Master the secrets of 5 major candlestick patterns and say goodbye to blind trading from now on

Why Are Candlestick Pattern Combinations So Important?

Many traders focus solely on price charts, overlooking a key tool—candlestick pattern combinations. In fact, since the launch of the domestic stock market in 1990, candlesticks have become a core element of technical analysis. However, for a long time, people’s understanding of candlesticks has remained superficial, based on Japanese classic studies, often observing single or a few candlesticks in isolation without a systematic framework.

Candlestick charts (also called yin-yang candles) originate from 17th-century Japanese rice market trading records and were later introduced into stock and crypto markets. They are widely used because they clearly display four key data points—opening price, closing price, highest price, and lowest price—helping traders quickly assess the balance of buying and selling forces.

Classification Logic of Candlestick Pattern Combinations

To understand candlesticks, one must first recognize a fact: the complete candlestick system includes 48 types, divided into 24 bullish (yang) and 24 bearish (yin) patterns. But rather than memorizing these details blindly, it’s more important to grasp the core principle—body size and shadow length determine the future trend.

Core features of bullish (yang) candles:

• The larger the body, the stronger the buying pressure, usually indicating an upward trend
• Longer lower shadow suggests strong support at lows, increasing the probability of a rise
• Longer upper shadow indicates significant selling pressure, warranting caution for a pullback

Core features of bearish (yin) candles:

• The larger the body, the more dominant the selling pressure, generally leading to downward movement
• Longer lower shadow indicates solid support at the bottom, possibly signaling a rebound
• Longer upper shadow suggests heavy selling at the top, with a potential continuation of the decline

Detailed Explanation of 5 Major Candlestick Pattern Types

1. Morning Star—A Reversal Signal in a Downtrend

In a continuing downtrend, the appearance of this candlestick pattern often signals an imminent improvement. Specifically:

The first day shows a strong long bearish candle, confirming that downward momentum persists; the next day’s price gaps down, possibly forming a doji or hammer, with the lowest point below the previous day’s low, creating a downward gap. This gap is critical as it indicates diminishing selling pressure; on the third day, a powerful long bullish candle appears, with buyers regaining control and gradually recovering lost ground.

The morning star typically appears at the end of a downtrend. Combining volume and other indicators can improve prediction accuracy. It is a relatively clear bottom reversal signal, and traders may consider establishing long positions.

2. Evening Star—A Warning of Danger in an Uptrend

If the morning star signals hope, the evening star rings the alarm. This candlestick pattern appearing during an uptrend often indicates that the top is near.

During an upward phase, a long bullish candle reflects continued buying momentum; the following day, the price gaps up, forming a doji or hammer, with the high exceeding the previous day’s high, creating an upward gap; on the third day, a heavy long bearish candle drops, dominating the market.

The danger of the evening star lies in its clear reversal signal. When this pattern appears during an uptrend, it’s prudent to consider profit-taking or reducing positions. Especially when volume confirms the reversal, the risk signal is amplified.

3. Three White Soldiers—A Classic Bullish Pattern

The three white soldiers are among the most common bullish signals. Once this pattern is confirmed, the probability of further upward movement is quite high.

It consists of three consecutive bullish candles, each closing higher than the previous; each candle opens within the previous candle’s body; each closes near its high. This arrangement reflects persistent strong buying.

While the three white soldiers are classic bullish signals, in practice, it’s difficult to define them absolutely due to variations. Traders should remain flexible and consider market context.

4. Three Black Crows—A Reversal Warning During an Uptrend

Opposite to the three white soldiers are the three black crows. When this pattern appears during a rally, it often signals a top or a forthcoming correction.

Three consecutive bearish candles, each closing below the previous day’s low, forming a step-down pattern; each opens within the previous body; each closes near its low, indicating accumulating selling strength.

When the three black crows pattern appears, there are two possibilities: either the top is near, or the market has been at a high level for some time. In either case, further decline is worth caution. Consider reducing holdings or staying on the sidelines.

5. Double Black Crows—Signs of Waning Momentum

At the top of an upward move, this pattern indicates that the bulls are losing strength.

First, a strong long bullish candle appears, continuing the upward trend; the next day, the price gaps up again but quickly falls back, closing lower and forming a downward gap; on the third day, the price gaps up again but closes lower, with a bearish candle large enough to engulf the previous day’s candle.

The danger of the double black crows pattern is that the bulls’ two-day rally fails, signaling a clear weakening of momentum. The risk of an island reversal also increases. When encountering this pattern, traders should be alert, consider taking profits or reducing positions, and wait for clearer market signals.

Practical Tips for Application

Mastering candlestick pattern combinations is just the starting point; profitability depends on execution. While indicators and candlestick analysis are essential tools, they are ultimately just references and should not be blindly trusted. Even the most classic patterns can perform differently across various market environments and timeframes.

Always combine volume confirmation, cross-verify with other indicators, and adjust your position size according to your risk tolerance. Candlestick patterns are just one dimension of judgment; true trading wisdom comes from experience and respect for the market.