16 Must-Know Candlestick Patterns for a Successful Trade

StockCharts.com maintains a list of all stocks that currently have common candlestick patterns on their charts in the Predefined Scan Results area. To see these results, click here and then scroll down until you see the “Candlestick Patterns” section. While a doji with an equal open and close would be considered more robust, it is more important to capture the essence of the candlestick.

The preceding candlestick gets completely engulfed by the following candle. The body of the candle completely covers the whole range of the prior candle in the opposite direction with no tails or wicks. A bullish engulfing pattern forms at the bottom of a downtrend when the candle body completely engulfs the prior red candle including the highs and lows. A bearish engulf candle is the opposite as it forms at the top of the trend with a red candle body that completely swallows the high and low range of the prior green candle. A candlestick that gaps away from the previous candlestick is said to be in star position.

The Long-tailed Pin Bar Candlestick Pattern

If you want to read the subtle signs that the market is sending to you, it’s not a question of how to do so. This is especially true if some of the preceding candles are huge candles pointing in the trend direction. In both cases, the trade entry is delayed until the market moves in the expected direction. This suggests that the market has gone too far into a zone and that it might reverse as it repeatedly did in the past.

A pin bar entry signal, in a trending market, can offer a very high-probability entry and a good risk to reward scenario. Yes, but the reliability of a pattern greatly depends on where it forms on the chart. For instance, a bullish pin bar at key support is going to be far more reliable than one that occurs in the middle of consolidation. Alternatively, a bearish engulfing pattern at a swing high is a sign of potential weakness. If you see one form in this manner, the chances are good that an increase in selling pressure is on its way.

Long Versus Short Shadows

This suggests that candles are more useful to longer-term or swing traders. A gravestone is identified by open and close near the bottom of the trading
range. The candlestick 20 candlestick patterns is the converse of a hammer and signals reversal when it
occurs after an up-trend. Trading with the trend is arguably the best way to trade any market.

If you are unfamiliar with why daily charts are so important, please read my daily chart trading tutorial before moving on. For more information on trading pin bars and other price action patterns, click here. The tail of the pin bar shows the area of price that was rejected, and the implication is that price will continue to move opposite to the direction the tail points. Thus, a bearish pin bar signal is one that has a long upper tail, showing rejection of higher prices with the implication that price will fall in the near-term.

Sometimes It’s Better to Look for Busted Kangaroo Tails

On the other hand, a short tail may suggest that the zone simply slowed down the market, but it might break through after a small consolidation. The first step is to look at the open and close of the candlestick. As we have discussed this before, once a trade has been set up, we should wait for either the stoploss or the target to be triggered. It is advisable not to do anything else, except for maybe trailing your stoploss. Please note once you initiate the trade you stay in it until either the stop loss or the target is reached.

The reason they are so important is because they often give us a very strong clue as to what price might do next, more so than any other type of price bar. In both cases, sellers could not take the price lower since whoever wanted to sell — already did. Hence, buyers were left to dominate in the market and will likely push the price up. This pattern triggered a sharp move higher back to previous swing lows, which acted as resistance. I hope the video above cleared up any questions you may have had about the pin bar.