Reading Candlestick Patterns
A candlestick chart packs four pieces of price information into one small shape. Once you can read a single candle fluently, patterns made of several candles start to tell a real story.
Anatomy of one candle
Each candle represents price movement over a fixed time period (a minute, an hour, a day — whatever timeframe you're viewing). It shows four prices: open (where price started), close (where it ended), high (the peak), and low (the bottom) for that period.
The thin lines are "wicks" (high/low); the thick body shows open-to-close movement.
Three patterns worth knowing well
Doji — a candle with almost no body, where open and close are nearly equal. It signals indecision — buyers and sellers fought to a draw.
Hammer — a small body near the top, with a long lower wick. It suggests sellers pushed price down, but buyers strongly pushed it back up before the period ended — often seen after a downtrend, hinting at a possible reversal.
Engulfing pattern — a two-candle pattern where the second candle's body completely "engulfs" the first candle's body, in the opposite color. A bullish engulfing after a downtrend can signal buyers have taken control.
Three patterns worth recognizing on sight — indecision, reversal hint, and control shift.
An honest caveat
No single candlestick pattern reliably predicts the future by itself — these are probability signals, not certainties, and work best combined with support/resistance (next lesson) and sound risk management (your stop-loss habit from earlier lessons), not used alone.
Quick Check
1. A candle with almost no body, showing indecision, is called a:
2. A green (bullish) candle means:
Quick Recap
- A candle shows open, close, high, and low for a time period — body plus wicks.
- Doji, hammer, and engulfing patterns each signal something different about buyer/seller control.
- Patterns are probability signals, not guarantees — always combine with risk management.
“World's Best Financial Education isn't a slogan here — it's the standard every lesson is written against.”
Akodi Victor — CEO & Founder, Global Market School Ltd.