Seven named candlestick formations — the patterns that every professional forex trader and technical analyst studies. Each one illustrated with a chart example and broken down to its signal-level fingerprint.
Candlestick chart analysis was developed by Japanese rice traders in the 18th century and has been refined over 300 years into one of the most widely used technical analysis frameworks in all of financial trading. The seven patterns in this guide — Engulfing, Hammer, Morning Star, Doji, Marubozu, Three-Line Strike, and Rising/Falling Three — are the most important named candlestick formations you will encounter in forex.
Each pattern appears as a distinct scenario within Trend Or Trap's 45 market regimes. The tool generates authentic candlestick structure — the Marubozu candles genuinely have no wicks, the Hammer candles have genuine long lower wicks, and the Morning Star sequences show the authentic three-candle structure that makes the pattern recognizable.
Understanding these patterns at both the visual level (what they look like) and the mechanical level (why they form and what they mean) is the foundation of price action trading. Part 1 of this series covered trending patterns. Part 2 covered trap patterns. This is the third and final part.
A two-candle pattern where the second candle's body completely engulfs the body of the first. Bullish Engulfing: a small bearish candle followed by a large bullish candle whose body extends both above the prior open and below the prior close. Bearish Engulfing: the reverse. This pattern signals a total and immediate transfer of control from one side to the other.
Candle anatomy: Candle 1: smaller body, moderate wicks. Candle 2: body substantially larger than Candle 1, positioned so it completely contains Candle 1's body. The engulfing candle typically has small wicks relative to its body — conviction is high, there was little pushback. The larger the engulfing candle relative to the prior candle, the stronger the signal.
Signal fingerprint: The engulfing candle creates an immediate and sharp shift in Momentum Quality — from the prior direction to the reversal direction. Close Position jumps from one extreme to the other. Structure shifts to STRONG in the engulfing direction. The reversal signal is clean and immediate because the engulfing candle's mechanics leave no ambiguity about who just took control.
Appears after a downtrend. The Hammer has a small body near the top of the candle's range and a long lower wick at least twice the length of the body — sometimes three to five times longer. The long lower wick is the signature: sellers pushed price dramatically lower during the period, but buyers came in so aggressively that they recovered all the losses and closed near the high. Buyers overwhelmed sellers completely.
Candle anatomy: Small body positioned in the upper third of the candle's full high-low range. The lower wick dominates — it is the most visible feature of the candle and extends dramatically below the body. Small or no upper wick. Color of the body is less important than the wick structure, though a bullish (green) body after a downtrend reinforces the signal. The Inverted Hammer has the same implications but with a long upper wick and small body near the bottom.
Signal fingerprint: The Hammer formation in Trend Or Trap creates a distinctive signal reading: Close Position shifts to UPPER RANGE (despite the appearance of selling pressure during the period). Structure reads INDECISIVE due to the large wick. Momentum Quality shows the shift — the body weighting now favors the recovery direction. The combination of Close Position UPPER and the wick-dominated structure is the diagnostic fingerprint.
A three-candle reversal pattern. Morning Star (bullish reversal after downtrend): a large bearish candle, followed by a small-bodied indecision candle (the 'star' — ideally a Doji), followed by a large bullish candle that recovers at least 50% of the first candle's range. Evening Star (bearish reversal after uptrend): the exact mirror sequence. The middle 'star' candle is the pivot — it shows the moment when the prior momentum exhausted.
Candle anatomy: Three clearly distinct candles: first is large-bodied in the trend direction. Second is small-bodied — minimal body, possibly a Doji — showing equilibrium. Third is large-bodied in the reversal direction, ideally with its close beyond the midpoint of the first candle. The three-candle sequence tells a story: conviction, doubt, reversal.
Signal fingerprint: The star candle creates an interesting signal reading: Momentum Quality briefly reads INDECISIVE as the small body registers equal weighting. Close Position reads MID RANGE. Then the third candle shifts everything: Momentum Quality, Structure, and Close Position all move to the reversal direction simultaneously. The three-candle combination is one of the few patterns where a brief INDECISIVE Momentum Quality reading is actually a bullish (or bearish) precursor.
A candle where the opening and closing prices are virtually identical — creating a candle with essentially no body. Only wicks remain. The Long-Legged Doji has substantial wicks on both sides, indicating that price traveled far in both directions during the period before returning to the same point it started. This represents perfect equilibrium: buyers and sellers fought to a draw.
Candle anatomy: The defining characteristic is the near-equal open and close — the body is so small it may appear as a horizontal line. Long wicks extend above and below. The total candle range (high to low) is large relative to the body. The Long-Legged Doji after a strong trend signals that the trend's momentum has stalled — but it does not predict direction. Both sides are equally matched.
Signal fingerprint: Doji candles create one of the most ambiguous signal readings on the tool. Momentum Quality reads INDECISIVE — body weighting is near zero. Structure reads INDECISIVE due to the dominant wicks. Close Position reads MID RANGE. The Prediction Meter strength drops significantly. This is correct: a Doji genuinely signals uncertainty, and a NEUTRAL or WEAK prediction from the meter accurately reflects the market's state.
A large body candle with no wicks — or nearly none. Price opened at one extreme and closed at the other with almost no retrace at any point during the period. The name comes from Japanese, roughly meaning 'close-cropped' or 'bald' — a reference to the absence of wicks. A bullish Marubozu means buyers were so dominant that sellers never even briefly controlled price. No wick means no pushback was possible.
Candle anatomy: Large body. No visible upper wick (or near-zero). No visible lower wick (or near-zero). The candle looks like a clean rectangle on the chart. Bullish Marubozu: opens at the low of the period and closes at the high. Bearish Marubozu: opens at the high and closes at the low. Wicks of less than 5% of the body length still qualify as near-Marubozu.
Signal fingerprint: Marubozu candles generate the cleanest, most decisive signal readings on the tool. Structure reads STRONG — the body-to-wick ratio is maximized, showing absolute conviction. Momentum Quality reads STRONG because large, consistent bodies dominate the weighting. Close Position reads at the extreme (TOP THIRD or BOTTOM THIRD). When the final candles are Marubozu formations, the Prediction Meter registers near-maximum confidence.
A four-candle pattern: three candles in the trend direction with progressively advancing closes, followed by a fourth massive counter-trend candle that engulfs all three. The strike candle looks like the reversal signal of the century — it retraces everything the three trend candles achieved in a single candle. This is the non-trap element: despite appearances, the Three-Line Strike most often acts as a liquidity flush before the trend resumes.
Candle anatomy: Three consecutive trend candles, each closing further in the trend direction. Then a single large candle moving opposite that retraces past the start of the first of the three candles. The strike candle is typically the largest single candle in the pattern. After the strike, watch for trend resumption candles — the three-line strike was the flush, not the reversal.
Signal fingerprint: The strike candle creates a dramatic signal reversal: Momentum Quality, Close Position, and Structure all shift hard against the prior trend. The Prediction Meter may briefly show high confidence in the counter direction. But EMA Spread and EMA Velocity still reflect the prior trend. This split — some signals shifted, others not — distinguishes the flush from a genuine reversal.
A five-candle continuation pattern: one large trend candle, three small counter-trend candles that stay entirely within the range of the large candle, then another large trend candle that resumes the original direction. The three small counter-trend candles represent a brief pause for breath — a minor consolidation — before the trend continues. This is the market's confirmation that the large trend candle was not a one-off but a genuine directional move.
Candle anatomy: Large trend candle with a wide range. Three consecutive small candles moving against the trend — each one contained within the high-low range of the first large candle. These three candles should not close beyond the first candle's extremes. Then a second large candle in the original direction, closing at or beyond the first large candle's close.
Signal fingerprint: The three small counter-trend candles create a temporary signal ambiguity: Momentum Quality may show a slight shift, Trend Consistency dips briefly. But EMA Spread and EMA Velocity remain pointed in the original trend direction throughout. The second large candle restores full signal alignment. The pattern is readable because the ambiguity during the three-candle pause is mild — the EMA structure holds the read.
Every candlestick pattern is more powerful in context. A Hammer at the bottom of a confirmed downtrend, forming on the EMA 200 support level, during the London session open, is a high-probability signal. The same Hammer appearing in the middle of a sideways market is noise.
The question to ask with every candlestick pattern: what is the surrounding structure? Where is price relative to the major EMAs? Does the pattern appear at a significant price level — a prior swing high, a round number, a major moving average? Is the pattern forming in a high-volume session or a low-volume one?
Trend Or Trap embeds all of these patterns within 200-candle context — the same way they appear on live charts. That context is what makes the practice valuable. You are not learning to recognize an isolated Hammer in a vacuum. You are learning to recognize a Hammer after a downtrend, with the EMA configuration telling you whether the bounce has support. That contextual recognition is the real skill.
Practice each candlestick pattern until you can spot it at a glance, understand what the signal engine is reading during its formation, and know whether the surrounding context supports trading the signal or filtering it out. That level of pattern fluency takes repetition — and Trend Or Trap is built to provide it.
All 7 candlestick patterns are live in Trend Or Trap's training console. Each one labeled after the reveal.
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