Important to Know: Candlestick Chart Patterns for Beginner Forex Traders

Trading Forex requires certain skills to achieve results. Many people want to know what the secret to success is. The answer is: truly understanding how to read candlestick charts. This tool is available on every trading platform, and many traders consistently profit by relying solely on their understanding of candlestick chart patterns. This article aims to help beginners gain a deeper understanding.

First Step: What Are Candlestick Charts?

Candlesticks display price movements over a specified period. Each candlestick provides 4 key pieces of information:

• The opening price during that period
• The closing price during that period
• The highest price reached
• The lowest price reached

Traders can use any timeframe, whether it’s 5-minute, hourly, or even weekly. The structure of candlesticks remains the same.

The three main components

1. The Candlestick Body (Body)

• If the closing price > opening price, the candle is white (Bullish) – indicating buying pressure wins
• If the closing price < opening price, the candle is black (Bearish) – indicating selling pressure wins
• A large candlestick indicates significant price change

2. The Wick/Shadow (Wick/Shadow)

• Upper wick = effort to push prices higher
• Lower wick = effort to push prices lower
• Long wicks = intense struggle, no clear winner
• Short wicks = minimal price movement

3. Color

• White/Green = buying strength
• Black/Red = selling strength

Why Do Traders Need to Learn Candlestick Patterns?

Reflects Market Sentiment

Unlike simple line charts, candlesticks show the balance or imbalance of buying and selling forces, allowing you to see “who is winning during that period.”

Easy to Learn and Predict

Candlestick patterns have distinct characteristics. When combined with tools like Support/Resistance levels, you can make better predictions.

Proven Success History

Candlestick charts have been used since the days of Japanese rice traders over 200 years ago, becoming a valuable tool for market analysis.

Basic Candlestick Patterns You Should Know

1. Doji - Sign of Indecision

Appearance: Opening and closing prices are the same (or the candlestick is absent)

Meaning: Buying and selling forces are balanced; it could be a turning point.

Subtypes:

• Standard Doji: Like a panda face, where open and close are equal, indicating hesitation
• Gravestone Doji: Long upper wick – declining buying pressure
• Dragonfly Doji: Long lower wick – declining selling pressure
• Four Price Doji: Open = close = high = low; rarely seen. Avoid trading when this appears.

2. Marubozu - Candles with no wicks

Appearance: No upper or lower wick

Meaning:

• White: Strong buying dominance (Open = Low, Close = High)
• Black: Strong selling dominance (Open = High, Close = Low)

3. Spinning Top - Sign of Uncertainty

Appearance: Short body with long wicks on both sides

Meaning: Market is unclear; buying and selling forces are balanced, possibly indicating a reversal.

Advanced: One, Two, and Three Candle Patterns

One Candle Pattern: Hammer and Hanging Man

Hammer (At the bottom of a downtrend):

• Appearance: Short body with a long lower wick
• Meaning: Sellers tried to push the price down, but buyers defended; potential reversal ⬆️

Hanging Man (At the top of an uptrend):

• Appearance: Short body with a long lower wick
• Meaning: Buyers attempted to push higher, but sellers pressed down; potential reversal ⬇️

Caution: Wait for confirmation from the next candle.

Two Candle Pattern: Engulfing Pattern

Bullish Engulfing (Reversal from downtrend to uptrend):

• A black (bearish) candle followed by a larger white (bullish) candle that engulfs the previous one
• The white candle “eats” the entire black candle

Bearish Engulfing (Reversal from uptrend to downtrend):

• A white candle followed by a larger black candle that engulfs the previous one
• The black candle “eats” the entire white candle

Three Candle Patterns: Evening Star and Morning Star

Morning Star (Reversal from downtrend to uptrend):

• Long black candle + Doji/small candle + long white candle
• Indicates a reversal from down to up

Evening Star (Reversal from uptrend to downtrend):

• Long white candle + Doji/small candle + long black candle
• Indicates a reversal from up to down

Other Useful Patterns:

Three White Soldiers (Continuous Uptrend):

• 3 consecutive long white candles = strong buying

Three Black Crows (Continuous Downtrend):

• 3 consecutive long black candles = strong selling

Tweezer Tops/Bottoms:

• Two candles with matching wicks = clear resistance/support levels

Important Notes When Using Patterns

✓ No pattern is 100% accurate – success depends on:

• The pattern’s position within the larger trend
• Confirmation from other analysis tools
• Nearby Support/Resistance levels
• Market news and conditions

✓ Wait for confirmation – don’t rush to trade immediately after spotting a pattern. Always wait for the next candle.

✓ Manage risk – even the best patterns require stop-loss orders.

✓ Practice on a demo account – understanding improves with real experience.

Summary

Candlestick chart patterns are more than just visual cues; they are a way to read the market’s psychology. Each candlestick tells a story of the battle between buyers and sellers. When you understand this, you will see the Forex market from a different perspective.

Start by studying Doji, Marubozu, and Spinning Top patterns until you master them. Then, move on to more complex patterns, and most importantly: Practice consistently without risking real money initially.

Success in Forex trading doesn’t come from finding a “perfect” system but from deep understanding and consistent application.