Candlestick patterns

A candlestick pattern is a group of candles whose bodies and shadows follow a set shape: a hammer, an engulfing pair, a morning star. Most span one to five candles; a few, such as the hikkake and the island reversal, span more. This category has a guide for each of the 65 candlestick patterns on the site, and each guide shows how the pattern did on our test bench.

How the bench reads a candle

Sizes are relative, as in TA-Lib: a body is long when it is more than 1.3 times the average body of the 10 previous candles (1.6 times on the textbook grade), and a doji has a body of at most 10% of their average range. Reversal patterns other than kicking need the opposite trend before them and continuation patterns the same trend, judged on the close just before the pattern: at least 1 ATR from the close 10 bars earlier, on the side of that trend, and in the matching half of the range of the 40 previous closes. Indecision candles have no trend condition. The pattern is recorded at the close of its last candle, the first moment a trader could see it.

Each occurrence is then followed for 10 bars. How often price moved the expected way is compared with random bars of the same asset, and the verdict tests the excess return over the rest of the market. A simple trade is replayed too: an entry order at the pattern high (bullish) or low (bearish), the stop at the other end, a target at twice the risk, against the same trade on random dates. Results are corrected for the number of tests, and the pipeline must find no proven edge on random-walk prices before anything is published. Many classic candles do no better than chance on this data; each guide says which.

Compare them all on the same measures in the pattern statistics table, or read the full methodology. Candlesticks are one of several chart types, and TradingView can display them for the markets it covers (affiliate link). For a structured course on reading candles, there is Joe Marwood's Candlestick Analysis For Professional Traders (affiliate link).