Introduction: Candlesticks as the Core of Technical Analysis
Candlesticks form the foundation of price action trading - this guide reveals how hedge fund managers build bulletproof trading systems using 320 chart patterns to target $1M+ profits.
Chapter 1: Candlestick Fundamentals for Consistent Gains
1-1 Candlestick Anatomy 101
- Body colors: Bullish (green/white) vs Bearish (red/black)
- Wicks: Upper (high) and lower (low) shadows reveal rejection levels
1-2 Timeframe Selection
| Timeframe | Best For |
|---|---|
| 30-60min | Day trading entries |
| Daily | Swing trading trends |
| Weekly/Monthly | Long-term investment signals |
1-3 Body Size Classification
👉 Master candlestick body analysis
- Micro: <1% price range - indecision
- Small: 1-3% range - mild momentum
- Medium: 3-7% range - strong conviction
- Large: >7% range - extreme volatility
1-4 Wick Analysis Secrets
- No wick: Strong directional close
- Long upper wick: Rejection at highs (potential reversal)
- Long lower wick: Support holding (bullish continuation)
Chapter 2: Decoding Price Action Through Candles
2-1 Trend Identification
- Consecutive large bullish bodies = uptrend acceleration
- Shrinking bullish bodies = momentum loss
2-2 Opening/Closing Price Psychology
- Gap-up close above open: Bullish institutional buying
- Gap-down close below open: Panic selling exhaustion
2-3 Wick-Based Trading Signals
- Upper wick >2x body = short opportunity
- Lower wick >3x body = long setup
Chapter 3: Single Candlestick Patterns (7 Buy/7 Sell Signals)
3-1 Trading System Essentials
- Risk management rules before pattern recognition
3-2 Bottom Reversal Buy Signals
- Hammer: Long lower wick after downtrend
- Bullish Engulfing: Green body swallows prior red candle
3-5 Top Reversal Sell Signals
- Shooting Star: Long upper wick after uptrend
- Bearish Engulfing: Red body consumes prior green candle
Chapter 4: Multi-Candlestick Formations (14 Buy/16 Sell Triggers)
4-1 Bottom Reversal Combos
- Morning Star: 3-candle bullish reversal
- Piercing Line: Downtrend break with gap support
4-3 Top Reversal Combos
- Evening Star: 3-candle bearish reversal
- Dark Cloud Cover: Failed breakout with overhead supply
👉 Advanced candlestick pattern strategies
Chapter 5: 5 Bottom Reversal Patterns
5-2 Double Bottom
- Entry: Break above neckline
- Target: 100% pattern height projected upward
Chapter 6: 5 Top Reversal Patterns
6-3 Head & Shoulders
- Confirmation: Close below neckline
- Volume: Declining on right shoulder
Chapter 7: Moving Average Confluence
7-2 Golden Cross Buy Signal
- 50MA crosses 200MA upward + candle close above
Chapter 8: Volume-Price Confirmation
8-2 Bullish Volume Signals
- Breakout candles with 150%+ average volume
FAQ Section
Q: How many candlestick patterns should I memorize?
A: Focus on 10 high-probability patterns (3 reversal, 3 continuation, 4 indicators)
Q: What's the optimal win rate for candlestick trading?
A: 55-65% with 1:2+ risk-reward produces sustainable profits
Q: Which timeframe works best for candlestick analysis?
A: Daily charts for swing trading, 4H for day trading
Q: How to filter false candlestick signals?
A: Require confirmation from volume surges or indicator divergences