just apply formulas mechanically in the same way every time.

Candlestick charts are also called yin-yang candles. They originated from Japan’s Tokugawa shogunate era, where they were used as a way to calculate rice price rises and falls. Later, they were introduced into the stock market and are especially popular in Southeast Asia today. Their appeal lies in the fact that they’re intuitive and very three-dimensional: they can predict the future market direction relatively accurately, and they also make it clear to see the power comparison between bulls and bears.

There are 48 candlestick formations in total, divided into 24 bullish patterns and 24 bearish patterns. The bullish patterns mainly include small bullish candles, medium bullish candles, large bullish candles, and bullish doji stars. Each of these is further divided into six cases based on the size of the real body and the length of the upper and lower shadows. Simply put, the larger the real body of a bullish candle, the stronger the buying pressure, and the more likely the market will rise afterward; the longer the lower shadow, the stronger the buying pressure and the more likely the market will rise; the longer the upper shadow, the stronger the selling pressure and the more likely the market will fall. The logic of bearish candles is the opposite: the larger the real body, the stronger the selling pressure and the more likely the market will fall.

The five K-line combinations I use most often are these. The Morning Star appears at the end of a downtrend: it starts with a long bearish candle showing that the decline will continue, then a gap-down with a doji or hammer line, and finally on the third day a long bullish candle completes a reversal. The Evening Star is exactly the opposite: it appears during an uptrend and is a relatively strong reversal signal. If you see this formation appearing within an uptrend, you should stay alert, because it might be a good selling opportunity.

Three Red Soldiers is a very common formation. It features three consecutive days where the closing price rises day by day, each day’s opening is within the previous day’s real body, and each closing is close to the highest point. In this kind of situation, the outlook is generally bullish. Three Black Crows is the opposite: during an uptrend, three consecutive long bearish candles step downward in a staircase-like manner, indicating that the stock price may already be near the top or has been staying at a high level for a while. When this formation appears, it generally suggests that the market will move further downward.

The last one is the Double Black Crows with a gap. It usually occurs at the top of a stock’s phase. After the price has been rising for a while, it first shows a long bullish candle that continues the rally. On the second day, it gaps up but closes bearish. On the third day, it gaps up again but closes bearish once more. The bulls’ attack fails twice in a row, momentum clearly weakens, and the probability of a reversal increases. When I encounter this, I usually choose to exit to lock in profits or reduce positions appropriately, and wait until the market direction becomes clearer.

In the end, learning candlestick formations still needs to be combined with trading volume and other indicators. Relying purely on candlestick formations to make judgments is easy to get wrong. When trading on Gate or other platforms, I treat these formations as references, and then add my own market intuition and risk control to make decisions.