The Major Candlestick Signals

DOJI
Recognition: The doji is an indecision candlestick. The open and close are the same or very close to the same.

Pattern Psychology: The lack of a real body means the Bulls and the Bears are conflicting. This is an alert to investors to take heed for possible trend reversal. The doji needs a confirmation candle before you can act on it.

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BULLISH ENGULFING
Recognition: Bullish Engulfing is a very powerful reversal candle after a significant downtrend. The second day candle body completely engulfs the body of the first day. Ignore the wicks or shadows

Pattern Psychology: This pattern suggests the Bulls are stepping in with force, suggesting prices will move up.

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BEARISH ENGULFING
Recognition: Bearish is a very poweful reversal candle after a significant uptrend. The body of the second day completely engulfs the body of the first day. Ignore the wicks or shadows

Pattern Psychology: This shows the Bears are overwhelming the Bulls, suggesting prices will move down.

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HAMMERS and HANGING-MAN
Recognition: Hammer and Hanging Man is a reversal signal. The long lower shadow or wick should be at least two times the length of the body. The color of the body is not important although a black body has slightly more Bearish indications and a white body has slightly more Bullish indications. The Hammer and Hanging Man needs a confirmation candle before we can act on it. We need to see a close above the close

Pattern Psychology: This pattern at the bottom of a down trend is called a Hammer. This pattern at the top of an uptrend is called a Hanging-Man

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PIERCING PATTERN
Recognition: A two candle pattern, the body of the first candle is black and the body of the second candle is white. The white day opens lower, under the trading range of the previous day. The price closes above the 50% level of the black body.

Pattern Psychology: After a strong downtrend, the atmosphere is Bearish but before the end of the day the Bulls step in and price closes near the high of the day. The Piercing Line pattern is the opposite of the Dark Cloud.

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DARK CLOUD
Recognition: A two candle pattern, the body of the first candle is white and the body of the second candle is black. The black day opens higher, above the trading range of the previous day. The price closes below the 50% level of the white body.

Pattern Psychology: After a strong uptrend, the atmosphere is Bullish but before the end of the day the Bears step in and price closes near the low of the day.

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BULLISH HARAMI
Recognition: A two candle pattern forming in a down trending price pattern. The body of the first candle is the same color as the current trend and should be a long black candle. The body of the second candle is white and opens and closes within the body of previous day’s candle.

Pattern Psychology: After a strong downtrend the Bulls step in and open the price higher than the previous day’s close. This concerns the Bears and the shorts start covering their postions. A strong day after that would convince everybody that the trend may be in a reversal.

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BEARISH HARAMI
Recognition: A two candle pattern forming in an uptrending price pattern. The body of the first candle is the same color as the current trend and should be a long white candle. The body of the second candle is black and opens and closes within the body of the previous day’s candle.

Pattern Psychology: After a strong uptrend the Bears step in and open the price lower than the previous day’s close. The price finishes lower for the day and the Bulls are concerned and begin taking their profits.

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MORNING STAR
Recognition: A three to ten candle pattern at the bottom of a downtrend.The body of the first candle is black and has a tall real body, confirming the current downtrend. The second candle is an indecisive formation or has a small real body. The third candle is white and should close at least 60% into the first candle’s real body..

Pattern Psychology: After an apparant downtrend the Bulls step in and open the price higher than the previous day’s close. The price finishes higher for the day and the Bears are concerned and begin covering their short positions.

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EVENING STAR
Recognition: A three to ten candle pattern at the top of an uptrend. The body of the first candle is white and has a tall real body, confirming the current uptrend. The second candle is an indecisive formation or has a small real body. The third candle is black and should close at least 60% down the white candle.

Pattern Psychology: After an apparant uptrend the Bears step in and open the price lower than the previous day’s open. The price finishes lower for the day and the Bulls are concerned and begin selling to take their profits.

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SHOOTING STAR
Recognition: A Shooting Star can mark a top and is often retested . The shadow or wick should be at least two times the length of the body. The color of the body is not important, although a black body has slightly more Bearish indications.

Pattern Psychology: After a strong uptrend the Bulls appear to still be in control with price opening higher, but by the end of the day the Bears step in and take the price back down to the lower end of the trading range. Lower trading the next day reinforces the probability of a pullback.

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INVERTED HAMMER
Recognition: A Inverted Hammer can mark a bottom and is often retested. The upper shadow should be at least two times the length of the body. The real body is at the lower end of the trading range. There should be no lower shadow or a very small lower shadow.

Pattern Psychology: After a downtrend has been in effect, the atmosphere is Bearish. The price opens and trades lower but before the end of the day, The Bulls step in and take the price back up. A higher open or a white candle the next day reinforces buying.

from kickforex