Top Continuation Candlestick Patterns: Bullish and Bearish Examples

Over the years, I’ve seen traders (myself included) fall in love with the “art” of patterns while ignoring the science of context, discipline, and adaptability. If volatility is low, if the pattern’s boundaries are messy, or if momentum indicators are flat, I walk away. Waiting for A+ setups—those aligned with the trend, confirmed by volume, and timed around key support/resistance—saves mental capital and keeps my win rate intact.

Bullish Harami Cross

Understanding candlesticks and interpreting candlestick graphs may seem daunting to a new trader, but it is an easy task. Once you have read the basics, you can use these charts to up your trading game. If you are still not confident about them, we suggest that you start with a small investment and with a small time-frame. You can invest more and upgrade your trading strategy once you are comfortable with its various aspects.

You only need to discover price patterns in the chart, and, if it works out, enter a trade and enjoy your profit. Next, we will deal with the three most common Forex chart patterns that will never lose their relevance and will suit both beginners and advanced traders. When technical analysis appeared, people noticed the zones in the price charts where the price moves repeated after a while. Next, when Forex traders saw the zone in the Forex chart that was noticed earlier, they could assume how the price would move after such a zone, where the price declines or rises. That is how first price action patterns appeared, or what we now call Forex chart patterns or formations. Understanding candlestick charts for beginners can be a little tricky, but you can do it quickly once your basics are right.

The White Marubozu candlestick pattern is formed by one single candle. The Inverted Hammer candlestick pattern is formed by one single candle. Remember that candlestick price patterns are merely tools for the trader to use, in conjunction with other tools such as indicators. A Hanging Man reversal pattern appears at the top of an uptrend, and is a warning to traders that the uptrend is about to reverse. There is usually a significant gap down between the first red candlestick’s closing price, and the green candlestick’s opening price. This is a three-candle pattern with one long green bullish candle at the top of an uptrend, then a doji or spinning top at the top of the trend, followed by a large bear candlestick.

The Hanging Man is visually identical to the Hammer pattern, but appears in an uptrend rather than a downtrend. This subtle difference completely changes its implications – highlighting again the importance of context in pattern trading. The hanging man shows up in an uptrend and could signal a bearish reversal. The Mount pattern is commonly thought to be a reversal pattern, unlike the Three Crows that is a continuation one.

This perfectly illustrates why understanding pattern context is crucial in candlestick trading. The target profit can be taken when the price covers the distance that is shorter than or equal to the breadth of the broken channel (Profit zone). A stop loss can be placed a few pips below the last local low inside the broken out channel, (Stop zone). You may open a sell position when the price, having broken through the neckline, reaches or goes lower than the low, preceding the neckline breakout (Sell zone). Target profit can be put at the distance that is less than or equal to the height of the middle peak (head) of the formation (Profit zone). You may put a stop loss around the level of the local high, preceding the neckline breakout, or at the level of the right shoulder (Stop zone).

Which candlestick pattern consists of three small bearish candles contained within the range of a prior bullish candle?

These patterns allow traders to enter established trends with favorable risk-reward profiles. how to read candlestick patterns in forex The Hammer pattern is one of my personal favorites because it shows a clear rejection of lower prices. The long lower wick indicates that sellers initially pushed prices down, but buyers stepped in with enough force to push prices back up by the close – a powerful signal of potential reversal. I’ve observed that Bearish Engulfing patterns are particularly effective when they form at key resistance levels or after a market has become overextended.

What Is Short Squeeze? Causes and GameStop Case Study

• Our cheat sheet outlines the most common patterns, categorised by the number of bars and market sentiment – bullish, neutral or bearish.
• A continuation pattern consisting of a strong downward move followed by a series of smaller candles forming a slight upward channel.
• After a series of corrective candlesticks is completed, there is a sharp movement via one or two bars in the direction, opposite to the first trend candlestick.
• The doji or spinning top at the base of the downtrend can be either bearish (red) or bullish (green) like the one below.
• If a breakout from a pattern like a triangle or head and shoulders happens with a spike in tick volume, I trust it more.

If you are a beginner trader, however, it’s best to stay in your trades, as overthinking can hamper your learning curve. I once held a perfect ascending triangle through a non-farm payroll (NFP) release—it collapsed in seconds. Now, I clear my trades before high-impact news or avoid trading altogether during these windows.

Which candlestick pattern has a small body with a long lower wick and little to no upper wick?

The formation is characterized by a long bullish candle, followed by three small bearish candlesticks, all within the price range of the first candlestick. The pattern concludes with a long top bullish candlestick that closes above the first one. The Three Black Crows candlestick pattern is a bearish formation that represents the opposite of the Three White Soldiers pattern.

Candlestick body length

• Indecision candlestick patterns show exactly what the name suggests, times when the market is undecided about where to go.
• A pennant in the longer timeframe is often a triangle in the short-term chart.
• A single-candle bearish reversal pattern with a small body at the bottom and a long upper wick at least twice the body’s size.
• If a large number of relatives were disbursed in a crowd of strangers it would be easy to miss them.
• As a rule, the asset prices move in cycles, because people behave similarly in certain situations.

The next day, AUDUSD price penetrated below the low of the Engulfing Bearish Candlestick and confirmed the trade, which triggers the sell order. However, on this instance, the market was already trading in a range for several days. As you may know, when the market consolidates for a while, it is basically setting up to breakout in one direction or the other. The formation of this bullish Candlestick pattern provided a signal as to of which way the market was about to break. Before you can read a Candlestick chart, you must understand the basic structure of a single candle. Each Candlestick accounts for a specified time period; it could be 1 minute, 60 minute, Daily, Weekly exc.

Let’s see how you open positions to buy and sell according to the signal delivered by a broadening formation pattern. Though sellers dominated early on, as evidenced by the lower open, buyers overwhelmed them by the close, creating a small body near the top of the range. The strong finish indicates buyers have seized control and upward momentum is building.

Understanding the Basics of Candlestick Charts

Learn how to identify key reversal points in the market using swing analysis to find high-probability trading opportunities. I’ve always loved teaching—helping people have their “aha moments” is an amazing feeling. That’s why I created Mind Math Money to share insights on trading, technical analysis, and finance.

The price should soon break through the low or the high of the volume candlestick, sending us a signal to enter a trade and work out the pattern. Of course, many of them are just their authors’ imagination, but, on the other hand, that is the way, how the first and the most popular chart patterns appeared. Later, technical analysis was expanded, and the Forex chart patterns were enriched by candlestick chart patterns. In the following parts, I’ll dwell upon the most common Forex Japanese candlestick patterns and some original configurations.

A stop order in this case may be put higher than the local high, following which you entered the trade (stop zone 2). It is reasonable to place a buy order when the price, having broken out the resistance line, reaches or exceeds the last local high, preceding the resistance breakout (Buy zone). Sometimes, you may lose about 3% of the price movement between the point of the resistance breakout and your entry. Target profit can be put at the distance, equal to or less than the breadth of the pattern’s first wave.