Candlestick & Chart Patterns — Complete Guide

Candlestick patterns are the language of price action. Learn to read what buyers and sellers are doing on every single candle — and how pattern context determines reliability.

✓ 5 Key Patterns✓ Reversal & Continuation✓ Entry Rules✓ Context Matters

1. Pin Bar — The Most Reliable Reversal Signal

A pin bar has a long wick and a small body, showing that price was rejected at a level. Bullish pin bars have a long lower wick. The most powerful pin bars form at key S/R levels with the wick pointing into the level.

🔍 Example

GBP/USD hits daily support at 1.2600. A bullish pin bar forms with a wick extending to 1.2560 and a body closing at 1.2620 → strong buy signal. Stop below wick at 1.2555.

✅ Best For

H4 and D1 for swing trading; most reliable at key confluence zones

2. Engulfing Candles — Momentum Confirmation

A bullish engulfing candle has a body that fully covers the previous bearish candle's body, signalling that buyers have overwhelmed sellers. Engulfing candles are most significant at support/resistance levels after an extended move.

🔍 Example

After a 3-day downtrend, EUR/USD prints a bullish engulfing at a key H4 support zone. The green candle body is 1.5× the size of the preceding red candle → high-probability bullish reversal.

✅ Best For

H1 to D1 for reversals; excellent for entry confirmation at S/R

3. Head & Shoulders — The Classic Reversal

Head & Shoulders is a three-peak pattern where the middle peak (head) is higher than the two outer peaks (shoulders). The neckline connects the two troughs. A close below the neckline confirms the pattern. Target = head to neckline distance projected downward.

🔍 Example

GBP/USD forms a head at 1.3200 with shoulders at 1.3050. Neckline at 1.2900. Close below 1.2900 → target 1.2600.

✅ Best For

H4 and D1 charts for swing trades; most reliable in confirmed uptrends

4. Double Top & Double Bottom

A double top is two failed attempts to break the same resistance, followed by a break below the neckline — indicating sellers are in control. Double bottom is the mirror image showing buyers absorbing supply twice before breaking higher.

🔍 Example

EUR/USD attempts 1.1000 twice, failing both times. Close below trough at 1.0900 confirms double top. Target: 1.0800.

✅ Best For

D1 and H4; higher timeframe patterns produce larger measured moves

5. Flags & Pennants — Continuation Patterns

Flags are brief consolidations against the prevailing trend after a sharp move. Pennants are symmetrical triangles that form similarly. Both are continuation patterns when they form mid-trend. Break in trend direction confirms the continuation.

🔍 Example

USD/JPY rallies 150 pips (flag pole). Price consolidates declining 30 pips for 2 days (flag). Break above channel = buy. Target = 150 pips from breakout.

✅ Best For

M15 to H4 for intraday and swing trades after confirmed trending moves

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