Top 10 Candlestick Patterns For Traders (Most Powerful Candlestick Patterns to Trade)

Top Candlestick Patterns: In the trading world, making money or losing it can all come down to the tiny details. That’s where candlestick patterns jump in as super useful tools. Whether you’re into forex, intraday, or swing trading, knowing these patterns can really boost your confidence. They’re like secret codes that help predict where the market’s heading with amazing accuracy. It’s not just about spotting signs; it’s about understanding what traders all over the world are feeling and thinking.

Candlestick Patterna

This article is your ultimate guide to mastering the Top 10 Candlestick Patterns Every Trader Must Know, featuring key patterns such as the Morning Star, Head and Shoulders Pattern, and Three White Soldiers. Each pattern is a critical piece in the puzzle of market analysis, offering insights into potential bullish or bearish reversals, momentum, and trend continuations that are invaluable for traders..

Understanding them allows traders to interpret possible market trends and form decisions from those inferences. There are various types of candlestick patterns which can signal bullish or bearish movements. 

Top 10 Candlestick Patterns

Candlestick patterns are crucial tools in technical analysis, helping traders to predict future market movements based on past price actions. Here are the top 10 candlestick patterns to maximize profit that every trader should know:

1. Morning Star

The Morning Star is a candlestick pattern that signals a potential shift from a downward trend to an upward trend. Think of it as the first sign of dawn in a dark market. Here’s how it works in simple terms:

Morning Star Pattern

• First Part (The Dark Night): The pattern starts with a big, red candle. This candle is like a continuation of a bad day, showing that prices are still falling and the bears (sellers) are in control.
• Second Part (The Glimmer of Hope): The next candle is small and can be either red or green. It doesn’t move much higher or lower than where it started. This candle is like a moment of indecision or a pause in the market, where neither the bears nor the bulls (buyers) have clear control. It’s the first sign that the bad times might be coming to an end.
• Third Part (The Dawn): The last candle is a big, green candle. This shows that the bulls have taken over and are pushing the price up, indicating the beginning of a possible uptrend. It’s like the sun rising after a long, dark night.

It starts with the continuation of a downturn, followed by a pause or uncertainty, and ends with a strong move upwards, suggesting that good times (an uptrend) may be ahead.

2. Evening Star

The Evening Star is a candlestick pattern that signals a potential change from an upward trend to a downward trend, like a warning that the good times might be coming to an end.

Evening Star Pattern

• First Part (The Good Times): It starts with a big, green candle. This candle is like a celebration of a good day, showing that prices are still climbing and the bulls (buyers) are in control.
• Second Part (The Doubt): The next candle is small and can be either green or red. It doesn’t make a significant move up or down. This candle is like a moment of hesitation or pause in the market, where neither the bulls nor the bears (sellers) have clear control. It’s the first sign that the good times might be facing a challenge.
• Third Part (The Turn): The last candle is a big, red candle. This shows that the bears have taken over and are pushing the price down, indicating the beginning of a possible downtrend. It’s like a warning that the night is coming after a long day of sunlight.

3. Head and Shoulders Pattern

The Head and Shoulders pattern is like a story of a battle between buyers and sellers in the market, ending with the buyers losing their strength.

Head and Shoulders Pattern

• Left Shoulder: The market is in an uptrend (prices are going up), and then it makes a peak (the top of the left shoulder). This is where the buyers (those wanting the price to go up) start to lose some power, and the price dips a little, forming a valley.
• Head: After this small dip, buyers gather their strength again and push the price up even higher than before, forming the top of the head. But then, they lose their power again, and the price falls, creating another valley. This peak is higher than the shoulders – like a real head stands taller than the shoulders.
• Right Shoulder: The price starts to rise again, but this time, it doesn’t go as high as the head. It reaches a point (the top of the right shoulder) similar to the left shoulder’s height and then starts to fall again. This is where the buyers really start to give up, and the sellers (those wanting the price to go down) take control.
• Neckline: Throughout this pattern, there’s a line that can be drawn across the bottoms of the valleys – this is called the neckline. When the price falls below this neckline after forming the right shoulder, it’s a sign that the sellers have won, and the price is likely to keep going down.

4. Inverse Head and Shoulders Pattern

The Inverse Head and Shoulders pattern is like the mirror image of the Head and Shoulders pattern, and it tells a story of change from bad times to good times in the market.

Inverse Head and Shoulder Pattern

• Left Shoulder: The market is in a downtrend (prices are going down), and then it makes a low point (the bottom of the left shoulder). This is where the sellers (those wanting the price to go down) start to lose some grip, and the price goes up a little, forming a small peak.
• Head: After this small peak, sellers push back and drive
• the price down even lower than before, forming the bottom of the head. But their victory is short-lived, as the price starts to climb again, creating another small peak. This low is lower than the shoulders, just like a head hangs lower than the shoulders when standing on your hands.
• Right Shoulder: The price dips again but doesn’t go as low as the head this time. It reaches a bottom similar to the left shoulder’s depth and then starts to rise. This is where the sellers are really starting to lose their power, and the buyers (those wanting the price to go up) take control.
• Neckline: Across the tops of the small peaks (the recovery points after each shoulder and the head), you can draw a line called the neckline. When the price rises above this neckline after forming the right shoulder, it’s a signal that the buyers have won, and the price is likely to keep going up.

5. Three White Soldiers

The Three White Soldiers pattern is like a team of three strong friends who come to the rescue after a bad time, signaling that good times are ahead.

Three White Soliders

• First Soldier: After a period of declining prices, the first tall, white (or green) candle appears. It’s like the first friend showing up, saying, “Don’t worry, I think things are going to get better from here.” This candle opens at or near its low and closes near its high, showing that buyers are starting to take control.
• Second Soldier: The next day, another tall, white candle appears, starting at or near the high of the first candle and closing even higher. It’s like the second friend joining the first, saying, “I agree, let’s push this even further!” This reinforces the idea that buyers are gaining strength.
• Third Soldier: On the third day, a third tall, white candle joins, starting near the high of the second and closing higher still. It’s like the third friend joining in, confirming, “Yes, we’re definitely turning things around!” This trio of candles strongly suggests that the downtrend is over, and an uptrend is beginning.

6. Three Black Crows

Each “crow” (candle) stands tall and foreboding, showing that sellers are consistently pushing prices down from open to close. When you see the Three Black Crows pattern, it’s like the market is saying, “The good times are over, and tougher times are ahead.” It’s a strong signal for potential investors that it might be a good time to consider selling or bracing for a downturn.

Three Black Crows

• First Crow: After a period of rising prices, the first tall, black (or red) candle arrives. It’s like the first uninvited guest showing up, saying, “I think the party’s over.” This candle opens near its high and closes near its low, showing that sellers are starting to take control, pushing prices down throughout the day.
• Second Crow: The next day, another tall, black candle appears, starting at or near the low of the first candle and closing even lower. It’s like the second guest joining the first, saying, “Let’s clear this place out.” This reinforces the idea that sellers are gaining more strength.
• Third Crow: On the third day, a third tall, black candle joins, starting near the low of the second and closing lower still. It’s like the third guest confirming, “Yes, it’s definitely time to end this.” This trio of candles strongly suggests that the uptrend is over, and a downtrend is beginning.

7. Falling Three Pattern

The Falling Three Methods pattern tells you that despite a short break or pause in a downtrend (where prices seem to recover a bit), the overall sentiment is still bearish, and the price is likely to keep falling. It’s a hint for traders that the pause is temporary, and the main trend (downward, in this case) is about to resume.

Falling Three Pattern

• The Long Step Down: It starts with a long, red (or black) candle, which is like taking a big step down the hill. This candle shows that the sellers are in control, pushing the price significantly lower.
• The Pause: After this big step, there are typically three or more small, green (or white) candles. These candles are like taking a small break during your walk downhill. They move upwards slightly, but not enough to change the overall direction. It’s like catching your breath before you continue walking down. These candles stay within the range of the first long candle, showing that the sellers are still around, even if they’re taking a little break.
• Continuing the Journey: The pattern finishes with another long, red candle, similar to the first one. This is like resuming your walk downhill, confirming that the downtrend is continuing. This last candle breaks through the low of the first long candle, showing that the sellers have taken control again and are pushing the price even lower.

8. Rising Three Pattern

The Rising Three Methods pattern tells you that despite a short break or pause in an uptrend (where prices seem to retract a bit), the overall sentiment is still bullish, and the price is likely to keep rising. It’s a hint for traders that the pause is temporary, and the main trend (upward, in this case) is about to resume.

Rising Three Pattern

• The Long Step Up: It begins with a long, green (or white) candle, which is like taking a big step up the hill. This candle shows that the buyers are in control, pushing the price significantly higher.
• The Pause: After this big step, there are typically three or more small, red (or black) candles. These candles are like taking a short break during your climb uphill. They move downwards slightly, but not enough to change the overall direction. It’s like catching your breath before you continue climbing. These candles stay within the range of the first long candle, indicating that the buyers are still around, even if they’re taking a little break.
• Continuing the Climb: The pattern finishes with another long, green candle, similar to the first one. This is like resuming your uphill climb, confirming that the uptrend is continuing. This last candle breaks through the high of the first long candle, showing that the buyers have taken control again and are pushing the price even higher.

9. Bearish Checkmate Pattern

The Bearish Checkmate pattern isn’t a standard term you’ll find widely recognized in technical analysis or among the classic candlestick patterns. It’s possible that “Bearish Checkmate” could be a term specific to certain trading circles or a less common name for a pattern that describes a situation where bears (sellers) gain a decisive advantage over bulls (buyers), leading to a potential market downturn.

Bearish Checkmate Pattern

• Breakdown from Consolidation: After a period of sideways movement where neither bulls nor bears could gain the upper hand, a sharp move downwards could signify that sellers have taken control decisively.
• Reversal After Attempted Rally: Following an attempted price rally (upward movement), if the price fails to break a significant resistance level and instead falls sharply, it could indicate that buyers have run out of steam and sellers are now in control.
• Completion of a Bearish Pattern: The term might also refer to the completion of a known bearish pattern, like a Head and Shoulders top, a Double Top, or a Bearish Engulfing pattern, where the pattern’s completion signals a strong move to the downside.

10. Bullish Checkmate Pattern

A Bullish Checkmate pattern in trading could suggest a scenario where, after a period of contest between buyers and sellers, the buyers finally secure a decisive victory. This victory could be indicated in several ways on a chart:

Bullish Checkmate Pattern

• Breakout from Consolidation: After a period of sideways movement, where the market doesn’t make significant moves up or down, a sharp move upwards could signal that buyers have taken control decisively.
• Reversal After a Decline: If the market has been in a downtrend and prices start to rally sharply, failing to make new lows and instead breaking through significant resistance levels, it could indicate that sellers are losing their grip and buyers are now dominating.
• Completion of a Bullish Pattern: The term might also be used to describe the completion of known bullish patterns, such as an Inverse Head and Shoulders, a Double Bottom, or a Bullish Engulfing pattern, where the completion of these patterns signals a strong upward move.

Conclusion

The Top 10 Candlestick Patterns Every Trader Must Know, we’ve understood the world of candlestick patterns of trading, exploring essential patterns that are crucial for anyone looking to excel in the forex, intraday, and swing trading spheres. From the hopeful emergence of the Morning Star to the cautionary tale of the Head and Shoulders Pattern, and the bullish charge of the Three White Soldiers, these patterns serve as the trader’s compass, guiding through market sentiment and potential shifts with unmatched precision.

These aren’t just random shapes on a chart; they’re like the market’s heartbeat, showing you the ups and downs of what traders around the world are feeling. By getting the hang of these patterns, you’re essentially learning to speak the market’s own language. It’s all about getting that insider info, that heads-up on whether the market’s about to throw a party (go up) or take a dive (go down).

Top 10 Candlestick Patterns (Most Powerful Candlestick Patterns to Trade) – FAQs

What is the most successful candlestick pattern?

The most profitable candlestick signals for trading are the Inverted Hammer (60% success rate), Bearish Marubozu (56.1%), Gravestone Doji (57%), and Bearish Engulfing (57%).

Which candlestick type is best?

Bullish Engulfing Pattern: This pattern occurs at the end of a downtrend and is characterized by a small bearish candle followed by a large bullish candle that completely engulfs the body of the previous candle. It suggests a potential reversal from bearish to bullish sentiment.

What is the 3 candle rule?

The pattern consists of three consecutive long-bodied candlesticks that open within the previous candle’s real body and a close that exceeds the previous candle’s high. These candlesticks should not have very long shadows and ideally open within the real body of the preceding candle in the pattern.

Which candle is best for intraday?

The shooting star candlestick is primarily regarded as one of the most reliable and one of the best candlestick patterns for intraday trading. In this type of intra-day chart, you will typically see a bearish reversal candlestick, which suggests a peak, as opposed to a hammer candle which suggests a bottom trend.

What is the big candle strategy?

The Break-out Big Candle trading strategy is based on significant changes in volatility. The strategy compares the size of the market’s current movement with the market’s recent average true range (ATR).