Recently reviewing the fundamentals of stock market technical analysis, I found that many people's understanding of candlesticks still remains superficial. Our country's stock market started in 1990 with the direct introduction of candlestick charts, but honestly, after so many years of research, the study of candlesticks mainly stays within the Japanese theoretical framework. Often, it's just scattered observations of single, double, or multiple candlestick statistical patterns, without forming a systematic and comprehensive understanding.

To put it plainly, simply looking at indicators and candlestick charts is indeed an essential part of stock trading, but these should only be used as reference tools, not as a bible. Conclusions drawn from a certain classic candlestick pattern or commonly used indicator are not necessarily 100% accurate. In actual trading, flexibility and adaptability are required; rigidly applying them without adjustment is unwise.

Candlestick charts (also called yin-yang candles) originate from rice market trading during Japan's Tokugawa shogunate era, used to track daily rice price fluctuations. Later, they were introduced into the stock market and are now especially popular in Southeast Asia. Their popularity mainly stems from being intuitive and three-dimensional, and practical experience has shown that candlesticks can relatively accurately predict future market directions, as well as clearly reveal the strength comparison between bulls and bears.

There are a total of 48 types of candlesticks, divided into 24 bullish (yang) and 24 bearish (yin) types. Bullish candlesticks are further subdivided into small bullish, medium bullish, large bullish, and doji (indecision) candles, each with six different conditions based on body size and shadow length. Simply put, the larger the body of a bullish candle, the stronger the buying pressure, and the more likely the market will rise afterward; a longer lower shadow indicates strong buying pressure and a potential rise, while a longer upper shadow suggests strong selling pressure and a possible decline. The logic for bearish candles is similar but in the opposite direction.

Now, let's focus on five practical candlestick patterns, which often provide clear reversal signals.

The first is the Morning Star. This pattern appears near the end of a downtrend: first, a long bearish candle indicates continued decline; second, a gap down with a doji or hammer pattern, sometimes with the highest point below the first day's lowest, creating a gap that shows the downward momentum is shrinking; third, a sudden long bullish candle appears, showing strong buying and a market turnaround. This is a very typical bottom reversal signal.

Conversely, the Evening Star appears during an uptrend. It starts with a long bullish candle indicating ongoing rise; the second day gaps up with a doji or hammer pattern, sometimes with the lowest point above the previous day's high, forming an upward gap; the third day, a long bearish candle appears, indicating strong selling. At this point, pay special attention because a clear reversal candlestick signal has emerged, which could be a good exit point or a short-term avoidance opportunity. Combining this with volume analysis will make it more accurate.

The Red Three Soldiers is a common pattern, consisting of three consecutive bullish candles, each closing higher than the previous day, with the opening within the previous bullish candle's body, and closing near the high of the day. When this pattern appears, the overall outlook is often bullish. Although the pattern looks simple, defining it precisely can be somewhat challenging.

The Three Black Crows is the opposite of the Red Three Soldiers. In an uptrend, three consecutive long bearish candles appear, each closing below the previous day's low, with the opening within the previous candle's body, and the closing near or at the day's low. This pattern forms a step-like descending pattern, indicating the market is either near a top or has been at a high level for some time, and subsequent prices are likely to fall further.

Finally, the Dark Cloud Cover (Double Black Crows) usually appears at a market top. After a period of rising prices, a long bullish candle continues the upward trend; the next day gaps up but closes lower, with the gap still present; on the third day, another gap up occurs but closes lower again, with the third day's bearish candle engulfing the second day's candle. The bulls' two-day failed attempts to push higher indicate a clear weakening momentum, increasing the probability of a reversal. This is a definite candlestick reversal signal. Traders should stay alert, consider taking profits or reducing positions, and wait for a clearer market direction.

If these candlestick patterns are combined with volume and other technical indicators for comprehensive analysis, it can greatly improve trading accuracy. On Gate, you can see candlestick movements of various cryptocurrencies. Those interested can use this knowledge to observe and analyze in practice.