Understanding Forex Candlestick Patterns A Complete Guide

The gap between the first and second candles emphasizes the indecision in the market. The third candle must close below the midpoint of the first candle to help validate the evening star candlestick pattern and confirm the reversal. Bullish kicker candlestick is a bullish trend reversal candlestick pattern consisting of two opposite-colored candlesticks with a gap between them. A Bearish Tower Top is a reversal pattern that typically forms after an uptrend. It starts with a long bullish candle, followed by a cluster of smaller candles that indicate consolidation or indecision, and ends with a strong bearish candle.

A doji sequence suggests the asset is in a period of consolidation, or a ‘resting’ pattern. If there is a large price difference, the candlestick will be a long one. First, you need to understand what individual candlesticks are telling you.

The initial long bearish candle establishes the trend, while the subsequent smaller bullish candles reflect a lack of strong buying interest.
Interpreting the Tweezer Top pattern involves recognizing the pattern as an indication of indecision in the market.
The fake signal rate of double candlestick patterns is high at about 40-50% in uncertain market conditions.
The Piercing Line formation captures a transition from bearish dominance to a resurgence of buyer interest.
Traders consider entering short positions if the Long-Legged Doji appears after a bullish trend and is followed by a bearish candle and anticipate a downward reversal.
The trend is traded according to one of the basic concepts of the trend reversal chart patterns.

What are patterns in Forex?

This chart pattern is a modification of the Flag, so it has the same major features. Become our client, start trading, and participate in the anniversary contest. Fill out the form to get started and you’ll have your own stock trading account within minutes. Forex/CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading Online Forex/CFDs with this provider.

Forex Prop Trading Firms & Funded Accounts: How to Get Backed and Scale in 2025

A Hammer is typically bullish and suggests a potential reversal from a downtrend to an uptrend. When it occurs at key support levels or after an extended down move, it may signal the market is preparing to shift direction. The Inverted Hammer, a variation with a long upper shadow, may also indicate a bullish reversal when confirmed by subsequent candles.

Where did the candlestick charting technique and analysis originate?

A Shooting Star pattern will appear after the completion of a rising trend. The main body of this candlestick chart is at the very bottom of the candle. The formation of this pattern occurs when the starting and closing prices are quite close to one another. In order for this pattern to develop, the top shadow needs to be far larger than the actual body. Both candlesticks reach a height that is virtually identical to one another. The previous trend must have been an upward trend for the Tweezer Top candlestick pattern to be developed.

Increased volume during the formation of the Tweezer Bottom pattern enhances the pattern’s reliability. Interpreting the Three Black Crows pattern involves recognizing the pattern as a signal of increased bearish sentiment. The subsequent candles indicate that selling pressure is rising and lead to a potential reversal of the preceding uptrend. Interpreting the Tweezer Top pattern involves recognizing the pattern as an indication of indecision in the market. The first candle reflects continued buying pressure, while the second candle’s failure to surpass the high of the first signals a potential reversal.

The failure rate of the pattern ranges from 25-35% if not supported by follow-up action.
The fifth candle closes above the high of the first candle and confirms that buyers are reasserting control and the bullish trend is likely to continue.
This is important because this may determine whether you’ll have a bullish or bearish bias.
Bearish kicking is a price trend reversal candlestick pattern consisting of two opposite-colored marubozu candlesticks with a gap between them.
Candlesticks build patterns were introduced to the Western world by Steve Nison in his popular 1991 book, “Japanese Candlestick Charting Techniques.”

The Morning Star pattern is interpreted as an indicator of shifts in market dynamics. The initial bearish candle reflects the strength of sellers, while the small-bodied second candle indicates that the selling pressure is starting to fade. The long bullish third candle shows that buyers are gaining control and that a reversal is underway. Traders look for the Morning Star Candlestick pattern at significant support levels or in conjunction with other bullish indicators to enhance the reliability of the signal.

The long shadows demonstrate volatility and a struggle for control between buyers and sellers. The unique shape and structure makes the Long-Legged Doji pattern noteworthy for traders looking to assess market dynamics. The components of the Tweezer Top include the two candlesticks and their respective bodies and wicks. The failure rate of the Tweezer Top pattern reaches 30-40% if the market remains bullish afterward. The effectiveness improves to about 65-75% when combined with resistance levels.

Third place: Head and Shoulders chart trading chart pattern (S-H-S)

Candlestick charts highlight the “real body” as the wider area between the open and close. If the market closed higher than it opened (bullish), the real body is white or unfilled, with the opening price at the bottom of the real body and the closing price at the top. If the market closed lower than it opened (bearish), the real body is black, with the opening price at the top and the closing price at the bottom. The longer the body, the more trend strength, and the shorter the body, more indecision. The “shadow” is the vertical line running from the real Forex candlestick patterns body up to price high (top of upper shadow), or running from real body down to price low (bottom of shadow).

This should set off alarms since this tells us that there are no buyers left to provide the necessary momentum to keep raising the price. Filippo Ucchino has developed a quasi-scientific approach to analyzing brokers, their services, offers, trading apps and platforms. He is an expert in Compliance and Security Policies for consumer protection in this sector. Filippo’s goal with InvestinGoal is to bring clarity to the world of providers and financial product offerings. Filippo Ucchino is the founder and CEO of the brand InvestinGoal and the owning company 2FC Financial Srl.

Second place: Broadening formation trading chart pattern

Double candlestick patterns are formations in technical analysis that consist of two consecutive candlesticks used to signal potential reversals or continuations in prevailing market trends. The Three Outside Up pattern’s shape and structure consists of three distinct candlesticks. The first candle is a bearish candle that reflects the continuation of the downtrend. The second candle is a larger bullish candle that completely engulfs the body of the first candle.

The target profit can be put at the distance that is shorter or equal to the height of the middle peak (head) of the chart (Profit zone). A reasonable stop loss in this case can be set at the level of the local low, marked before the neckline breakout, or at the lowest level of the left shoulder (Stop zone). In the common technical analysis, the Inverse Head and Shoulders pattern works out only in case of the trend reversal upwards, that is the price growth.

The first candle is a long bullish candle that confirms the prevailing uptrend and reflects strong buying momentum. The second candle is a Doji that is characterized by a small body and long wicks on either side. The Doji opens above the close of the first candle but closes near its opening price. The third candle is a long bearish candle that closes below the midpoint of the first candle to show a strong shift in momentum as sellers step in.