{"id":939100,"date":"2023-11-10T13:45:22","date_gmt":"2023-11-10T11:45:22","guid":{"rendered":"https:\/\/www.etoro.com\/trading\/charting-and-candlestick-patterns\/"},"modified":"2025-11-25T08:55:52","modified_gmt":"2025-11-25T06:55:52","slug":"charting-and-candlestick-patterns","status":"publish","type":"page","link":"https:\/\/www.etoro.com\/en-us\/trading\/charting-and-candlestick-patterns\/","title":{"rendered":"Charting and Candlestick Patterns"},"content":{"rendered":"\n

Candlestick patterns offer immediate insights into market conditions and can often be used to identify signals that suggest that the price will shortly go up or down. Candlestick pattern analysis considers each candlestick\u2019s real body and the length of its shadows.<\/p>\n\n\n\n\n\n\n

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Technical analysis chart patterns, formed by price movements, are closely monitored by traders and <\/strong>investors<\/strong><\/a>. This is because the shapes formed on charts can act as indicators of future price moves.<\/p>\n\n\n\n

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Tip:<\/strong> Pattern trading can be used to trade any financial market.<\/p>\n<\/div><\/div>\n\n\n\n

What are charting patterns?<\/h2>\n\n\n\n

Chart patterns are shapes formed as price data is recorded on charts over time. When particular patterns form, they can offer indications as to which direction the price might move in the future. <\/mark><\/p>\n\n\n\n

Generally speaking, the more signals that align, the greater confidence<\/strong> you can have in a trading decision.<\/p>\n\n\n\n

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Key charting patterns for technical analysis<\/h2>\n\n\n\n

Some patterns appear relatively frequently, while others occur less often. Remember, each pattern must be considered within its particular context <\/strong>\u2014 the frequency with which a pattern forms does not necessarily influence the degree to which it will be accurate.<\/p>\n\n\n\n

Uptrend<\/h3>\n\n\n\n

Uptrends are formed when price action makes higher highs and higher lows. Upward trendlines are formed by connecting at least two of the price lows.<\/strong><\/p>\n\n\n\n

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Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

Downtrend<\/h3>\n\n\n\n

Downtrends are formed when price action makes lower highs and lower lows. Downward trendlines are formed by connecting at least two of the price highs<\/strong>.<\/p>\n\n\n\n

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Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

Double\/triple top & bottoms<\/h3>\n\n\n\n

A double or triple top pattern is formed when an upward trend fails to break through a price resistance level, despite making at least two attempts to do so. Double and triple bottoms are formed<\/strong> when a downward trending market bottoms out at a support level.<\/p>\n\n\n\n

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For illustration purposes only. Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

Rectangles<\/h3>\n\n\n\n

When price trades sideways, the highs and lows of the trading channel can be used to form a rectangular price pattern. Rectangle patterns offer an opportunity to range trade<\/strong>, which involves buying at the bottom and selling at the top of the range.<\/p>\n\n\n\n

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Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

Flags & pennants<\/h3>\n\n\n\n

In some patterns, an upward price move can be interpreted as a flagpole<\/strong>, and when followed by a period of price consolidation, the chart forms the shape of a flag or pennant. <\/p>\n\n\n\n

A breakout of the flag or pennant to the upside can be seen as an indicator of further bullish price movement, while a downward break is a bearish<\/e-tip> indicator.<\/p>\n\n\n\n

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Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

Head & shoulders<\/h3>\n\n\n\n

A head & shoulders pattern is similar to a triple top pattern, except that the central price spike is higher than the surrounding two price highs. It also incorporates a \u201cneckline\u201d <\/strong>support\/resistance price level, and a break below this is considered a bearish signal.<\/p>\n\n\n\n

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Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

What are candlestick patterns?<\/h2>\n\n\n\n

Candlestick chart patterns consider price history<\/strong> over a specific time interval and can therefore be used to identify future price moves. <\/p>\n\n\n\n

They allow investors<\/a> to consider data relating to the opening price, closing price, low price and high price<\/strong> of an asset, across one of a range of time intervals.<\/p>\n\n\n\n

Each candle is, itself, a pattern, though it is also possible to find signals by considering the pattern formed by a sequence of candles<\/strong>.<\/p>\n\n\n\n

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Key candlestick patterns<\/h2>\n\n\n\n

Candlestick pattern analysis considers each candlestick\u2019s real body and the length of its shadows<\/strong>, which is enough information for some traders to build an effective strategy<\/a> with. <\/mark><\/p>\n\n\n\n

Doji<\/h3>\n\n\n\n

These occur when buyers and sellers push an asset\u2019s price<\/strong> to relatively extreme lengths during a particular time period, but the price ends up close to where it started at the end of the trading session. A doji is typically considered a sign that there is a degree of indecision in the markets.<\/p>\n\n\n\n

Shooting star<\/h3>\n\n\n\n

This is a candlestick pattern found in an upward trending market<\/strong>, and it typically points to market mood<\/e-tip> turning bearish<\/a>. The upper shadow needs to be at least twice the height of the real body length, and the real body needs to be located at the bottom of the day\u2019s trading range.<\/p>\n\n\n\n

Hammer<\/h3>\n\n\n\n

Similar to the shooting star, a hammer is a bullish<\/e-tip> candlestick signal <\/strong>that is found on a downward trending price chart. It is typically interpreted as a sign that a market could be about to rebound.<\/p>\n\n\n\n

Inverted hammer<\/h3>\n\n\n\n

An inverted hammer is formed by the opening, closing and low price of candlesticks <\/strong>being similar, with a long upper shadow pointing to the potential for bullish price action to be seen at some point during the session. It is usually considered a sign that a bearish trend might be about to reverse.<\/p>\n\n\n\n

Hanging man<\/h3>\n\n\n\n

Similar in shape to the inverted hammer<\/strong>, the hanging man is seen when price is trending upward, not downward.<\/p>\n\n\n\n

Star<\/h3>\n\n\n\n

A star signal can indicate the reversal of a downward or upward trend<\/strong>. The key element is the smaller real body of the second candlestick, and a gap existing between the bodies of the two candles.<\/p>\n\n\n\n

Doji star<\/h3>\n\n\n\n

A doji star is a trend reversal signal. It is similar to the star signal<\/strong>, but the second candle forms a doji pattern.<\/p>\n\n\n\n

Harami<\/h3>\n\n\n\n

A harami is formed when the real body of a second candle is contained within the body of the preceding one. If the first candle is in line with the current trend<\/strong>, a harami can suggest that the trend is about to reverse.<\/p>\n\n\n\n

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Tip:<\/strong> Patterns that form over a longer time frame typically have a greater influence on long-term price moves.<\/p>\n<\/div><\/div>\n\n\n\n

How do traders use candlestick patterns?<\/h2>\n\n\n\n

Candlestick patterns are incredibly popular. The widespread use of trading candlestick patterns is largely based on the key features <\/strong>of the approach.<\/p>\n\n\n\n

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