There are well over a hundred named candlestick patterns. Most of them are trivia. Seven are worth the space in your head, and the reason is not that they work more often, it is that each one describes a specific, checkable thing that happened between buyers and sellers.
Before the list, the part that gets skipped. A bullish candlestick pattern is only bullish in the right place. The shapes below appear on every chart constantly. What makes one of them information rather than noise is that it forms after a decline, where a failure of selling pressure is a change in the situation. The identical shape in the middle of a range is the chart doing what ranges do.
So each entry names two things people leave out: what must have happened before the pattern, and the price that would prove the read wrong.
1. The hammer
A single candle with a small body near the top of its range and a lower wick at least twice the body’s height, forming after a decline.
The long lower wick is the whole message. Sellers drove price well below the open and buyers took every bit of it back before the close. That is a session where selling pressure was tested and failed.
- Needs: a measurable decline before it.
- Confirmed by: the next candle closing above the hammer’s high.
- Invalidated by: a close below the hammer’s low.
The hammer is also the most over-called pattern in trading, because the shape is everywhere. It has an identical twin called the hanging man that forms after a rise and warns the opposite way. Same drawing, opposite meaning, and the only difference is what came before.
2. The bullish engulfing
Two candles: a down candle, then an up candle whose real body completely covers it.
One session undid the previous one outright. Buyers took control from a lower open and carried price through the prior session’s entire range, which takes sustained demand rather than one burst.
- Needs: a visible decline before it.
- Confirmed by: a close above the engulfing candle’s high.
- Invalidated by: a close below the engulfing candle’s low.
The detail almost every screener ignores: bodies are compared, not wicks, and relative size is everything. Engulfing a tiny doji-like body is trivially easy and means close to nothing. Engulfing a long-bodied candle is a real event. If your tool flags both identically, it is not telling you what you think it is. See bullish engulfing.
3. The morning star
Three candles: a long down candle, a small-bodied candle that stalls below it, then a long up candle closing well into the first candle’s body.
Three sessions, one story. The decline is working; then it stalls at a low with neither side able to extend it; then it resolves upward hard enough to undo most of the first session. The middle candle is the pivot, because it is the session where selling stopped being effective.
- Needs: a visible decline before it.
- Confirmed by: candle three closing past the midpoint of candle one, which is most of the pattern’s own definition.
- Invalidated by: a close below the low of the middle candle.
Three-candle patterns carry more weight than single candles for an obvious reason: they describe a stall and a reversal, rather than one ambiguous session. See morning star.
4. Three white soldiers
Three consecutive long up candles, each opening inside the previous candle’s body and closing near its own high.
Each session opens inside the last one’s range, so the advance is being bought rather than gapped, and each closes near its high, so it holds into the bell. Three of those in a row is demand with persistence behind it.
- Needs: a decline or a long base before it.
- Confirmed by: itself, largely, by the third close.
- Invalidated by: a close back below the open of the first candle.
Watch the upper wicks. Long ones on the second and third candles quietly break the pattern, because that is buying being sold into, and the whole definition rests on closes near the highs. See three white soldiers.
5. The dragonfly doji
A candle that opens and closes at or very near the high of its range, leaving a long lower wick and effectively no body.
Sellers took price a long way down and finished with nothing to show for it. In a decline that is the clearest single-session evidence that supply has been absorbed at this level.
- Needs: a decline, or a level that has held before.
- Confirmed by: the next candle closing above the doji’s high.
- Invalidated by: a close below the doji’s low.
One caveat worth carrying: a perfect doji is rare on liquid instruments and common on thin ones. On an illiquid asset or a very short timeframe, it is often a liquidity artefact rather than a decision by the market. See dragonfly doji.
6. The inverted hammer
A small body near the bottom of its range with a long upper wick, forming after a decline.
This is the counter-intuitive one. The candle looks like a failure, because price rose and gave it back. But it forms in a downtrend, where the notable thing is that a rally happened at all. It says buyers are testing, not that they have won.
- Needs: a decline before it, which is the only thing separating it from a shooting star.
- Confirmed by: the next candle opening higher and closing above the inverted hammer’s body.
- Invalidated by: a close below its low.
Of the patterns here, this is the one that most needs confirmation. Without it, it really is just a failed rally. See inverted hammer.
7. The tweezer bottom
Two adjacent candles reaching almost exactly the same low, after a decline.
One rejection at a low could be noise. Two at essentially the same price in consecutive sessions suggests demand is waiting there rather than arriving by chance. It is a two-session double bottom and reads the same way.
- Needs: a decline before it.
- Confirmed by: a close above the high of the second candle.
- Invalidated by: a close below the shared low.
Honest caveat: nobody agrees how close the two lows must be, which makes this pattern easy to see everywhere once you start looking. On a volatile instrument, two lows within a few ticks may be noise rather than a defended level. See tweezer bottom.
What this list is not
It is not a ranking by reliability. Published work on candlestick performance varies widely by market, timeframe and the exact definition used, and any article quoting you a clean win rate for “the hammer” has quietly picked one study and dropped the conditions that produced it. What these seven have in common is that each describes a specific, observable event, and each comes with a price that settles the argument.
That last part is the habit worth building. A read you cannot disprove is a feeling. Naming the invalidation level before you do anything turns an impression into something you can check tomorrow.
If you want the full set with the drawings, the candlestick pattern library covers every pattern here plus the bearish and indecision ones, each drawn to its real proportions. If you are still getting comfortable with what the four prices in a candle mean, how to read a stock chart is the place to start.
Sources
- Bulkowski, Hammer (thepatternsite)
- Bulkowski, Bullish Engulfing
- Bulkowski, Morning Star
- Bulkowski, Three White Soldiers
- Bulkowski, Inverted Hammer
- Bulkowski, Tweezers Bottom
- Investopedia, Hammer Candlestick