Recently, someone asked about candlestick pattern analysis again, which made me realize that many people’s understanding of candlesticks still stays on the surface. To be honest, our domestic stock market has been using candlesticks since it opened in 1990, but research on them has never been truly in-depth. Most people are still using the old theories from the Japanese, looking at single, double, or multiple candlesticks in a scattered way, without forming a systematic, complete cognitive framework.

Candlestick charts actually originate from rice market trading during Japan’s Tokugawa shogunate era, used to track rice price fluctuations, and were later introduced into the stock market. They became popular because they are intuitive and visually impactful, allowing quick judgment of the supply and demand balance. But I want to emphasize one point—although candlestick pattern analysis is an essential tool in technical analysis, it is ultimately just a reference, not an absolute truth. Conclusions drawn from a classic candlestick pattern or commonly used indicators may not always hold in practice; specific situations still require specific analysis.

Candlesticks are divided into 48 types, 24 bullish and 24 bearish. Bullish candlesticks are categorized into small bullish, medium bullish, large bullish, and doji stars, with each category further subdivided into six scenarios. The core logic is simple: the larger the real body of a bullish candlestick, the stronger the buying pressure, and the more likely the market will rise afterward; longer lower shadows indicate stronger buying, while longer upper shadows suggest stronger selling. Conversely, for bearish candlesticks, larger real bodies indicate stronger selling pressure, and the market generally tends to fall afterward.

I think mastering some common candlestick patterns is particularly practical. For example, the Morning Star pattern appears at the end of a downtrend. The first day is a long bearish real body, the second day gaps down to form a doji or hammer, and the third day pulls out a long bullish candlestick. This pattern usually signals a reversal. The opposite is the Evening Star, which appears during an uptrend and is also a three-candlestick pattern but in the opposite direction, serving as a strong sell signal.

Another example is the Three Red Soldiers, which is the most common bullish pattern—three consecutive days of new high closes, with each day opening within the previous day’s real body and closing near the high. Conversely, the Three Black Crows appear during an uptrend as three consecutive long bearish candles, forming a stair-step decline, often indicating further price drops. The last pattern worth noting is the Double Black Gaps, which occur at a market top. The price first surges with a long bullish candle, then gaps up two days in a row but closes lower, indicating weakening bullish momentum and increasing chances of an island reversal.

In short, candlestick pattern analysis helps you understand market psychology. But don’t blindly trust a single pattern; it’s essential to combine it with volume and other indicators to improve accuracy. When these patterns appear in practice, stay alert—take profits when appropriate, reduce positions when necessary, and wait for clearer market signals before acting.