The Most Commonly Used Candlestick Patterns in Technical Analysis

Reading charts is extremely important for those who are new to technical analysis or those who want to direct their investment transactions according to technical analysis. In order to make a technical chart interpretation, it is necessary to know the formations of the chart first.

There are many types of charts such as candles, lines, bars. The candlestick chart is one of the most common tools used in examining price movements. They have been widely preferred by investors for a long time in order to predict which direction the price will move towards.

Candlestick patterns do not by themselves provide a buy or sell signal, but instead serve as an indicator for potential opportunities to arise. In order to get maximum efficiency from candle formations, it will be useful to combine them with other techniques. Some of these techniques are Elliot Wave Theory and DoW Theory. There are also technical analysis indicators that can be beneficial when combined with candlestick patterns. Some of these indicators that will benefit are Moving Averages (MA), Relative Strength Index (RSI), Bollinger Bands, Ichimoku, MACD and Fibonacci Levels as examples.

Most Common Candlestick Patterns


Hammer Pattern

The Hammer pattern is a bullish reverse pattern consisting of a single candle on the price charts of financial assets. Located at the bottom of the downtrend, it has a short body and a rather long lower piping. Because of this appearance, it is likened to a hammer.

A hammer pattern in a downtrend indicates an absolute reversal, with the bulls taking control of the price despite high selling pressure.

Inverted Hammer Pattern

The reverse hammer bullish pattern, on the other hand, represents a long wick formed above the short body, as the opposite of the straight hammer pattern. Reverse hammers are located at the bottom of the downtrend and may signal an upward reversal.

Three White Soldiers Pattern

The bull three white soldiers pattern is a pattern that signals a strong reversal for the market. It consists of candles arranged in the form of an upward ladder and each positioned higher than the previous one.

Harami/Pregnant Bull Pattern

The pregnant or harami bull formation is a formation formed in a downtrend. The formation consists of a black body and a white candlestick completely inside this body. This name is given because this shape reminds a pregnant woman. This downward trend is pregnant with an upward trend.



Hanging Man Bear Pattern

The hanging man bear pattern is the bear market counterpart of the hammer pattern. Located at the very end of the uptrend, it has a short body and a long lower wick. There is an uptrend in the market.

Shooting Star Bear Pattern

The shooting star bear pattern consists of a long upper wick and a short lower wick. Its body is positioned close to the lower wick. Its shape is similar to an inverted hammer, but this pattern occurs at the last stage of an uptrend.

Pregnant Bear Pattern

The Pregnant Bear pattern consists of a long white body with a black candle inside it. Since the formation resembles a pregnant woman in this form, it is called the pregnant bear formation. There is an uptrend in the market

Three Black Crow Formations

Three black crow bears Pattern is observed when the market is in a strong reversal trend. It consists of candles arranged downwards, each positioned lower than the previous one. The opening of each candle is slightly higher than the close of the previous one. It is interpreted as a downward trend in the market.