40 Powerful Candlestick Patterns: A Complete Trading Guide for Beginner Traders

Nov 8, 2024

Candlestick charts are like the secret language of financial markets. Each formation tells a story about the battle between buyers and sellers over a specific period. I am fascinated by how these small colored rectangles reveal so much: the opening, the closing, the highs and lows, all encoded in their shape and color.

1. Bullish kicker

The bullish kicker seems to me one of the most exciting patterns. Imagine seeing a bearish candle followed by a bullish explosion that opens with a gap upwards and closes above the previous high. It's as if the market suddenly wakes up!

This pattern signals a dramatic shift in sentiment - sellers are fleeing as buyers take control with force. It’s not perfect, but according to CXO Advisory Group, it works about 68% of the time. Personally, I always get excited when I see one of these forming.

2. Drilling line

The piercing line is more subtle but equally revealing. It occurs when a bullish candle opens below the low of a previous bearish candle, but manages to close above its midpoint.

I love this pattern because it shows resilience - sellers tried to sink the price, but buyers counterattacked with determination. The TAST study indicates a 60% effectiveness, which is not bad, although I always look for additional confirmation before trusting it blindly.

3. Three outside down

This bearish reversal pattern makes me nervous when I see it in my long positions. It starts with a deceptive bullish candle, followed by a bearish candle that completely engulfs it, and finally a third candle that closes below the low of the second.

It's like watching a collapse in slow motion - first optimism, then doubts, and finally capitulation. According to Dr. Cottle in the “Journal of Technical Analysis”, it has a 64% success rate in predicting bearish reversals. In my experience, it tends to be quite reliable, especially in overbought markets.

Follow me for more ❤️‍🩹

Legal notice: Contains personal opinions. It is not financial advice. It may include sponsored content.