Recently, I saw someone asking about candlestick patterns again, so I decided to organize my understanding and share it with everyone.

Speaking of candlesticks, many people know that this is a technical tool from Japan, but few can use it well. Our domestic stock market has been using candlesticks since it opened in 1990, but after all these years, most people's research on candlesticks still remains at the old methods from Japan—just looking at scattered combinations of single, double, or multiple candlesticks, without forming a truly systematic and complete understanding. Frankly speaking, current research on candlestick patterns is still far from in-depth enough.

I have to be honest: although indicators and candlestick charts are essential for stock trading, never treat them as absolute truths. Many people jump to conclusions just because they see a classic candlestick pattern or a commonly used indicator, often resulting in heavy losses. In actual trading, you must be flexible and adapt to specific situations, analyzing each case individually rather than rigidly applying rules.

A candlestick chart is essentially a yin-yang candle, originating from rice market trading during Japan’s Tokugawa shogunate era, used to record rice price fluctuations. Later, it was introduced into the stock market and gradually became popular in Southeast Asia. Its popularity comes from being intuitive, three-dimensional, and capable of more accurately predicting future market directions, as well as clearly showing the strength comparison between bulls and bears.

Regarding the classification of candlestick patterns, there are a total of 48 types—24 bullish (yang) and 24 bearish (yin). The main difference in patterns is basically whether it’s a bullish or bearish candle. Bullish candles are divided into four categories: small bullish, medium bullish, large bullish, and bullish doji stars, with each category further subdivided into six situations. The core logic is simple— the larger the real body of a bullish candle, the stronger the buying pressure, and the more likely the market will rise afterward; longer lower shadows indicate stronger buying pressure, longer upper shadows suggest stronger selling pressure, and the market may fall. The logic for bearish candles is the opposite: larger real bodies indicate stronger selling pressure, and the market generally tends to decline afterward.

In practical trading, I think it’s important to focus on a few common candlestick combinations. The Morning Star pattern usually appears at the end of a downtrend. The first day features a strong long bearish candle, the second day gaps down opening creating a gap, and the third day shows a long bullish candle indicating a reversal—that’s a bottom signal. The Evening Star is the opposite; it appears during an uptrend, forming a reversal pattern over three days, which is a very strong sell signal.

The Red Three Soldiers is three consecutive bullish candles, each closing at a new high. When this pattern appears, the probability of a continued upward trend is high. On the flip side, the Three Black Crows pattern occurs during an uptrend, with three consecutive bearish candles stepping down, signaling potential further decline. Another reversal signal is the Gap Up with Double Crows—initially a long bullish candle, then a gap up but closing lower, followed by another gap up and closing lower again. This indicates that the bulls’ momentum is weakening, and it’s time to consider taking profits or reducing positions.

Ultimately, studying candlestick patterns is about finding market regularities, but the market is always more complex than we think. The most important thing is to combine candlestick analysis with volume and other indicators; don’t make decisions based solely on one pattern. Observe more, think more, and only then can you truly develop a keen eye for trading.