This pattern is essentially the bearish equivalent of the Inverted Hammer. While the Inverted Hammer signals waning seller power in a downtrend, the Shooting Star signals that buyer dominance is fading at a peak. For day traders using candlestick patterns for day trading, this is a critical signal of a potential short-selling opportunity.

• Let’s take a look at four of the most widely used candlestick patterns along with some actual stock chart examples.
• I tested 25 candle formations on 30 Dow Jones Industrial Average stocks over 20 years.
• Candlestick patterns are structured visual representations of price movement that reflect the interaction between buying and selling forces over a given time period.
• But a hammer appearing at a strong support zone, confirmed by RSI divergence and higher volume, carries significant weight.
• The first one reflects a sustained sales drive, and the second one reflects a strong re-entry of buyers.

The percentage of Inverted Hammer winning trades was 60% versus 40% losing trades, significantly higher than the 55.8% average performance across all candlestick types. The Max Drawdown was -29.6%, versus the stock’s drawdown of -59.4%, which shows less volatility than a buy-and-hold strategy. My rigorous testing shows the most reliable candle patterns are the Inverted Hammer (60% success rate), Bearish Marubozu (56.1%), Gravestone Doji (57%), and Bearish Engulfing (57%).

Bearish Harami Cross: 57% Win Rate

Applying these reliable patterns within the right market context leads to more confident and disciplined trading. These charts provide insights into price movements, making them versatile tools for analyzing different markets. The first two being long bearish candles followed by a third bearish candle that is completely engulfed by the fourth bearish candle.

Shooting Star

To trade hammers effectively, wait for the next candle to close higher. Place entries slightly above the hammer’s high, with stops below the wick low to allow for volatility. The hammer works best at major support zones, round numbers, or after extended declines. To deepen your skills, you can learn more about how to read trading charts to interpret these signals with greater accuracy. Mastering these basics is a non-negotiable step toward consistent profitability.

Evening Star

• The enduring relevance of candlestick analysis lies in its balance of simplicity and adaptability.
• Often observed in longer time frames, the rounding top pattern is used by traders to anticipate the end of an uptrend and the beginning of a potential downtrend.
• It occurs in a downtrend, with the first candlestick being bearish and followed by a bullish candlestick that opens lower but closes above the midpoint of the previous candlestick.
• Traders who identified the setup gained confidence to hold long positions.
• Steven is an active fintech and crypto industry researcher and advises blockchain companies at the board level.

Small bullish candle fully contained within previous bearish candle; suggests reversal or trend weakening. Three consecutive long bullish candles, signaling strong bullish momentum. There are an almost infinite number of patterns possible, but investors tend to focus on established continuation and reversal patterns.

Its reliability makes it one of the most respected candlestick patterns for day trading when looking to initiate a short position. A gravestone doji candlestick is a bearish reversal candlestick pattern that appears at the top of an uptrend. It has a small body at the bottom with a long upper wick, indicating that despite buying pressure, sellers pushed the price down significantly during the session. A dragonfly doji candlestick pattern is a bullish reversal pattern that appears at the bottom of a downtrend.

Bullish Candlestick Patterns

When markets fall sharply, traders often panic and sell at any price. If buyers absorb that selling and force a rebound, it shows the decline may be running out of energy. Below, you’ll find the 10 candlestick patterns every trader should know in 2025, each explained with its structure, psychology, and trading application. Reversal and continuation patterns add value because they repeat across markets and timeframes.

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It is a sign that momentum in sales is dropping and an upward direction will follow. Traders often trade inverted hammers by waiting for confirmation, entering above the high of the pattern, and placing stops below its low. The best results come when it appears at a strong support level or after oversold conditions. To improve reliability, many pair it with RSI divergence or MACD signals. Join our beginner-friendly course for cryptocurrency trading, mastering market analysis, risk management, and practical strategies. Enhance skills and confidence, transforming beginners and experienced traders.

Certain candlestick setups appear in every market and timeframe, making them a core part of trading strategies. They reveal shifts in sentiment, highlight reversals, and confirm continuations. It appears as an inverted “U” shape, where prices gradually rise, consolidate, and then decline steadily, indicating a transition from bullish to bearish sentiment. This pattern shows a significant shift in market sentiment from bullish to bearish. The three black crows pattern consists of three consecutive long bearish candlesticks with small or no wicks.

To trade it, look for the pattern at demand zones or after retracements in an uptrend. Traders typically enter above the engulfing candle’s high, with stops below its low. Volume confirmation increases reliability, as strong participation shows buyers are committed.

The candles with the highest performance per top-4 best candlestick patterns for 2025 trade over a 20-year test period are the Inverted Hammer (1.12%), the Bearish Marubozu (0.8%), and the Gravestone Doji (0.65%). The best software for candle pattern trading is TrendSpider because it has a complete solution for pattern recognition, backtesting, and even Bot integration for auto-trading. Plus, you do not need coding skills to use it; the entire system is point-and-click simplicity.

Spinning Top: 55.9% Win Rate

A long lower wick shows that sellers pushed prices down, but buyers fought back, rejecting lower levels. A long upper wick reflects the opposite strong selling pressure after buyers attempted to drive prices higher. Meanwhile, large-bodied candles represent conviction, where one side dominated throughout the session. The Engulfing pattern is a potent two-candle reversal signal that indicates a swift and decisive shift in market sentiment.