Common candlestick patterns, explained

A candle records the open, high, low and close of a period. Combine a few and you get a "pattern". Patterns aren't signals by themselves — where they appear is what matters. The same hammer means one thing at key support and something else mid-slope.

Single-candle patterns

• Hammer / hanging man: small body, long lower wick — a hammer at the end of a decline often hints at a bottom.
• Doji: open and close nearly equal — indecision, common before turns.
• Long upper/lower wicks: one side's push was firmly rejected.

Multi-candle patterns

• Bullish / bearish engulfing: the next body fully engulfs the prior — a stronger reversal cue.
• Morning star / evening star: three-candle bottoms and tops.
• Dark cloud cover: a deep bearish candle stabs into the prior up candle — bearish.

Using them well

Three rules: (1) patterns matter most at key support/resistance; (2) confirm with volume (reversals with volume are more credible); (3) never read one candle in isolation — factor in trend and a higher timeframe.