Main Japanese candlestick patterns: reversal candlestick patterns and trend continuation patterns

In the last article we discussed the topic of “Japanese candlesticks”, in this article we will talk about the patterns that these candles form. Of course, in this article it will not be possible to fit all the candlestick formations, so I will talk about the most important and frequently used models.

Bullish Japanese candlestick patterns

By bullish Japanese candlestick patterns we mean those formations that will lead to further price growth. Very often you will encounter reversal patterns, and they will work best on support and resistance levels. If there are no such levels, and the model has formed “in the field,” then it is better to refuse to use the formation.

Abandoned baby - bullish model (abandoned baby)

basic japanese candlestick patterns: abandoned baby

Abandoned Baby - a pattern of three Japanese candles. The first candle indicates the continuation of the trend, the second candle is formed in the form of a doji candle (uncertainty), the third candle is bullish. Moreover, the last candle absorbs the first two, thereby confirming an upward reversal. The trade should be opened after the third (bullish) candle closes.

Morning doji star

The Morning Star Doji is also a Japanese candlestick pattern consisting of three bars. The first candle indicates a strong trend, the second candle is a doji (star) candle, the third candle is a reversal candle, but it is smaller than the first bearish candle. To confirm a reversal, you can draw a line for the maximum of the first candle and, when it breaks through, open a trade for an increase.

Three inside up

basic japanese candlestick patterns: Three inside up

Three inside up is a reversal pattern of Japanese candlesticks. The essence of the pattern is that the 2nd and 3rd candles absorb the first bearish candle. Entry to go up immediately after the close of the third candle of the pattern.

Three outside up

Three outside up – a model similar to the “absorption” model. The pattern starts with a bearish candle, which is immediately engulfed by a bullish candle (outside bar). It all ends with confirmation in the form of another bullish candle. Enter a trade immediately after the pattern is formed.

Three white soldiers

Three white soldiers are three rising candles, forming one after another. This Japanese pattern is a trend continuation pattern, so it can form without support and resistance levels. The main thing is that the candles are approximately the same size and do not have large shadows on top. Enter the market immediately after the close of the third candle of the “Three White Soldiers” pattern.

If the pattern formed on a reversal, then you should also expect a strong upward price movement - the model indicates a serious advantage of the bulls, so the price will move up.

Breakaway candle

Breakout candle – a pattern of 5 candles. The first four candles are downward. Closer to the fourth candle, the trend begins to slow down (the bears have hit a strong support level). The fifth candle is bullish and large-bodied. It absorbs the last three candles and closes at or above the middle of the first candle. Entry to go up immediately after the closing of the last candle of the pattern.

Doji star

A Doji Star is a Doji candle formed after a downtrend. In fact, you should be very careful with this Japanese candlestick pattern. A Doji is not necessarily a reversal candle! It can also indicate the equality of strength between bulls and bears (candle of uncertainty), which means that the price, after a short break, can continue its trend movement.

For a pattern to be a reversal, it must form at a strong support level! It would also be a good idea to wait for confirmation of the reversal, and only then enter into a rise.

Dragonfly doji

basic japanese candlestick patterns: Doji dragonfly

Dragonfly Doji can form both at the very bottom of a trend and during a price correction in trend movements. Confirmation is the presence of a support level. The model itself suggests that the bulls are very strong, which means the price will move up. Enter the trade immediately after the formation of the “dragonfly”.

Engulfing

basic japanese candlestick patterns: Engulfing

Engulfing or bullish engulfing is a candlestick pattern in which the left bearish candle is completely contained within the boundaries of the right bullish candle. The pattern is interesting to consider at support levels, and can form not only at reversals, but also during trend price movements. Entry after the formation of an engulfing bullish candle.

Three stars in the south

basic japanese candlestick patterns: three stars in the south

Three southern stars are three bearish candles, one after the other. The first candle is the largest, the second is smaller than the first, and the third candle is the smallest. The model indicates that sellers have exhausted their strength and they no longer have the opportunity to lower the price. It's time to go up.

Hammer

A hammer is a type of pin bar. A small bear body and a long shadow (twice as long as the body). The candle signals that during the formation, the bears gave way to the bulls - if there was a little more time, “Pinocchio” would have formed. The hammer should be looked for at strong support levels. You can enter either immediately or after confirmation in the form of the next bullish candle.

Ladder bottom

A stepped bottom is a candlestick pattern consisting of five candles. The first three candles indicate a falling price, the fourth candle is a downward candle with a long shadow on top and a small body, and the fifth candle is a reversal candle (it should be larger than the previous one and, preferably, close higher than the shadow of the previous candle).

Morning star

basic japanese candlestick patterns: morning star

Morning star is almost the same as "morning star doji". Only in this case, instead of a doji, we will observe a small bearish candle, which may be far from the low of the previous candle. It is advisable to confirm the reversal with the support level or the next candle (it should be bullish).

Piercing line

Piercing candle – the pattern consists of two candles. The first candle is downward and the second candle is bullish. The essence of the model is for the second candle to close above the middle of the first candle. The model may not work itself out right away, so you should wait for a candle that closes above the high of the first candle of the model and confirms the entry for a rise.

Three stars

basic japanese candlestick patterns: three star

Three stars - three doji candles with small shadows that formed at the very bottom of a downtrend. All candles should be at the same level - they indicate the presence of a strong support level that the price cannot overcome. You should enter if a bullish candle forms after the third star.

Belt hold

Belt grab – reversal candlestick pattern. The first candle of the pattern is a full-bodied downward candle, the second candle is a doji candle or a small red candle, the third candle is a large bullish candle that closes above the high of the first candle and has no shadows (or has but very small shadows). A strong bullish signal is entering a trade immediately after the formation of the last (third) candle.

Gravestone doji

A tombstone doji is a formation that forms at the ends of a bearish trend or during pullbacks. The main candle in this formation is a doji with a shadow only on top. There should be a downward candle to the left of the doji, and an upward candle to the right. Entry for a rise after an ascending (confirming) candle.

Inverted hammer

Reverse hammer is a reversal pattern consisting of three candles. The first candle indicates a falling price, the second candle is an inverted hammer (a candle with a small body and a long shadow at the top, no shadow at the bottom), the third candle is a reversal (rising) candle. It is better to filter this pattern with support levels or Fibonacci levels. Entry after a rising candle.

Tweezers bottom

basic japanese candlestick patterns: tweezers bottom

The base of the tweezers is a model of two Japanese candles, similar to a reverse hammer. The first candle is downward, and the second candle has a body equal to the shadow above. It is important that the second candle is bullish and not bearish. It would be a good idea to wait for confirmation of the reversal - the breaking of the high of the first (bearish) candle - after which you can open a trade up.

Bearish candlestick patterns

Bearish Japanese candlestick patterns are patterns, after the formation of which, the price falls. They should also be filtered by resistance levels or Fibonacci retracement levels, you can also use indicators predicting price reversals.

Abandoned baby - bearish model (abandoned baby)

basic japanese candlestick patterns: Abandoned baby - bearish pattern

The abandoned baby (bearish pattern) is a complete mirror image of the bullish pattern. The first candle is bullish, the second candle is a doji with small shadows, the third candle is a reversal (bearish). The pattern is formed at strong resistance levels. Entry after the formation of the third candle.

Dark cloud cover

basic japanese candlestick patterns: dark cloud cover

Dark Veil (in Price Action – Bearish CPR) – a candlestick pattern in which the second candle breaks the high of the first candle, but closes much lower than its opening level. The candle indicates the strength of the bears and the continuation (or beginning) of a downward trend. Login immediately after the model is formed.

Evening doji star

Evening Doji Star is a candlestick pattern that forms only at the tops of trending movements. The price moves up, after which it encounters a strong resistance level, from which a reversal occurs. Enter down immediately after the formation of a pattern of three candles.

Evening star

The evening star is exactly the same pattern as the “evening star-doji”, with one difference - instead of a doji, there is a small candle with a shadow on top (or just a small candle). Formed at the tops of upward trends.

Three inside down

Three inside down – a reversal candlestick pattern, consisting of an inside bar and breaking through the boundaries of the mother candle against the current trend (breakdown downwards). Enter a bearish trade immediately after the formation of the third (confirming) candle.

Three outside down

Three outside down is a variant of a reversal candlestick pattern with engulfing. The second candle engulfs the first bullish candle, and the third candle only confirms the price reversal. The model is quite strong and is formed at the tops of trend impulses. Entry immediately after the confirmation candle closes.

Advance block

The repulsed offensive is three ascending candles, the last of which has a long shadow at the top. The fourth candle should be a reversal candle. It’s not bad at all if it forms a bearish CPR (breaks the high of the previous candle and closes below the opening price – as in the example above). Entry immediately after the formed reversal candle.

Breakaway candlestick

A breakout candle is a formation of five candles. The first four candles are moving upward, the fifth candle is bearish. It should absorb the last three candles - a signal to open a downward trade.

Deliberation

basic japanese candlestick patterns: deliberation

Reflection – reversal pattern or trend continuation candlestick pattern. A distinctive feature of the formation is that the second candle, most of its body, is located within the first candle, and the third candle is a doji candle or a candle with a small body. The fourth candle is a reversal candle - entry down after its formation.

Downside tasuki gap

The lower tasuki gap is a candlestick pattern of three candles. The first and second candles are downward, the third candle is upward. The second candle is formed with a gap (the gap between the candles), the third candle begins to form approximately from the middle of the second candle. Enter a bearish position after the formation of the third candle.