8 essential forex candlestick patterns (2024)

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Doji

Doji, or crosses, are usually made up of a single candlestick and they show that the opening and closing price of a candlestick is virtually the same. Doji candles​​ resemble crosses or inverted crosses, or plus signs. In technical analysis, dojis usually represent neutrality, meaning that the trend is likely to continue. The shadows or wicks on a doji are an important indicator of market sentiment. For example, if the shadow at the top of the candlestick is long, it means that investors tried to push the price higher, but failed, while a longer shadow at the bottom indicates the presence of selling pressure.

Engulfing pattern (bullish/bearish)

Engulfing candlestick patterns (bullish/bearish market) signify a potential reversal in trend and are indicated by a large candlestick extending higher and lower than (literally engulfing) the previous candlestick. The larger the size of the engulfing candlestick, the more significant it is to analysts. A black engulfing candlestick represents a potential bearish reversal during an uptrend, while a white engulfing candlestick could indicate that a bullish reversal is about to occur in a downtrend. Read more about how to tradethe bear market​.

Hammer

A common bullish reversal pattern, hammers indicate that an uptrend is likely to occur. As the name suggests, hammer candlesticks have a short body, with a shadow or wick that is twice as long at the bottom. When the high and close are the same, it indicates the formation of a bullish candlestick pattern, meaning that while bears tried to push prices lower, buying pressure from the bulls pushed up prices, with prices eventually closing at the same level as the day's high. Hammers candlestick patterns where the open is the same as the high are considered less bullish, but indicate a possible bullish trend nevertheless.

Shooting star

Shooting stars look a lot like inverted hammers from above and indicate that a bearish reversal is about to occur. Shooting star candlesticks are created when the low, open and close of the day are close to each other, with the day's high located high above, forming at least twice the length of the body of the candlestick. When the low and closing prices are the same, a shooting star is considered more significant as it indicates that bulls tried to push prices higher but were overpowered by the bears, and prices eventually closed at a similar level to where they opened. Shooting star candlestick chart patterns can sometimes look like a gravestone doji.

Three-line strike

The three-line strike pattern refers to three white candlesticks occurring on a daily chart timeframe​​ three days in a row, indicating that prices closed higher for three simultaneous days. Three-line strikes usually occur at the end of a downtrend and may, therefore, indicate that a reversal might be in order.

Three black crows

Three-black crows are a common reversal forex indicator in an uptrend and are indicated by three black consecutive candlesticks on a daily chart where the closing prices were lower than the opening price of the day. Formed of three consecutive black candlesticks with long bodies, these indicate the lack of buying conviction in the market, which allowed bears to successfully push prices lower.

Evening star

Evening star candlestick patterns usually occur at the top of an uptrend and signify that a trend reversal is about to occur. Evening stars consist of three candlesticks, with the first candlestick having a significantly large green or white body, indicating that prices closed higher than the opening level. The second candlestick opens higher after a gap, meaning that there is continued buying pressure in the market. The second candlestick in an evening star pattern is usually small, with prices closing lower than the opening level. The third and final evening star candlestick opens lower after a gap and signifies that selling pressure reversed gains from the first day's opening levels.