A single candle tells you who won one period. A candle pattern is a small group of candles, usually one to three, that shows control changing hands. Traders have named dozens of them. You only need a handful, and you need to know when they matter.
Engulfing patterns
A bullish engulfing is a bearish candle followed by a larger bullish candle whose body covers the whole of the previous body. Sellers were in charge, then buyers overwhelmed them in a single period. The bearish engulfing is the mirror image.
Hammer and shooting star (pin bars)
A hammer has a small body near the top and a long lower wick, at least twice the size of the body. It appears after a decline and shows lower prices being rejected. A shooting star is its mirror: a long upper wick after a rise, showing higher prices being rejected. Together they are often called pin bars.
Inside bar
An inside bar sits completely within the range of the previous candle (the "mother bar"). It signals a pause. Traders watch for price to break out of the mother bar's high or low, often in the direction of the existing trend.
Doji, morning star and evening star
A doji has almost no body: open and close are nearly equal. On its own it only signals indecision. A morning star is a three-candle bullish reversal: a strong bearish candle, a small candle or doji, then a strong bullish candle that closes well into the first one's body. The evening star is the bearish version at a top.
| Pattern | Bias | Look for it | Confirmation |
|---|---|---|---|
| Bullish engulfing | Bullish | After a decline, at support | Next candle holds above the engulfing low |
| Bearish engulfing | Bearish | After a rise, at resistance | Next candle holds below the engulfing high |
| Hammer | Bullish | At the end of a decline | Close above the hammer's high |
| Shooting star | Bearish | At the end of a rise | Close below the star's low |
| Inside bar | Continuation (usually) | In a trend, before a move | Break of the mother bar's range |
| Morning / evening star | Reversal | At the end of a move | Third candle closes deep into the first |
Location matters more than the pattern
A hammer in the middle of a range means very little. The same hammer at a level where buyers have stepped in before, after a clear decline, tells a story: sellers pushed into a known area of demand and were rejected.
Key takeaways
- Engulfing patterns show one side overwhelming the other in a single candle.
- Hammers and shooting stars (pin bars) show prices being rejected through long wicks.
- Inside bars show a pause; morning and evening stars are three-candle reversals.
- A pattern only matters at a meaningful location, such as support, resistance or the end of a move.