In this blog, we will explore the most popular candlestick patterns every trader should know for better trading decisions.
1. Bullish Engulfing Pattern
The Bullish Engulfing Pattern is a two-candle formation:
- A small bearish (red) candle
- Followed by a larger bullish (green) candle
What it Indicates:
The bullish candle completely covers the previous bearish candle, showing strong buying pressure and signaling a potential upward trend reversal.
2. Hammer Pattern
Hammer is a single candlestick pattern with
- A small body candle, and
- Long lower shadow/wick
What Hammer Pattern Indicates:
Whenever the chart is in a downtrend, and a Hammer candlestick is made, it indicates that the share price might go up because the buyers have become more dominant or active.
3. Bullish Harami Pattern
The Bullish Harami is a two-candle pattern that may indicate a potential trend reversal to the upside. It forms when a small bullish candle appears completely within the body of a larger bearish candle.
What it Indicates:
This pattern reflects weakening selling pressure and suggests that buyers may be gaining control, signaling a possible bullish reversal.
4. Three White Soldiers
The Three White Soldiers pattern is formed by three consecutive bullish candles with small wicks. Each candle opens within the previous candle’s body and closes higher than the previous day’s close.
What it Indicates:
This pattern signals strong buying momentum and suggests a potential reversal from a downtrend to an uptrend.
5. Dragonfly Doji
The Dragonfly Doji is a single-candle pattern with a long lower shadow and little to no body, usually appearing after a downtrend.
What it Indicates:
This pattern shows that sellers pushed prices lower, but buyers regained control and pushed the price back near the opening level. It signals potential bullish reversal momentum. Unlike the Hammer pattern, the Dragonfly Doji has almost no real body, while the Hammer has a small body.
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