I noticed that many beginners in trading do not understand how candlestick formations actually work. And this is one of the most useful tools for market analysis.

Candlestick formations are essentially a visual representation of the struggle between bulls and bears. Each candle shows the opening, closing, high, and low prices over a specific period. If you understand these patterns, you can spot potential reversals or trend continuations earlier than most.

The history is interesting — Japanese rice traders used this system as early as the 1700s, and it was only in the late 1980s that the West learned about it. Now, it is the main method for any serious trader.

I am studying the main types. Bullish patterns indicate a potential rise — this could be a reversal after a decline or a continuation of an upward trend. Bearish patterns, on the other hand, hint at falling prices. There are also reversal and continuation formations.

Here are specific examples of bullish reversals to watch for:

Hammer — one of the most reliable candlestick formations for a reversal. It forms when the price drops significantly below the open but then recovers and closes near the open level. The long lower shadow shows that sellers tried to push the price down, but buyers regained control. This often signals an upward reversal.

Bullish engulfing — a small red candle is followed by a large green candle that completely covers it. This indicates that buying pressure has overtaken selling pressure. Market sentiment shifts, and the price may go up.

Morning star — consists of three candles: a long red, a small (any color), and a long green. The small candle indicates uncertainty, and the green one afterward signals recovery. The pattern shows weakening of the downward trend.

Piercing line — two candles: a red and a green, where the green opens below the previous low but closes above the midpoint of the first candle. A strong close indicates a change in sentiment. It is more common on stocks due to overnight gaps but can also appear on weekly charts of any assets.

Inverted hammer — similar to the hammer but inverted — a small body with a long upper shadow. It appears after a decline and shows an attempt by buyers to push the price up. It may signal a reversal.

Doji — when open and close are nearly at the same level. The body is minimal, and shadows can be long. This indicates indecision, with neither bulls nor bears in control. It can signal either a reversal or continuation — depends on the context.

Now, bearish patterns work in the opposite direction.

Bearish engulfing — a small green candle is followed by a large red candle. Selling pressure has increased, and sentiment has shifted bearish. The price may go down.

Evening star — a mirror image of the morning star. Three candles: a long green, a small, and a long red. It indicates weakening of the upward trend and a potential reversal downward.

Shooting star — a small body with a long upper shadow, appearing after a rise. It shows an attempt by sellers to push the price down. It can signal a reversal.

Current prices: BTC is around $80.58k with a 0.95% increase, XRP at $1.47 with a 2.37% gain, SOL at $91 with a 0.42% decrease.

Candlestick formations are not 100% guarantees, but combined with other indicators and support levels, they provide a good advantage. The main thing is to practice and see these patterns in real-time on charts.