Recently studying stock technical analysis, I found that many people’s understanding of candlestick patterns still stays at a superficial level. Our domestic stock market has been using candlesticks since 1990 when trading opened, but honestly, after so many years, the research on candlesticks still isn’t deep enough.

I’ve noticed that most people learning candlesticks just follow the Japanese theory, learning about single candlesticks, double candlesticks, multiple candlesticks, piecing together bits here and there, without forming a complete system. Indicators and chart analysis are indeed essential for trading, but don’t treat them as gospel. Conclusions based on a classic candlestick chart or indicator don’t necessarily reflect the truth; actual trading still requires case-by-case analysis.

Candlestick charts are also called yin-yang candles, originating from rice market trading in Japan’s Edo period, used to track rice price fluctuations. Later they were introduced into the stock market and are now especially popular in Southeast Asia. Why so popular? Because they are intuitive, highly three-dimensional, and can more accurately predict future market directions, as well as clearly show the strength comparison between bulls and bears.

There are a total of 48 candlestick pattern types, divided into 24 bullish (yang) and 24 bearish (yin). Bullish candles are further divided into small bullish, medium bullish, large bullish, and doji stars, each subdivided into six scenarios based on body size and shadow length. Simply put, the larger the body of a bullish candle, the stronger the buying pressure, and generally the more likely the market will rise afterward; a longer lower shadow indicates strong bottom support, also favoring a rise; a longer upper shadow suggests strong selling pressure, and the market may fall. The logic for bearish candles is the opposite.

In my opinion, mastering five common candlestick pattern combinations is especially important. The Morning Star is a signal at the end of a downtrend, consisting of three candles: a long bearish, a doji or hammer, and a long bullish, indicating a possible trend reversal. The Evening Star is the opposite, appearing during an uptrend, with three candles: a long bullish, a doji or hammer, and a long bearish, which is a strong sell signal. I’ve caught this pattern several times; recognizing it can help avoid many declines.

The Three Soldiers (Red Three) is a bullish signal, with three consecutive bullish candles, each closing higher than the previous day, opening within the previous candle’s body, and closing near the high of the day. Conversely, the Three Black Crows are three consecutive bearish candles in a step-down pattern, generally indicating the stock has peaked or has been at a high level for too long, and the trend is likely to continue downward.

Another easily overlooked pattern is the Double Black Gaps. This pattern often appears at the top of a stock’s phase. It starts with a long bullish candle continuing the upward trend, then a gap up opening but closing lower, and on the third day, another gap up but closing lower again, swallowing the previous day’s bearish candle. This indicates that the bulls’ two-day attack has failed, momentum is clearly weakening, and the probability of an island reversal increases. At this point, it’s best to either take profits or reduce positions and wait.

Honestly, just knowing these candlestick patterns isn’t enough; they need to be combined with volume and other indicators to improve accuracy. Technical analysis is just a reference tool, not an absolute truth. During actual trading, you must stay alert and adjust strategies flexibly according to market changes. If you’re interested, you can follow the candlestick trends of related assets on Gate and practice more to gain experience.