{
  "url": "https://thetraderwiki.com/en/chart-patterns/",
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  "kind": "article",
  "key": "chart-patterns",
  "title": "Candlestick patterns and chart patterns explained",
  "h1": "Candlestick patterns and chart patterns: what they look like and how often they fail",
  "description": "Candlestick patterns and chart patterns described in plain words: engulfing, doji, hammer, head and shoulders, double top, triangles, flags and the evidence.",
  "keywords": [
    "candlestick patterns",
    "chart patterns",
    "head and shoulders pattern",
    "bullish engulfing",
    "doji candlestick",
    "support and resistance"
  ],
  "published": "2026-09-30",
  "updated": "2026-10-12",
  "author": {
    "name": "Gabriel L.",
    "url": "https://thetraderwiki.com/en/authors/gabriel-l/"
  },
  "publisher": {
    "name": "TheTraderWiki",
    "url": "https://thetraderwiki.com/"
  },
  "riskWarning": "CFDs are complex, leveraged products, and the regulators’ own figures show that most retail accounts lose money. Nothing on TheTraderWiki is investment advice. Read the full risk disclosure, and if you’re unsure, talk to a qualified adviser. Broker details can change and they can be wrong. Before you open an account, confirm them with the broker and the regulator’s register.",
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    {
      "name": "Guides",
      "url": "https://thetraderwiki.com/en/learn/"
    },
    {
      "name": "Chart patterns",
      "url": "https://thetraderwiki.com/en/chart-patterns/"
    }
  ],
  "lead": [
    "Candlestick patterns are shapes formed by one to three candles on a price chart. Chart patterns are larger shapes made from dozens of candles. Traders name both kinds and read them as hints about where the price moves next. Both are part of technical analysis, the study of past prices, and every CFD platform includes them. A CFD is a contract with a provider that pays out the difference between the price when you open a trade and the price when you close it.",
    "Every common pattern gets a description in words on this page, so you can recognise it without a picture. The page then gives what each one is taken to mean and what the research says about whether that meaning holds up. The short version is that patterns describe what buyers and sellers just did. Evidence that they predict what comes next is mixed for a few patterns and missing for most."
  ],
  "leadLinks": [
    {
      "label": "technical analysis",
      "url": "https://thetraderwiki.com/en/technical-analysis/",
      "type": "internal"
    },
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      "url": "https://thetraderwiki.com/en/glossary/#cfd",
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  "blocks": [
    {
      "type": "list",
      "id": "key-points",
      "heading": "Key points",
      "url": "https://thetraderwiki.com/en/chart-patterns/#key-points",
      "ordered": false,
      "items": [
        "A candle displays the open, high, low and close for a single period. Every candlestick pattern refers only to these four prices and no others.",
        "Only after a clear move do reversal patterns such as the hammer, the engulfing candle and the head and shoulders mean something. The same shapes appear all the time in a sideways market and mean nothing there.",
        "Continuation patterns like flags, pennants and triangles mark a pause in a move. Traders act once the price breaks out, but many breakouts then reverse.",
        "A handful of chart patterns do hold some information, according to academic research. But no study in that research shows a retail trader keeps a profit after costs.",
        "No reliable failure rate exists for any pattern. The percentages trading websites quote depend on how the author defined the pattern, the market and the years tested.",
        "A pattern can help you spot where your idea breaks down and where to place a stop. It can’t predict tomorrow’s news."
      ]
    },
    {
      "type": "prose",
      "id": "what-a-candlestick-shows",
      "heading": "What does a candlestick show?",
      "url": "https://thetraderwiki.com/en/chart-patterns/#what-a-candlestick-shows",
      "paragraphs": [
        "A candlestick shows the open, high, low and close prices for one trading period. The period is whatever your chart is set to, so one candle can cover a minute, an hour or a day. The thick part is the body, and it stretches between the open and the close. The thin lines above and below the body are the wicks, also called shadows, and they extend to the high and the low.",
        "Colour shows the direction. A candle that closed above its open is usually drawn green or hollow, and traders call it bullish. A candle that closed below its open is red or filled, and traders call it bearish. A long body means the price moved far in one direction and stayed there. A long wick means the price went to a level but got pushed back before the period ended.",
        "Traders call it price action when you read a chart using only the candles and levels, with no indicators overlaid. Many people add calculations to that, and the technical indicators page explains them."
      ],
      "links": [
        {
          "label": "technical indicators",
          "url": "https://thetraderwiki.com/en/technical-indicators/",
          "type": "internal"
        }
      ]
    },
    {
      "type": "table",
      "id": "candlestick-patterns",
      "heading": "The main candlestick patterns",
      "url": "https://thetraderwiki.com/en/chart-patterns/#candlestick-patterns",
      "intro": [
        "Candlestick patterns use one, two or three candles. Reversal patterns only matter after a clear rise or fall, because there has to be a move to reverse."
      ],
      "caption": "Common candlestick patterns, how to recognise each, and what traders take each to mean.",
      "head": [
        "Pattern",
        "What it looks like",
        "What it’s taken to mean"
      ],
      "rows": [
        [
          "Doji",
          "One candle whose open and close are almost the same price, so the body is a thin line with wicks above and below",
          "Neither buyers nor sellers won the period. On its own it says little"
        ],
        [
          "Hammer",
          "One candle after a fall, with a small body at the top and a lower wick at least twice as long as the body. Little or no upper wick",
          "Sellers pushed the price down and buyers pushed it all the way back. Read as a possible turn upward"
        ],
        [
          "Shooting star",
          "The hammer upside down, after a rise: a small body at the bottom and a long upper wick",
          "Buyers pushed the price up and lost the gain before the close. Read as a possible turn downward"
        ],
        [
          "Bullish engulfing",
          "Two candles after a fall. A small falling candle, then a rising candle whose body covers the whole body of the first",
          "Buyers took back more than the previous period’s loss. Read as a possible turn upward"
        ],
        [
          "Bearish engulfing",
          "Two candles after a rise. A small rising candle, then a falling candle whose body covers the whole body of the first",
          "Sellers wiped out the previous period’s gain and more. Read as a possible turn downward"
        ],
        [
          "Morning star",
          "Three candles after a fall. A long falling candle, a small-bodied candle below it, then a long rising candle that closes above the middle of the first",
          "Selling slowed, stalled and gave way to buying. Read as a turn upward"
        ],
        [
          "Evening star",
          "Three candles after a rise. A long rising candle, a small-bodied candle above it, then a long falling candle that closes below the middle of the first",
          "Buying slowed, stalled and gave way to selling. Read as a turn downward"
        ]
      ],
      "numericColumns": [],
      "outro": [
        "A candlestick’s shape can carry one name in one spot and another name elsewhere. When a hammer appears at the top of a rise, it’s called a hanging man and the signal flips. That alone shows how much of the meaning comes from the move before the candle and how little from the candle itself."
      ]
    },
    {
      "type": "subsections",
      "id": "chart-patterns",
      "heading": "The main chart patterns",
      "url": "https://thetraderwiki.com/en/chart-patterns/#chart-patterns",
      "intro": [
        "Chart patterns are shapes made up of many candles, often taking weeks to form on a daily chart. Most use two lines, and traders act only after the price closes beyond one of those lines."
      ],
      "items": [
        {
          "id": "head-and-shoulders",
          "heading": "Head and shoulders",
          "url": "https://thetraderwiki.com/en/chart-patterns/#head-and-shoulders",
          "paragraphs": [
            "A head and shoulders pattern forms after a rise and shows three peaks in a row. The middle peak (the head) is higher than the two on either side (the shoulders). The neckline connects the two dips between those peaks. Traders treat a close below the neckline as the sign that the upward move has ended. After a fall, the opposite pattern, three troughs with the middle one lowest, is called an inverse head and shoulders, and it’s read as a turn upward."
          ]
        },
        {
          "id": "double-top-and-bottom",
          "heading": "Double top and double bottom",
          "url": "https://thetraderwiki.com/en/chart-patterns/#double-top-and-bottom",
          "paragraphs": [
            "A double top is two peaks at about the same price with a dip between them, so it looks like the letter M. The price reached a resistance level twice and failed on both attempts. Traders call the pattern complete when the price closes below the low of the dip. A double bottom is the same thing upside down. It looks like a W, forms at a support level and is complete when the price closes above the peak in the middle."
          ]
        },
        {
          "id": "triangles",
          "heading": "Ascending, descending and symmetrical triangles",
          "url": "https://thetraderwiki.com/en/chart-patterns/#triangles",
          "paragraphs": [
            "A triangle is a price range that tightens until its two boundary lines come together. With an ascending triangle, the top stays flat while the lows rise, and traders read it as buyers pushing against a resistance level. A descending triangle has a flat bottom and falling highs, and it’s read the other way. A symmetrical triangle shows falling highs and rising lows at the same time, and it offers no directional clue until the price breaks out of it."
          ]
        },
        {
          "id": "flags-and-pennants",
          "heading": "Flag pattern and pennant pattern",
          "url": "https://thetraderwiki.com/en/chart-patterns/#flags-and-pennants",
          "paragraphs": [
            "After a sharp move, which traders call the flagpole, a flag pattern is a short pause. The pause drifts between two parallel lines that slope gently against the move. In a bull flag the lines slope down, and in a bear flag they slope up. A pennant pattern is the same pause but between two lines that come together, looking like a very small symmetrical triangle. Both patterns are read as a rest before the first move carries on."
          ]
        },
        {
          "id": "wedges",
          "heading": "Rising wedge and falling wedge",
          "url": "https://thetraderwiki.com/en/chart-patterns/#wedges",
          "paragraphs": [
            "A wedge forms between two sloping lines that move in the same direction and converge. In a rising wedge, both lines tilt upwards, with the lower line steeper than the upper, so each price peak gains less than the one before. Traders see a rising wedge as a sign that the upward move is running out of strength. A falling wedge slopes downward with the upper line steeper, and it’s read as a fall running out of strength."
          ]
        }
      ],
      "links": [
        {
          "label": "resistance",
          "url": "https://thetraderwiki.com/en/glossary/#support-and-resistance",
          "type": "internal"
        }
      ]
    },
    {
      "type": "prose",
      "id": "worked-example",
      "heading": "A worked example: how traders measure a head and shoulders",
      "url": "https://thetraderwiki.com/en/chart-patterns/#worked-example",
      "basis": "illustrative",
      "basisLabel": "Illustrative figures: a made-up example, not a forecast or a quote.",
      "paragraphs": [
        "To measure a head and shoulders, traders take the head’s height above the neckline and project that distance downward from the break. Consider an example with made-up numbers. A currency pair goes up to 1.2100, then back down to 1.2000. It rises to 1.2200, falls to 1.2000 again, and after that only reaches 1.2100 before dropping. The neckline is at 1.2000, and the head stands 200 pips above it. For most currency prices, a pip is the fourth decimal place.",
        "According to the textbook, the target sits 200 pips below the neckline, at 1.1800. A trader who sells on a close at 1.1990 might place a stop-loss above the right shoulder at 1.2110. That’s a risk of 120 pips for a hoped-for 190. The target is a drawing convention. Nothing forces the price to reach it. If instead the price climbs back over the neckline, the pattern has failed and the stop takes the loss. Our risk management page shows how the stop distance sets the trade size."
      ],
      "links": [
        {
          "label": "pips",
          "url": "https://thetraderwiki.com/en/glossary/#pip",
          "type": "internal"
        },
        {
          "label": "stop-loss",
          "url": "https://thetraderwiki.com/en/stop-loss-orders/",
          "type": "internal"
        },
        {
          "label": "risk management",
          "url": "https://thetraderwiki.com/en/risk-management/#position-sizing",
          "type": "internal"
        }
      ]
    },
    {
      "type": "prose",
      "id": "what-the-evidence-says",
      "heading": "What the evidence says about pattern reliability",
      "url": "https://thetraderwiki.com/en/chart-patterns/#what-the-evidence-says",
      "paragraphs": [
        "Most trading guides suggest you can rely on chart patterns more than the evidence supports. The best-known academic test used a computer to scan US shares from 1962 to 1996 for ten patterns, including head and shoulders and double bottoms. It found that several of the patterns “do provide incremental information and may have some practical value” (Lo, Mamaysky and Wang, 2000). That means returns after a pattern looked statistically different from returns in general, but it doesn’t mean a trader could have made money from them after costs.",
        "A test of the head and shoulders on daily exchange rates from 1973 to 1994 found that trading it made a profit, but that much simpler rules made more (Chang and Osler, 1999). Support and resistance levels published by six currency firms were the subject of a study that found “strong evidence that the levels help to predict intraday trend interruptions”. The results varied between firms and currency pairs (Osler, 2000).",
        "Of 95 modern studies of technical trading rules, a review counted 56 with positive results, 20 with negative and 19 mixed. The reviewers warned that many positive results suffer from data snooping (Park and Irwin, 2007). Data snooping means testing many rules on the same data and reporting the winners. That’s the same trap as overfitting a backtest.",
        "There’s no independent, peer-reviewed evidence that any candlestick patterns predict prices. Nothing in these studies covers a retail CFD account with its spread and financing. All of this research also uses data that is decades old."
      ],
      "links": [
        {
          "label": "Lo, Mamaysky and Wang, 2000",
          "url": "https://www.nber.org/papers/w7613",
          "type": "source",
          "title": "Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation (NBER Working Paper 7613)",
          "publisher": "National Bureau of Economic Research"
        },
        {
          "label": "Chang and Osler, 1999",
          "url": "https://econpapers.repec.org/RePEc:ecj:econjl:v:109:y:1999:i:458:p:636-61",
          "type": "source",
          "title": "Methodical Madness: Technical Analysis and the Irrationality of Exchange-Rate Forecasts (Economic Journal, vol. 109)",
          "publisher": "Royal Economic Society"
        },
        {
          "label": "Osler, 2000",
          "url": "https://www.newyorkfed.org/research/epr/00v06n2/0007osle.html",
          "type": "source",
          "title": "Support for Resistance: Technical Analysis and Intraday Exchange Rates (Economic Policy Review, vol. 6, no. 2)",
          "publisher": "Federal Reserve Bank of New York"
        },
        {
          "label": "Park and Irwin, 2007",
          "url": "https://ideas.repec.org/a/bla/jecsur/v21y2007i4p786-826.html",
          "type": "source",
          "title": "What Do We Know About The Profitability Of Technical Analysis?",
          "publisher": "Journal of Economic Surveys (via IDEAS/RePEc)"
        },
        {
          "label": "overfitting",
          "url": "https://thetraderwiki.com/en/glossary/#overfitting",
          "type": "internal"
        },
        {
          "label": "backtest",
          "url": "https://thetraderwiki.com/en/glossary/#backtesting",
          "type": "internal"
        },
        {
          "label": "spread",
          "url": "https://thetraderwiki.com/en/costs-and-fees/#spread",
          "type": "internal"
        }
      ]
    },
    {
      "type": "list",
      "id": "why-patterns-fail",
      "heading": "Why chart patterns fail",
      "url": "https://thetraderwiki.com/en/chart-patterns/#why-patterns-fail",
      "intro": [
        "Why chart patterns fail has little to do with how carefully you draw them."
      ],
      "ordered": false,
      "items": [
        "You only know a pattern is complete in hindsight. A head and shoulders is just three bumps until the price breaks the line, and many sets of three bumps never break.",
        "Two traders draw the same chart differently. Where the neckline or trend line goes is a judgement. The computer tests above only worked because they replaced that judgement with fixed rules.",
        "Breakouts often reverse. The price crosses the line, sets off the orders sitting there, then returns. Our trading strategies page explains why breakout rules lose in ranging markets.",
        "Short timeframes are mostly noise. You’ll see dozens of hammers and dojis on a five-minute chart each day, and the spread takes up a larger part of every small price move.",
        "News ignores the chart. A rate decision moves the price through any pattern. So does an earnings report. The economic calendar tells you when both are due."
      ],
      "links": [
        {
          "label": "trading strategies",
          "url": "https://thetraderwiki.com/en/trading-strategies/#breakout",
          "type": "internal"
        },
        {
          "label": "economic calendar",
          "url": "https://thetraderwiki.com/en/economic-calendar/",
          "type": "internal"
        }
      ]
    },
    {
      "type": "callout",
      "id": "patterns-warning",
      "heading": "A pattern is a description, and your money is still at risk",
      "url": "https://thetraderwiki.com/en/chart-patterns/#patterns-warning",
      "variant": "warning",
      "label": "Risk warning",
      "paragraphs": [
        "A pattern describes what the price has already done. Your margin, the deposit your provider holds while a trade is open, is at risk in what the price does next. With leverage, a trade is much bigger than your deposit and a failed pattern costs you the full move on the full trade size. National regulators found that between 74 % and 89 % of retail CFD accounts lost money, as ESMA reported (ESMA press release). Those accounts had the same candlestick charts and drawing tools as everyone else. If you want to see how often a pattern works for you, a demo account and a written record of every trade cost nothing."
      ],
      "links": [
        {
          "label": "margin",
          "url": "https://thetraderwiki.com/en/glossary/#margin",
          "type": "internal"
        },
        {
          "label": "leverage",
          "url": "https://thetraderwiki.com/en/leverage-and-margin/",
          "type": "internal"
        },
        {
          "label": "ESMA",
          "url": "https://www.esma.europa.eu/",
          "type": "source",
          "title": "European Securities and Markets Authority",
          "publisher": "ESMA"
        },
        {
          "label": "ESMA press release",
          "url": "https://www.esma.europa.eu/press-news/esma-news/esma-agrees-prohibit-binary-options-and-restrict-cfds-protect-retail-investors",
          "type": "source",
          "title": "ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors",
          "publisher": "ESMA"
        },
        {
          "label": "demo account",
          "url": "https://thetraderwiki.com/en/demo-accounts/",
          "type": "internal"
        }
      ]
    },
    {
      "type": "faq",
      "id": "chart-pattern-questions",
      "heading": "Common questions about candlestick and chart patterns",
      "url": "https://thetraderwiki.com/en/chart-patterns/#chart-pattern-questions",
      "intro": [
        "Candlestick patterns and chart patterns bring up the same limited set of questions in search. Each answer below is independent."
      ],
      "items": [
        {
          "id": "what-are-candlestick-patterns",
          "question": "What are candlestick patterns?",
          "url": "https://thetraderwiki.com/en/chart-patterns/#what-are-candlestick-patterns",
          "answer": [
            "Candlestick patterns are named shapes made by one to three candles on a price chart. Examples include the doji, the hammer and the engulfing pattern. Each candle shows the open, high, low and close for one period. Traders read the shapes as signs that buyers or sellers are gaining control. Research hasn’t shown the shapes predict prices well enough to cover trading costs."
          ]
        },
        {
          "id": "what-is-bullish-engulfing",
          "question": "What is a bullish engulfing pattern?",
          "url": "https://thetraderwiki.com/en/chart-patterns/#what-is-bullish-engulfing",
          "answer": [
            "A bullish engulfing pattern forms after a fall with two candles: a small falling candle, then a rising one whose body fully covers the first candle’s body. Traders see this as a sign that buyers have taken control and the fall may be ending. A bearish engulfing pattern is the opposite, appearing after a rise. Neither pattern alone is a reliable signal."
          ]
        },
        {
          "id": "what-is-head-and-shoulders",
          "question": "What is a head and shoulders pattern?",
          "url": "https://thetraderwiki.com/en/chart-patterns/#what-is-head-and-shoulders",
          "answer": [
            "A head and shoulders pattern appears after a rise and has three peaks, the middle one being the tallest. The neckline links the two dips between those peaks. Traders read a close below the neckline as a sign that the rise has finished. One academic test on exchange rates found the pattern made a profit but did worse than simpler rules (Chang and Osler, 1999)."
          ]
        },
        {
          "id": "flag-vs-pennant",
          "question": "What is the difference between a flag pattern and a pennant pattern?",
          "url": "https://thetraderwiki.com/en/chart-patterns/#flag-vs-pennant",
          "answer": [
            "A flag pattern and a pennant pattern are both short pauses after a sharp move. The flag’s pause sits between two parallel lines that slope against the move. The pennant’s two lines come together into a small triangle. Traders read both as a rest before the move carries on, and both can break the other way."
          ]
        },
        {
          "id": "how-reliable-are-chart-patterns",
          "question": "How reliable are chart patterns?",
          "url": "https://thetraderwiki.com/en/chart-patterns/#how-reliable-are-chart-patterns",
          "answer": [
            "Chart patterns have no established success rate. In old share and currency data, academic tests found that some patterns carry a little information (Lo, Mamaysky and Wang, 2000). The studies cited here don’t show a retail trader profiting from them after costs. Any percentages quoted on trading websites depend on the author’s own definitions and test period."
          ]
        }
      ],
      "links": [
        {
          "label": "Chang and Osler, 1999",
          "url": "https://econpapers.repec.org/RePEc:ecj:econjl:v:109:y:1999:i:458:p:636-61",
          "type": "source",
          "title": "Methodical Madness: Technical Analysis and the Irrationality of Exchange-Rate Forecasts (Economic Journal, vol. 109)",
          "publisher": "Royal Economic Society"
        },
        {
          "label": "Lo, Mamaysky and Wang, 2000",
          "url": "https://www.nber.org/papers/w7613",
          "type": "source",
          "title": "Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation (NBER Working Paper 7613)",
          "publisher": "National Bureau of Economic Research"
        }
      ]
    },
    {
      "type": "sources",
      "id": "sources",
      "heading": "Sources",
      "url": "https://thetraderwiki.com/en/chart-patterns/#sources",
      "intro": [
        "The original documents this page cites, in the order they first appear."
      ],
      "items": [
        {
          "key": "lo-mamaysky-wang-2000",
          "title": "Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation (NBER Working Paper 7613)",
          "publisher": "National Bureau of Economic Research",
          "date": "2000-03-01",
          "url": "https://www.nber.org/papers/w7613"
        },
        {
          "key": "chang-osler-1999",
          "title": "Methodical Madness: Technical Analysis and the Irrationality of Exchange-Rate Forecasts (Economic Journal, vol. 109)",
          "publisher": "Royal Economic Society",
          "date": "1999-10-01",
          "url": "https://econpapers.repec.org/RePEc:ecj:econjl:v:109:y:1999:i:458:p:636-61"
        },
        {
          "key": "osler-2000-support-resistance",
          "title": "Support for Resistance: Technical Analysis and Intraday Exchange Rates (Economic Policy Review, vol. 6, no. 2)",
          "publisher": "Federal Reserve Bank of New York",
          "date": "2000-07-01",
          "url": "https://www.newyorkfed.org/research/epr/00v06n2/0007osle.html"
        },
        {
          "key": "park-irwin-2007",
          "title": "What Do We Know About The Profitability Of Technical Analysis?",
          "publisher": "Journal of Economic Surveys (via IDEAS/RePEc)",
          "date": "2007-09-01",
          "url": "https://ideas.repec.org/a/bla/jecsur/v21y2007i4p786-826.html"
        },
        {
          "key": "esma",
          "title": "European Securities and Markets Authority",
          "publisher": "ESMA",
          "url": "https://www.esma.europa.eu/"
        },
        {
          "key": "esma-2018-press",
          "title": "ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors",
          "publisher": "ESMA",
          "date": "2018-03-27",
          "url": "https://www.esma.europa.eu/press-news/esma-news/esma-agrees-prohibit-binary-options-and-restrict-cfds-protect-retail-investors"
        }
      ]
    }
  ],
  "related": [
    {
      "title": "Technical analysis: what price history can tell you",
      "url": "https://thetraderwiki.com/en/technical-analysis/",
      "blurb": "Chart types, trend, support and resistance, why every indicator lags, and why good backtests mislead."
    },
    {
      "title": "Technical indicators: RSI, MACD, moving averages and more",
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