Common Candlestick Patterns Explained

1. Bullish Engulfing

Occurs after a downtrend. A small red candle is followed by a large green candle that completely engulfs it. This signals a potential reversal to the upside.

2. Bearish Engulfing

Appears at the end of an uptrend. A small green candle is followed by a large red candle that fully engulfs the previous one, indicating a possible downward reversal.

3. Hammer

Forms at the bottom of a downtrend. It has a small body with a long lower wick, showing that buyers are pushing back after a sell-off. It suggests a potential bullish reversal.

4. Shooting Star

Found at the top of an uptrend. It has a small body and a long upper wick, indicating strong selling pressure after a brief price rally. Often signals a bearish reversal.