Concept
Candlestick Patterns
Candlestick Patterns, also known as candlestick catalog, candle patterns, Japanese candlestick patterns, are Chart & Candlestick Patterns concepts. The Library holds 3 implementations, each one a working definition you can pull into Quant.
Top Candlestick Patterns indicators
3 total
What are candlestick patterns?
Candlestick patterns are recurring formations of one to five candles that traders read as shorthand for the shifting balance between buyers and sellers. Each candle compresses four prices (open, high, low, close) into a body and two wicks, and specific arrangements of those bodies and wicks, such as a hammer after a decline or a bullish engulfing candle at support, are catalogued as signals that a move may be reversing, continuing, or stalling.
The charting style is Japanese. Trading lore credits Munehisa Homma, an eighteenth-century rice merchant from Sakata who traded at the Dojima exchange in Osaka, with the ideas behind candle analysis. The historical record is thinner than the legend, and the charts as drawn today probably took their standard form later in Japanese practice. The move West is easier to date: Steve Nison is widely credited with popularizing candlestick charting among English-speaking traders, above all through his 1991 book Japanese Candlestick Charting Techniques, and candles have since become the default chart style on most trading platforms.
The catalog is conventionally sorted by candle count and by implication. Single-candle signals include the doji, hammer, and marubozu; two-candle signals include the engulfing pair, the harami, and dark cloud cover; three-candle signals include the morning star and its bearish twin, the evening star. Each is then labeled bullish or bearish, reversal or continuation. Context decides which label applies: the same small-bodied, long-wicked candle is a hammer after a downtrend and a hanging man after a rally.
The core claim is that candle shapes encode crowd behavior. A long lower wick shows sellers drove price down and were rejected, a tiny body shows indecision, and a full body closing on its high shows one-sided conviction. That descriptive reading is uncontroversial. The predictive claim is contested: formal studies of pattern profitability reach conflicting conclusions, and experienced traders generally treat a pattern as one input that needs confirmation from trend, location, and volume rather than a standalone signal.
How to identify candlestick patterns
Recognition is anatomy plus context: the candle's shape records what happened inside that session, and the surrounding chart decides whether it means anything.
- 1Establish context first. Reversal patterns only carry information after a directional move. A hammer in the middle of a flat range is just a candle with a long wick; the same candle printing into a falling market at prior support is a candidate signal.
- 2Read each candle's anatomy. The body (open to close) shows who won the session, while the wicks show what was rejected. A small body with a long lower shadow is the hammer template; its mirror image after a rally is the shooting star.
- 3Check the relationships between candles for multi-bar patterns. An engulfing candle's real body covers the previous body, a harami sits inside it, an inside bar is contained by the prior candle's full range, and star patterns hinge on a small middle candle separated from its neighbors.
- 4Weigh the location. A pattern at a prior swing level, a widely watched moving average, or the neckline of a larger structure carries more weight than the identical pattern printed mid-range.
- 5Wait for confirmation. Many traders require the next candle to close in the signal's direction and check the volume signature behind the pattern. If a screener flagged it, verify by eye: automated detection is literal about geometry and blind to context.
How traders use it
- As entry triggers, not forecasts. The most defensible use is timing: a trader who already likes a level for independent reasons waits for a hammer, an engulfing candle, or a three-bar reversal to print there before committing, so the pattern times an existing idea instead of generating it.
- For stop placement and invalidation. Pattern extremes give objective lines in the sand: below the hammer's wick, above a shooting star's high, beyond the engulfing pattern's own extreme. If price trades back through the level that created the signal, the signal has failed and the trade is closed.
- As continuation and breakout reads. Not every candle signal is a reversal: a marubozu closing through resistance is read as conviction, inside bars mark compression that breakout traders straddle, and small-bodied pullback candles within a trend are read as rest rather than rejection.
- As confluence inside larger structures. Candle signals are commonly nested in bigger setups: a dark cloud cover at the second peak of a double top, or an evening star on the retest of a broken neckline, ties short-term rejection to a larger reversal thesis.
- Through screeners and automated detection. Because the definitions are geometric, patterns are easy to code. Library scripts such as repo32's Candlestick Patterns Identified, alona.gz's All Candlestick Patterns Identifier, and MUQWISHI's All Candlestick Patterns Screener flag formations automatically across symbols and timeframes, which traders then filter by context.
Candlestick patterns vs related concepts
Head & Shoulders: Chart patterns like the head and shoulders are built from many swings and can take weeks to complete; candlestick patterns resolve in one to five bars. Traders often nest them: the large structure supplies the thesis, and the candle pattern supplies the trigger and the stop.
Pin Bar: The pin bar is the Western price-action name for the long-wick rejection candle, covering roughly the same ground as the hammer and shooting star. Candlestick patterns is the full Japanese catalog; the pin bar is one entry from it, renamed by a different tradition.
Double Top/Bottom: A double top or bottom is defined by two swing extremes and a neckline spanning many candles. Candle patterns do not define that structure, but they often mark its turning points, an engulfing candle at the second peak being the classic example.
Related concepts · Candlestick catalog
Concept family
Chart & Candlestick Patterns
84 concepts mapped · 46 in the Library
Candlestick Patterns FAQ
Do candlestick patterns actually work?
The honest answer is that it is contested. Formal studies have tested candlestick strategies across stocks, futures, and FX and reached conflicting conclusions: some find small, short-lived edges for certain patterns, others find nothing after transaction costs. Practitioners broadly agree that shape alone is weak, and that whatever value exists comes from context such as trend, location, timeframe, and confirmation.
Who invented candlestick charts?
Tradition credits Munehisa Homma, an eighteenth-century Japanese rice trader, though historians note the modern chart form likely evolved later in Japan. Steve Nison popularized the technique in the West with Japanese Candlestick Charting Techniques in 1991, which is why many English pattern names are translations of Japanese originals.
What is the most reliable candlestick pattern?
There is no consensus winner. Engulfing patterns, the hammer family, and the morning and evening stars are among the most cited in trading literature and formal tests, but rankings change with the market and period studied. Exact reliability percentages quoted online usually trace back to small samples or backtests with specific assumptions, so treat them with suspicion.
Do candlestick patterns work on 24-hour markets like crypto and forex?
Body-and-wick patterns form normally, but gap-dependent signals rarely print in textbook form because continuous markets seldom gap. Textbook stars, the abandoned baby, and the related island reversal all require gaps, so traders in continuous markets either relax those definitions or accept that textbook versions mostly print around forex weekend opens and are rarer still in crypto, which barely gaps at all.
What timeframe do candlestick patterns work best on?
The patterns were developed on daily prices, and each candle is only as meaningful as the session it summarizes. They can be drawn on any timeframe, and the common practitioner view is that higher-timeframe patterns are less noisy because each candle aggregates more trading. That view is widely held rather than rigorously proven, so test it on your own market.
How many candlestick patterns are there?
Nison's books document several dozen, and modern references list anywhere from about forty to more than a hundred named variants. Most working traders rely on a small core (the doji, hammer and inverted hammer, the engulfing pair, harami, and the star formations) and ignore the rest, since many rare variants describe near-identical psychology under different names.
Build Candlestick Patterns your way.
Quant writes, tests, and refines it with you — then it runs on LuxAlgo charting or ports to TradingView.