(30-sec refresher)
Body = distance between Open and Close. Long body → strong buying/selling.
Wicks = rejection zones (price probed there but couldn’t stay).
Color = direction (green up / red down).
Context rules: Patterns are strongest at key levels (support/resistance, trendlines, VWAP), with volume confirmation, and on higher timeframes (H4/D1 > M5). Always define invalidations (stops).
Single-candle signals
Doji / Dragonfly / Gravestone / Spinning top – Indecision/reversal risk.
Use: wait for next candle to break the doji’s high/low for confirmation.
Hammer (bullish) – Long lower wick after a drop → buyers defended support.
Trade: buy on break above hammer high; stop a few ticks below the low.
Hanging man (bearish) – Same shape as hammer but after an uptrend → distribution.
Trade: sell on break below low; stop above high.
Inverted hammer / Shooting star – Long upper wick shows failed rally.
In downtrend = inverted hammer (bullish attempt); in uptrend = shooting star (bearish).
Marubozu (bullish/bearish) – Full body, no wicks → strong momentum bar.
Use: favor continuation, or place pullback entries near 38–50% retrace of the body.
Kicker (bullish/bearish) – Gap opens opposite to prior close and runs hard → sentiment shock.
Use: trade in the gap direction; invalid if price fills gap quickly.
Two-candle reversals
Engulfing (bullish/bearish) – Candle 2 fully wraps Candle 1’s body.
Bullish at support; bearish at resistance. Entry on break of engulfing high/low.
Harami (bullish/bearish) – Candle 2 sits inside Candle 1’s body → pause/possible turn.
Needs breakout of the mother candle for confirmation.
Piercing line (bullish) / Dark cloud cover (bearish) – Candle 2 retraces >50% into Candle 1 in the opposite color.
Good at swing levels; confirm with volume.
Tweezer top/bottom – Two candles reject the same high/low (matching wicks).
Place stop just beyond the shared high/low.
Three-candle patterns
Morning star (bullish) / Evening star (bearish) – Strong move → small indecision → strong move opposite.
Treat as mini trend-reversal blocks; enter on candle 3 close/break.
Three white soldiers / Three black crows – Three consecutive strong bodies in one direction.
Continuation bias; buy pullbacks (soldiers) or sell rallies (crows).
Three inside up/down – Harami + confirmation candle.
Safer than a lone harami because candle 3 breaks the range.
Three outside up/down – Engulfing + confirmation candle.
Momentum reversal; enter on candle 3 close.
Gaps & windows
Rising window (gap up) / Falling window (gap down) – Gaps often become support/resistance.
Strategy: buy the first successful test of a rising window; sell the first test of a falling window.
Continuations & chart patterns in the sheet
Flag / Wedge – Brief counter-trend consolidation after an impulse.
Entry: break of the pattern in trend direction; stop beyond the opposite side.
Cup & handle – Rounded base then a small pullback (handle).
Entry: break above cup rim; stop under handle low; target = cup depth.
Double top / Double bottom – Two failed pushes at a level.
Entry: neckline break; stop beyond most recent swing.
Head & shoulders (not pictured but common) – Similar logic to double tops/bottoms with a middle “head.”
Reliability tips (read this like a checklist)
Trend first: A hammer against a strong downtrend is weaker than one at higher-timeframe support with volume.
Location matters: Prior supply/demand zones, moving averages, VWAP, Fib clusters.
Confirmation: Wait for range breaks, retests, or volume spikes.
Invalidation: Your stop goes beyond the wick or pattern boundary, position size so risk per trade is fixed (e.g., 0.5–1%).
Timeframe alignment: Look for the pattern on your entry TF backed by the same bias on a higher TF.
Example playbook (you can reuse this)
Bullish hammer at daily support
Entry: Buy when price breaks above hammer high.
Stop: A few ticks below hammer low.
Targets: Prior swing highs (TP1), supply zone (TP2); trail remainder using higher-low structure or ATR.
Invalidation: Close back below support or heavy sell volume on retest.
Bearish engulfing at resistance
Entry: Sell on break of engulfing low.
Stop: Above engulfing high.
Targets: Mid-range (TP1), prior demand (TP2); trail with lower-highs.