Most Popular Single Candlestick Patterns

In this article, you will learn how to identify market reversals using single candlestick patterns and their trade signals. Here are the six most popular single candlestick patterns explained with examples.

Contents

Dragonfly Doji

Gravestone Doji

Hammer

Hanging Man

Inverted Hammer

Shooting Star


Dragonfly & Gravestone Doji by https://letsforex.net/most-popular-single-candlestick-patterns/

                           Dragonfly & Gravestone Doji by Let`s Forex

Dragonfly Doji

The dragonfly doji is one of most popular single candlestick pattern. It is a bullish reversal or resistance signal appears at the bottom of a preceding downtrend.

Identifying a dragonfly doji

    • There should be a preceding downtrend in the specific time frame or session.
    • The opening price, closing price, and highest price are at the same level.
    • No real body.
    • Lengthy lower shadow.
    • There must not be an upper shadow.

The psychology behind dragonfly doji

    • With the opening of new session/time frame, the seller (bears) drags price to bottom of the market as a result of which formation of long lower tail or shadow occurs.
    • Buyer enters the market to outclass sellers and push the price to the opening, hence making a no real body.
    • The length of the lower tail defines the intensity of the buyer’s power.
    • More lengthy lower tail gives a strong bullish signal.

The trading signal of dragonfly doji

    • Find the dragonfly doji at the bottom of a downtrend.
    • Finding only a dragonfly doji does not necessarily mean open a buy (long) position, rather wait for confirmation by next candle.
    • There will be bullish confirmation if the next candle makes closing above the closing of dragonfly doji.
    • On confirmation of next signal making closing above the closing of dragonfly doji then open a buy (long) position.
    • Stop loss must be below the low of dragonfly doji.

Gravestone Doji

The gravestone doji makes second in the list of most popular single candlestick patterns. It is a bearish reversal or resistance signal appears at the top of a preceding uptrend.

Identifying a gravestone doji

    • There should be preceding uptrend in the specific time frame or session.
    • The opening price, closing price, and lowest price are at the same level.
    • No real body.
    • Lengthy upper shadow.
    • There must not be a lower shadow

The psychology behind gravestone doji

    • Find the gravestone doji at the top of an uptrend.
    • Finding only a gravestone doji does not necessarily mean open a sell (short) position, rather wait for confirmation by next candle.
    • There will be bearish confirmation if the next candle makes its closing below the closing of gravestone doji.
    • On confirmation of next signal making closing below the closing of gravestone doji then open a sell (short) position.
    • Stop loss must be above the high of gravestone doji.

The trading signal of gravestone doji

    • Find the gravestone doji at the top of an uptrend.
    • Identifying only a gravestone doji does not necessarily mean open a sell (short) position, rather wait for confirmation by next candle.
    • There will be bearish confirmation if the next candle makes closing below the closing of gravestone doji.
    • On confirmation of next signal making closing below the closing of gravestone doji then open a sell (short) position.
    • Stop loss must be above the high of gravestone doji.

Hammer & Hanging Man by https://letsforex.net/most-popular-single-candlestick-patterns/

                                         Hammer & Hanging Man by Let`s Forex

Hammer

On the third in the list of most popular candlestick patterns is the hammer. The hammer is a bullish reversal or resistance signal appears at the bottom of a preceding downtrend.

Identifying a hammer candle

    • When there is preceding downtrend and market is hammering at the bottom of a downtrend.
    • The small real body of candle either green or red.
    • Lengthy lower shadow at least three times the length of the real body.
    • There may be no or negligible upper shadow.

The psychology behind the hammer candle

    • With the opening of new session/time frame, seller drags price to bottom of the market result of which formation of long lower tail or shadow occurs.
    • Buyer enters the market to outclass sellers and push the price to the near opening (above or below) of the candle, hence making a small real body.
    • The length of the lower tail defines the intensity of the buyer’s power.
    • More lengthy lower tail gives a strong bullish signal.

The trading signal of a hammer candle

    • Find the hammer at the bottom of a downtrend.
    • Finding only a hammer does not necessarily mean open a buy (long) position, rather wait for confirmation by next candle.
    • There will be bullish confirmation if the next candle makes closing above the closing of hammer candle.
    • On confirmation of next signal making closing above the closing of hammer candle then open a buy (long) position.
    • Stop loss must be below the low of the hammer.

Hanging Man

On the fourth in the list of most popular single candlestick patterns is hanging man.  It is a bearish reversal or resistance signal appears at the top of a preceding uptrend.

Identifying a hanging man candle

    • There must be a preceding uptrend in the market.
    • The small real body of candle either green or red.
    • Lengthy lower shadow at least three times the length of the real body.
    • There may be no or negligible upper shadow.

The psychology behind hanging man candle

    • With the opening of new session/time frame, seller drags price to bottom of the market result of which formation of long lower tail or shadow occurs.
    • Buyer enters the market to push back price back but only near to open, hence making a small real body.
    • Small body indicates buyers are losing momentum and sellers are getting control.

The trading signal of a hanging man candle

    • Find the hanging man at the top of an uptrend.
    • Identifying only a hanging man does not necessarily mean open a sell (short) position, rather wait for confirmation by next candle.
    • There will be bearish confirmation if the next candle makes closing below the closing of hanging man candle.
    • On confirmation of next signal making closing below the closing of hanging man candle then open a sell (short) position.
    • Stop loss must be above the high of hanging man.

Inverted Hammer & Shooting

                                 Inverted Hammer & Shooting Star by Let`s Forex

Inverted Hammer

The inverted hammer is a bullish reversal or resistance signal appears at the bottom of the preceding downtrend.

Identifying an inverted hammer candle

    • In the preceding downtrend when the market is hammering at the bottom of a downtrend inverted hammer will appear.
    • The small real body of candle either green or red.
    • Lengthy upper shadow at least three times the length of the real body.
    • There may be no or negligible lower shadow.

The psychology behind the inverted hammer candle

    • With the opening of new session/time frame, sellers drag price down result of which formation of long lower tail or shadow occurs.
    • Buyers enter the market to push the price back but only near to open, hence making a small real body.
    • Long lower tail indicates sellers are losing momentum and buyers are getting control.

The trading signal of inverted hammer

    • Find the inverted hammer at the bottom of a downtrend.
    • Identifying only an inverted hammer does not necessarily mean open a buy (long) position, rather wait for confirmation by next candle.
    • There will be bullish confirmation if the next candle makes closing above the closing of inverted hammer candle.
    • On confirmation of next signal making closing above the closing of inverted hammer candle then open a buy (long) position.
    • Stop loss must be below the low of the inverted hammer.

Shooting Star

The shooting star pattern is a bearish reversal or resistance signal appears at the top of a preceding uptrend.

Identifying a shooting star candle

    • There must be a preceding uptrend in the market.
    • The small real body of candle either green or red.
    • Lengthy upper shadow at least three times the length of the real body.
    • There may be no or negligible lower shadow.

The psychology behind shooting star candle

    • With the opening of a new session/time frame, buyers push price up result of which formation of long upper tail or shadow occurs.
    • Sellers enter the market to drag price back but only near to open, hence making a small real body.
    • Long upper tail indicates buyers are losing momentum and sellers are getting control.

The trading signal of shooting star candle

    • Find the shooting star at the top of an uptrend.
    • Identifying only a shooting star does not necessarily mean open a sell (short) position, rather wait for confirmation by next candle.
    • There will be bearish confirmation if the next candle makes closing below the closing of shooting star candle.
    • On confirmation of next signal making closing below the closing of shooting star candle then open a sell (short) position.
    • Stop loss must be above the high of a shooting star.

Previous related resource: Introduction to Japanese Candlestick

Next related resources:     Most Popular Double Candlestick Patterns

More related resources:    What is Forex?

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5 Responses

  1. Hugh says:

    Thanks to the excellent manual

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