Candlestick patterns
A candle is a record of a fight between buyers and sellers over a period of time. Read that way it is genuinely informative. Read as a set of shapes that predict the future, it is a way to lose money confidently.
What a candle actually records
Four numbers: where the period opened, where it closed, and the highest and lowest prices reached in between. The body spans open to close; the wicks show how far price travelled and was rejected.
That last part carries the information. A long upper wick means buyers pushed price up and sellers forced it back — an attempt that failed. The pattern names are shorthand for these attempts and rejections.
Which is why the same shape means different things in different places. A long lower wick after an extended decline says something; the identical candle in the middle of a range says almost nothing.
The few worth knowing
Pin bar or hammer. A small body with a long wick. Price tried to go one way, was rejected decisively, and closed back. At the edge of a well-tested level it is one of the more reliable signals available.
Engulfing. A candle whose body completely covers the previous one in the opposite direction — one side taking control within a single period. More meaningful after a run than in a chop.
Doji. Open and close nearly equal. Genuine indecision, which matters after a strong move and means nothing during quiet hours.
Inside bar. A candle contained entirely within the previous one — a pause and a contraction in range, which often precedes expansion in either direction. It signals that something is coming, not which way.
Why they work when they work
Not because the shape has power, but because many traders watch the same shapes at the same levels and act on them. The reaction is partly self-fulfilling, which is real but has a consequence: patterns work best where they are most obvious, and fail when there is enough pressure to run straight through.
It also means a pattern in isolation is nearly worthless. The same hammer is meaningful at a level that has held three times and noise in the middle of nowhere. Context is not a refinement, it is the signal.
How to use them without fooling yourself
Wait for the candle to close. A pattern that exists mid-period frequently does not exist by the end, and acting early means acting on something that never happened.
Use higher timeframes. A daily pin bar reflects a full session of participation; a five-minute one reflects a few minutes of noise, and there are far more of the latter.
Require a level. Take patterns only where price is at something that already mattered — a prior high, a tested support, a session boundary.
And write the rules down before trading them, because patterns are exceptionally easy to find in hindsight and much harder to spot at the right edge of the chart in real time.
Common questions
Do candlestick patterns predict price?
No. They record what buyers and sellers did over one period. That is useful information, but it is a description of the past, not a forecast.
Which patterns are worth learning?
Pin bar, engulfing, doji and inside bar cover most of what is useful. Learning fifty named shapes adds vocabulary, not accuracy.
Why do patterns fail so often?
Usually because they are taken without context. The same shape means different things at a tested level and in the middle of a range.
What timeframe works best?
Higher ones. A daily candle summarises a full session; a five-minute candle summarises noise, and produces far more false signals.
Should I act before the candle closes?
No. A pattern that is present mid-candle often disappears by the close, so acting early means trading something that never formed.
Are candlesticks better than indicators?
They are more direct — price itself rather than a calculation on it. Neither predicts, and both work better with context than alone.