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    Gold Trading with the Lowest Spread
    Reversal Candlestick Patterns

    Top 18 Bullish and Bearish Reversal Candlestick Patterns

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      As a trader, keeping up with market trends can be confusing. You’ve got different indicators and signals suggesting different potential outcomes, but you don’t know which one you should trust. One of the most reliable tools you can use in such instances is reversal candlestick patterns.

      Of course, we’ve all heard of candlestick patterns and the Japanese legend who brought them to life. The fact of the matter is these patterns can seem intimidating from a general standpoint. But when you start to learn them in detail, that’s when you truly realize what you’ve gotten yourself into.

      The good news is that learning more about reversal candlestick patterns, or any other patterns, for that matter, doesn’t have to be so difficult. As long as you follow a reliable, well-crafted guide and spend enough time to understand and practice each pattern, your journey will be smooth sailing. So, in this blog post, you’ll learn more about the top 18 bullish and bearish reversal candlestick patterns and the secrets they hold within. Sounds interesting? Then, you should stay tuned!

      What Are Reversal Candlestick Patterns?

      Grasping the concept of reversal candlestick patterns is not that hard, as they don’t hold a deeper meaning than what their name suggests. They’re patterns consisting of one or more candlesticks that indicate a potential trend reversal in the market. There are some patterns that are more reliable and some patterns that need further investigation of the market context, but they all indicate the same thing: a potential reversal.

      There are two major types of candlestick reversal patterns, bullish and bearish. Simply put, bullish reversal candlestick patterns form at the end of downtrends, suggesting a potential upward reversal might be on the way. At the same time, bearish reversal candlestick patterns suggest a potential downward reversal at the end of well-established bullish trends.

      Bullish Reversal Candlestick Patterns

      Bullish reversal patterns show a potential shift of power in the market, as bears begin to lose their dominance and bulls enter the market and begin a rally. There are 9 bullish reversal candlestick patterns that every trader should know, which we will go over below.

      1. Hammer Candlestick Pattern

      Hammer is one of the most well-known bullish reversal candlestick patterns. It has a small-ish body, with a long lower shadow and a small to non-existent upper shadow. Like other bullish reversal patterns, it forms at the end of downtrends, suggesting the bears are about to lose their power.

      From a psychological standpoint, an ideal hammer forms in the midst of high selling pressure from the bears. The candle opens, and the price starts fluctuating between the high and low price levels. The long lower shadow of the candle represents the bears’ last ditch effort to keep pushing the price down. However, they meet support and the candle closes near its high. This indicates that the bulls managed to pull through and show the bears who’s in charge.

      Hammer candlestick patterns can be bullish or bearish themselves, but they both provide a bullish reversal signal. This is because of the importance of the overall shape of the candle, rather than where it opened and closed. Still, a green (orange) hammer has more power, as it shows that buyers could go that extra mile and close the candle right below its high.

      Hammer reversal Candlestick Pattern

      2. Inverted Hammer Candlestick Pattern

      Inverted hammer candlesticks are very similar to normal hammers. However, as their name suggests, they’re upside down. These candles have their open, close, and low prices super close to one another, but their high price stands at a distance, creating a long upper shadow.

      When an inverted hammer candle is forming, the bears are the party in control. However, after the candle opens, the bulls enter the market and drag the price up, creating the candle’s high. Despite their efforts, though, the bears manage to push the prices back down and close the candle near the open and low price levels, creating a small real body. Although the session ends in their favor, the bears have been challenged, and the inverted hammer candle, whether green (orange) or red (navy blue), shows a possibility of a potential bullish trend reversal.

      Inverted Hammer Candlestick Pattern

      3. Bullish Engulfing Candlestick Pattern

      Engulfing candles are one of the most well-known reversal candlestick patterns in the market. Like many other patterns, they have a bullish and a bearish version.

      A bullish engulfing candlestick pattern consists of two candles. During the first session in the set timeframe, sellers create a bearish candle that closes below its open price. Following this red (navy) candle, there is a large bullish candle, the body of which fully encompasses (engulfs) the first candle’s body. The candle is usually marked by a gap down, indicating that the bears are trying their hardest to push the price down. The engulfing candle opens below the previous candle’s close, and as the bulls enter the market, the prices start to rise. At the end of the timeframe, the candle closes above the previous candle’s open, fully engulfing its body. Since bullish engulfing candles show the gradual process of buyers taking control of the market, the candle high usually remains close to the closing price level, creating a small upper shadow. 

      Bullish Engulfing Candle

      4. Morning Star Candlestick Pattern

      The morning star is a triple candle pattern that forms at the end of downtrends and signifies a potential upward reversal. The pattern gets its name from its appearance, which resembles a real morning star.

      When the morning star pattern is forming, there is first a large bearish candle, indicating the sellers are trying to maintain their power and dominance. The next candle is a small one that gaps down from the first candle. It can be bullish or bearish, and it has a small body. Usually, the second candle is either a spinning top or doji, showing indecision in the market. Then, there is the third candle, which is an up candle, gapping up and closing above the first candle’s midpoint. Together, these three candles point to a potential upward reversal in the market.

      Morning Star Candlestick Pattern

      5. Piercing Line Candlestick Pattern

      The piercing line is another two-candlestick bullish reversal pattern. First, there is a down candle, showing the bears’ dominance over the market. They keep control of the market, opening the second candle with a downward gap. But then, the bulls come through, nudging the prices higher and higher, piercing through the first candle’s midpoint and continuing to increase it. Eventually, the candle closes near its high, establishing the newfound power of the buyers.

      Because of how the pattern is formed (piercing through the first candle’s midpoint and all that stuff), it’s called the piercing pattern or the piercing line candle pattern. When facing this bullish reversal pattern, some factors make it more reliable. For example, the longer the candles are, the stronger the reversal signal. Another thing you should pay attention to is how high up the first candle the second candle closes, as the higher it gets, the more likely the reversal is. Lastly, pay attention to the gap between the first and second candles, as the larger this gap is, the stronger the reversal pattern gets.

      Piercing Line Candlestick Pattern

      6. Three White Soldiers Candlestick Pattern

      The three white soldiers candlestick pattern is one of the most easy to spot patterns in financial charts. It consists of three bullish candles that progressively move higher, forming a stairwell-like shape.

      The formation of the three white soldiers candlestick pattern begins at the lowest point of an ongoing downtrend. The first candle opens, and the bears push the price down to create its low. But then, the price begins to rally as buying pressure increases, resulting in a long bullish candle. The next candle opens above the first candle’s opening and keeps increasing the price. Ideally, the first candle’s close should be above the second candle’s midpoint. There is also a third candle that opens above the second candle’s open and and closes above its close. Just like the first pair, the pattern is more powerful if the second candle’s close is above the midpoint of the third candle.

      Three White Soldiers Candlestick Pattern

      7. Dragonfly Doji Candlestick Pattern

      Doji candles are one of the most easy-to-spot candlestick patterns out there. Although they come in different shapes and forms, they all have one thing in common. The doji candle’s body is always a flat line, indicating the candle opened and closed at the same level.

      Among different types of doji, a dragonfly doji is the strongest bullish reversal candlestick pattern. Same with other doji, it has a slim, flat-line body and a small-ish upper shadow. However, the candle’s lower shadow is long, signifying the bears’ struggle to keep up with the market.

      Psychologically speaking, when a dragonfly doji candle opens at the end of a pre-established downtrend, the bears keep pushing the price down at first. However, the buying pressure starts to increase, and the bulls drag the price back up, closing it at the same level the candle opened and super close to the candle’s high. This proximity between the candle’s close and high indicates the state of the market at the end of the trading session. The set timeframe ended while the prices were still increasing, which signals a potential upward trend reversal.

      Dragonfly Doji Candlestick Pattern

      8. Tweezer Bottom Candlestick Pattern

      Tweezers are two-candle reversal patterns that can be bullish or bearish depending on the order in which bullish and bearish candles form. A tweezer bottom pattern signifies a potential upward (bullish) trend reversal.

      A tweezer bottom pattern forms at the end of a downtrend. First, the trend continues and a down candle forms. However, the next trading session forms an up candle, showing a positive change in the market sentiment. What you should look out for here is a shared “bottom” for both candles. So, if the first candle’s lower shadow ends at a certain price point, the second candle’s lower shadows cannot go past that level either.

      Tweezer Bottom Candlestick Pattern

      9. Bullish Harami Candlestick Pattern

      Harami patterns sort of look like the engulfing pattern, but the other way around. Like the engulfing pattern, harami also has bullish and bearish versions.

      In a bullish harami reversal candlestick pattern, you first have a bearish candle, which represents the negative market sentiment. However, there is a dramatic change, and the next candle is bullish, showing the bulls’ newfound power. The catch here is that the second candle’s body should be fully encompassed by the first candle’s body, which makes the pattern resemble an engulfing pattern to some extent.

      Bullish Harami Candlestick Pattern

      Bearish Reversal Candlestick Patterns

      There are also reversal candlestick patterns that signal potential bearish trend reversals. You should look for them at the end of uptrends and check them with other indicators before making any trading decisions.

      1. Hanging Man Candlestick Pattern

      A hanging man reversal candlestick pattern looks pretty much the same as a hammer. However, it forms at the top of an uptrend and signals a potential bearish reversal, as opposed to a bullish one. The candle has a small body, a long lower shadow, and an upper shadow that is super small or non-existent.

      Although the hanging man pattern looks like a hammer, it should not be interpreted the same way as one. So, you’ve got an uptrend. The bulls keep pushing the price up, and then the candle opens. The buyers are really trying hard to keep nudging the price up, but resistance is met, and they get to the point that they’re not willing to pay a higher price for the asset. At this very moment, the bears take advantage of the bulls’ weakness and enter the market, shoving the price back down to form the candle’s long lower shadow and low price. However, the bulls retreat and bring the price back up, closing the candle near the open price, making its body slim.

      While the trading session ends in the bulls’ favor, they show weakness, and this weakness is enough to suggest a potential downward reversal.

      Hanging Man Candlestick Pattern

      2. Shooting Star Candlestick Pattern

      Following the previous reversal candlestick pattern, the shooting star is the bearish version of an inverted hammer. As a result, it has a small body at the bottom of the candle, which is attached to a small or absent lower shadow, and a long upper shadow to make it look like a shooting star.

      When a shooting star candle forms, it follows the general trend first. So, the candle opens, and the continuous increase in the buying pressure increases the price until it reaches the candle’s high. Ideally speaking, the candle faces resistance at its high, and bulls are not willing to pay a higher price for the asset. That’s when the bears enter the market. They push the price down and lead it towards the candle’s open price, before closing the candle near it. Whether the shooting star candle itself is bullish or bearish, it is still considered a bearish reversal candlestick pattern.

      Shooting Star Candlestick Pattern

      3. Bearish Engulfing Candlestick Pattern

      Much like its bullish peer, the bearish engulfing candlestick pattern consists of two candles. It appears at the end of uptrends and signals a potential downward reversal.

      The first candle of the bearish engulfing pattern is a green (orange) trend follower. With its small body, the candle further establishes the buyers’ power over the market. However, it is followed by a large bearish candle that opens above the first candle’s close and closes below its open; in effect, swallowing or engulfing it fully. The bears require a significant amount of power to drag the price down below the first candle, highlighting the possible upcoming downward trend reversal.

      Bearish Engulfing Candlestick Pattern

      4. Evening Star Candlestick Pattern

      The evening star candlestick pattern is another bearish pattern that shows a negative change in the market sentiment. It’s actually the bearish version of a morning star pattern that forms at the end of long uptrends.

      The pattern begins when a long bullish candle forms to continue the ongoing upward trend in the market. After this candle closes well above its open price, the second candle, the star of the show (literally), opens, gapping up from the previous candle. The prices continue to fluctuate between the high and low prices of the candle, but they meet resistance, and the selling pressure starts to increase. This lowers the price, resulting in the candle closing super close to its open, forming a doji or a spinning top. Then, there is the third candle, which is bearish, showing that the selling pressure is running with full force. Ideally, you’d want the third candle to form with a gap down from the previous candle.

      Evening Star Candlestick Pattern

      5. Three Black Crows Candlestick Pattern

      The three black crows is simply the bearish version of the three white soldiers candlestick reversal pattern. It consists of three candles, each with a lower high than the previous one.

      Much like other bearish reversal candlestick patterns, the three black crows also form at the top of an uptrend. The whole thing starts off with a long down candle following the bullish uptrend. It shows how the selling pressure is increasing gradually but consistently. The next candle continues this newfound bearish sentiment in the market, opening near (below) the first candle’s open and closing near (below) its close. After that, there’s the third candle, which showcases the same behavior. Together, these three consecutive candles form the three black crows bearish reversal pattern.

      Three Black Crows Candlestick Pattern

      6. Dark Cloud Cover Candlestick Pattern

      The dark cloud is another bearish reversal candlestick pattern. It features two candles, one bullish and one bearish. The psychological analysis of this pattern starts with an initial positive sentiment in the market. The bulls have held the power for some time now and continue to raise the prices when the first candle of the pattern forms. The candle opens, and the prices are quick to move up, continuing the existing upward trend in the market.

      However, every ruler will come to meet his demise, and the bulls are no different. So, they meet resistance because people are starting to think, “Wow, that price is crazy high. I ain’t paying that kind of money!” At that moment, when the bulls start to show the tiniest bit of weakness, bears enter the market and do their magic. They pull a trick at first and open the candle with a gap up, giving buyers the illusion that prices might still go up. However, the selling pressure starts to increase rapidly, dropping the price so low that it falls below the first candle’s midpoint and closes there. This shift in power is a clear sign of a potential bearish trend reversal.

      Dark Cloud Candlestick Pattern

      7. Tweezer Top Candlestick Pattern

      The bearish version of the tweezer bottom is the tweezer top reversal candlestick pattern. It forms when there is a bullish candle in the uptrend that’s followed by a down candle, the high point of which is at the same level as the first candle’s high.

      When interpreting this pattern, you basically see that the bulls have been playing their cards right for some time now. They drop their last card, creating that first bullish candle. It reaches a high, whether with its real body or upper shadow, and then the price drops to close above the candle’s open. After that, another candle forms. The price increases just like it did with the previous candle, but fails to go past that same high. This shows how buyers are unwilling to buy the asset at any price above the candle’s high, which creates a resistance level. After the high forms, the price starts to drop, and it goes below the open price, creating a bearish candle.

      Tweezer Top Candlestick Pattern

      8. Bearish Harami Candlestick Pattern

      Another reversal candlestick pattern that could be both bullish and bearish is the harami candlestick pattern. We went over the bullish version of the pattern, and now it’s time to learn the bearish one.

      So, for a bearish harami pattern to form, there should first be an uptrend. Then the first candle forms. It has a long body and closes above its open price. The next candle, however, is bearish. Its real body is small and fully encompassed by the first candle’s body. The short body of the second candle, along with the fact that it’s bearish, shows the buyers struggle to keep the prices rising but fail in the end. Together, these two candles resemble a pregnant woman, which is why the pattern is called harami, as it translates into pregnant in Japanese.

      Bearish Harami Candlestick Pattern

      9. Gravestone Doji Candlestick Pattern

      A gravestone doji is like the upside-down version of a dragonfly doji. Like any other doji, it has a super slim to non-existent body. The key difference is that the candle’s body forms at its bottom, either at the low price or slightly above it.

      To translate this candle into comprehensible English terms, you should consider the context in which it forms. There is an ongoing uptrend, and the bulls are having the time of their life ruling over the market. The doji candle opens, which you don’t know for sure if it’s a doji or not at first. Anyways, the candle opens, and the price soars, just like it did with previous candles. The buying pressure keeps increasing, and the price reaches the candle’s high. Then, there’s resistance, and the bears return to the market. With the new shift in the market sentiment, the prices begin to drop, and the candle eventually closes at the same virtual level as its open. By virtual, we mean that it’s either extremely close to the open price or at the exact same level. Either way, a gravestone doji is formed, suggesting a potential downward price reversal.

      Gravestone Doji Candlestick Pattern

      What to Do Upon Spotting a Reversal Candlestick Pattern?

      Spotting reversal candlestick patterns is one thing, and confirming them to make more informed trading decisions is another. The first thing you should do is check and see if the pattern forms in the right context. For example, for a bullish engulfing pattern, you need to first have a well-established downtrend. An evening star candlestick, on the other hand, requires a bullish trend to be able to actually reverse something.

      After you check the market vibes, you need to confirm the pattern. One thing you can do is assess the candles or candlestick patterns that form after your chosen reversal candlestick pattern has been established. If they signal the same potential reversal, you’ll have more confidence in your analysis. You can also use other technical analysis tools, such as indicators and price action patterns. For example, MACD, RSI, and oscillators can give you a pretty good understanding of the market sentiment and current momentum.

      Upon confirming the candle, you can decide whether you should enter a trade (long or short) or exit one, which also depends on your general trading plan and strategy. Don’t forget to take risk management measures to protect your capital and avoid losing more than what you can.

      Pros and Cons of Candlestick Reversal Patterns

      The table below will introduce you to some of the pros and cons of candlestick reversal patterns:

      ProsCons
      Providing short-term reversal signalsLagging indicator
      Distinctive appearance and easy-to-spotDifferent levels of reliability
      Offering insights into market psychologyConfirmation requirement

      Final Thoughts

      So, if you made it here, you are a total reversal candlestick pattern connoisseur now. This blog covered a lot, from what candlestick reversal patterns are to bullish and bearish reversal candlestick patterns. In fact, this clog post was a full-on reversal candlestick patterns cheat sheet that comprehensively assessed these patterns and how they form.

      Now that you’re here at the end of this blog, you know more about the top 18 reversal candlestick patterns and how you should go about trading with them. Of course, trading is more complicated than getting to know some candle patterns (and you thought that was the hard part). You have to master a lot of intricacies and techniques to become a successful trader. This is where a good broker comes handy. Not only do we offer a great trading platform with tight spreads and nearly non-existent commissions, but we’ve also got you covered when it comes to education. Our weblog is a good place to start learning, but if you’re more of a visual learner, you can always check out our YouTube channel!

      The top 10 trend reversal candlestick patterns include hammer, bullish and bearish engulfing, morning star, tweezer top and bottom, bullish and bearish harami, hanging man, gravestone and dragonfly doji, and dark cloud cover.

      Bullish reversal candlestick patterns form at the end of downtrends and signal a potential upward reversal in the near future. Examples include hammer, inverted hammer, bullish engulfing, morning star, bullish harami, piercing line, three white soldiers, and dragonfly doji.

      Bearish reversal candlestick patterns form at the end of uptrends and signal a potential downward reversal in the near future. Examples include hanging man, shooting star, bearish engulfing, evening star, bearish harami, dark cloud cover, three black crows, and gravestone doji.

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