Candlestick Patterns: A Practical Glossary

Candlestick charts pack a surprising amount of information into a single small shape. Once you know how to read that shape, certain recurring formations start jumping out at you — some suggesting hesitation, others suggesting one side of the market just won a decisive battle.

This glossary walks through the candlestick patterns you'll actually run into in practice, organized by what they look like and what they're traditionally read to mean. Think of it as a reference to come back to, not something to memorize in one sitting.

What a Candlestick Actually Encodes

Every candlestick represents one time period — a day, an hour, a week, whatever chart you're looking at — and it encodes four numbers: the open, high, low, and close for that period.

The thick part of the candle, the body, spans the distance between the open and the close. If the close is higher than the open, the body is typically shown in green or white; if the close is lower than the open, it's shown in red or black. The thin lines extending above and below the body — the wicks or shadows — mark the high and low reached during the period, even if price didn't stay there.

That's it: four data points, one shape. But the proportions of that shape — a long body versus a tiny one, long wicks versus short ones, where the body sits within the day's range — are what candlestick pattern analysis is built on. A long body means one side controlled the period from start to finish. A tiny body with long wicks in both directions means the price traveled a lot but ended up almost exactly where it started — a tug of war that ended in a draw. Patterns are really just named shorthand for recognizable versions of that story, sometimes across several candles in a row.

Doji

A doji forms when the open and close are at, or very near, the same price — the body shrinks to a thin line or a cross, regardless of how far price ranged during the period. Visually, it looks like a plus sign or a cross: a thin horizontal sliver with wicks extending above and below.

The doji is read as a pure indecision signal — neither buyers nor sellers could push the close meaningfully away from the open, even though price may have moved a lot intraperiod. A single doji doesn't mean much on its own in the middle of a strong trend; it matters more when it appears after an extended move, where it can hint that the prevailing side is losing conviction.

There are a few recognizable doji sub-types worth knowing:

• Standard doji: A small, roughly centered body with wicks of similar length on both sides — plain indecision.
• Long-legged doji: The same near-equal open/close, but with unusually long wicks on both sides, showing a wide intraperiod range that still closed flat — a more dramatic tug of war.
• Dragonfly doji: The open, high, and close are all bunched near the top of the range, with a long lower wick — price sold off hard during the period and buyers fully recovered it by the close. Often noted at the bottom of a downtrend.
• Gravestone doji: The mirror image — open, low, and close bunched near the bottom, with a long upper wick — price rallied hard intraperiod and gave it all back. Often noted at the top of an uptrend.

Hammer and Hanging Man

These two patterns share the exact same shape: a small body sitting near the top of the period's range, with a long lower wick (typically at least twice the length of the body) and little to no upper wick. The only difference between them is where they appear — and that context completely changes what they're read to mean.

Hammer: When this shape appears after a decline, at the bottom of a downtrend, it's called a hammer. The long lower wick shows that sellers pushed price sharply lower during the period, but buyers stepped in and drove it back up near the open by the close. It's read as a potential bullish reversal signal — a sign that selling pressure may be running out.

Hanging Man: The identical shape appearing after an advance, at the top of an uptrend, is called a hanging man. Here, the same long lower wick is read less optimistically: it shows that sellers were able to push price down meaningfully during an uptrend, even if buyers rescued the close. That's interpreted as an early warning sign that selling pressure is creeping into what had been a one-sided rally.

Same candle, opposite implication — which is exactly why the trend context around a candle matters as much as the candle itself.

Engulfing Patterns

An engulfing pattern is a two-candle formation where the second candle's body fully contains, or "engulfs," the body of the candle before it.

Bullish engulfing: A down candle (close below open) is followed by a larger up candle whose body opens below the prior close and closes above the prior open — completely swallowing the previous session's body. It's read as a sign that buyers decisively overpowered the prior period's sellers, and is generally considered more meaningful after a decline.

Bearish engulfing: The mirror image — an up candle is followed by a larger down candle whose body engulfs it entirely, suggesting sellers just overwhelmed the prior buying. It's typically given more weight after an advance.

The larger the engulfing candle relative to the one it swallows, and the more volume behind it, the more conviction is generally attributed to the signal.

A Few Others Worth Knowing Exist

You don't need a dedicated deep-dive on every named candlestick pattern to have a useful working vocabulary — but a few come up often enough that you should at least recognize the names and general shape.

Morning Star / Evening Star: Three-candle reversal patterns. A morning star appears after a decline: a long down candle, a small indecisive candle (gapping lower), and then a long up candle that closes well into the first candle's body — read as a bottoming signal. An evening star is the mirror image after an advance, ending in a long down candle, and is read as a topping signal.

Shooting Star: A single-candle pattern that looks like an upside-down hammer — a small body near the bottom of the range with a long upper wick — appearing after an advance. It suggests buyers pushed price sharply higher during the period, only for sellers to drag it back down near the open by the close, and is treated as a potential bearish reversal warning at the top of a move.

An Honest Note on Reliability

It's worth being direct about something the candlestick-pattern industry doesn't always emphasize: academic backtests of candlestick patterns traded in isolation tend to show pretty mixed, often unimpressive results. A hammer that appears in a vacuum, with nothing else considered, is not a reliable standalone buy signal — and the same goes for nearly every pattern on this list.

Where candlestick patterns earn their keep is as a vocabulary for pattern recognition, not a standalone trading system. A hammer that forms right at a well-tested support level, on above-average volume, with the broader trend already showing signs of stabilizing, tells a much more coherent story than the same hammer appearing in the middle of nowhere on a quiet, low-volume day. The candle is a data point. The trend, the volume, and the broader chart context are what turn that data point into an actual signal worth paying attention to.

Learn the shapes, learn what each one is meant to represent, and then use them the way they're meant to be used: as one more piece of evidence layered on top of everything else you already know about a chart — never as the whole case on its own.

Candlestick shapes tell you what traders did on a given day — insider and congressional filings tell you what people with real information are doing with real money. MySmarTrend tracks SEC insider filings and congressional trade disclosures every day and surfaces the ones that matter. Free. Drop your email below.