Candlestick Patterns Reference
Overview
Candlestick patterns are visual representations of price action that can signal potential market reversals or continuations. x3Algo supports 9 candlestick patterns that can be used in entry conditions to enhance signal quality.
Pattern Categories
Single-Candle Patterns
- Hammer
- Shooting Star
- Doji
- Marubozu
- Spinning Top
Two-Candle Patterns
- Bullish Engulfing
- Bearish Engulfing
Three-Candle Patterns
- Morning Star
- Evening Star
Single-Candle Patterns
Hammer
Type: Bullish Reversal
Detection Criteria:
- Long lower wick (at least 2x the body length)
- Small body at the top of the candle
- Little to no upper wick
- Appears after a downtrend
Visual Representation:
┌─┐
│ │ Small body
└─┘
│
│ Long lower wick
│
│
Significance: The hammer indicates that sellers pushed prices lower during the session, but buyers regained control and pushed prices back up near the open. This shows potential buying pressure and possible trend reversal.
Strategy Example:
{
"entryConditions": {
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "hammer",
"operator": "detected"
},
{
"type": "indicator_value",
"indicator": "RSI",
"period": 14,
"operator": "below",
"value": 30
}
],
"logicalOperator": "AND"
}
}
Best Used With:
- RSI oversold conditions
- Support levels
- Downtrend reversals
Shooting Star
Type: Bearish Reversal
Detection Criteria:
- Long upper wick (at least 2x the body length)
- Small body at the bottom of the candle
- Little to no lower wick
- Appears after an uptrend
Visual Representation:
│
│ Long upper wick
│
│
┌─┐
│ │ Small body
└─┘
Significance: The shooting star shows that buyers pushed prices higher during the session, but sellers regained control and pushed prices back down near the open. This indicates potential selling pressure and possible trend reversal.
Strategy Example:
{
"entryConditions": {
"positionType": "short",
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "shooting_star",
"operator": "detected"
},
{
"type": "indicator_value",
"indicator": "RSI",
"period": 14,
"operator": "above",
"value": 70
}
],
"logicalOperator": "AND"
}
}
Best Used With:
- RSI overbought conditions
- Resistance levels
- Uptrend reversals
Doji
Type: Indecision/Reversal
Detection Criteria:
- Very small body (open ≈ close)
- Can have wicks of varying lengths
- Body size less than 10% of the total candle range
Visual Representation:
│
│ Upper wick
│
─┼─ Tiny body
│
│ Lower wick
│
Significance: A doji indicates indecision in the market where neither buyers nor sellers gained control. At trend extremes, it can signal potential reversals. In ranging markets, it shows equilibrium.
Strategy Example:
{
"entryConditions": {
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "doji",
"operator": "detected"
},
{
"type": "price_indicator",
"priceType": "close",
"indicator": "SMA",
"period": 200,
"operator": "above"
},
{
"type": "indicator_value",
"indicator": "Volume",
"operator": "above",
"value": 1000000
}
],
"logicalOperator": "AND"
}
}
Best Used With:
- Trend extremes
- Support/resistance levels
- Volume confirmation
Marubozu
Type: Strong Continuation
Detection Criteria:
- Large body with no wicks (or very small wicks)
- Bullish Marubozu: Opens at low, closes at high
- Bearish Marubozu: Opens at high, closes at low
- Body represents 95%+ of the candle range
Visual Representation:
Bullish: Bearish:
┌─────┐ ┌─────┐
│ │ │ │
│ │ │ │
│ │ │ │
└─────┘ └─────┘
(white/green) (black/red)
Significance: A marubozu shows strong conviction in one direction with no price rejection. Bullish marubozu indicates strong buying pressure, while bearish marubozu shows strong selling pressure.
Strategy Example:
{
"entryConditions": {
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "marubozu",
"operator": "detected"
},
{
"type": "indicator_indicator",
"indicator1": "EMA",
"period1": 9,
"indicator2": "EMA",
"period2": 21,
"operator": "crosses_above"
}
],
"logicalOperator": "AND"
}
}
Best Used With:
- Breakouts
- Trend continuations
- Strong momentum moves
Spinning Top
Type: Indecision
Detection Criteria:
- Small body (20-40% of total range)
- Long wicks on both sides
- Upper and lower wicks approximately equal length
- Body can be bullish or bearish
Visual Representation:
│
│ Upper wick
│
┌─┐
│ │ Small body
└─┘
│
│ Lower wick
│
Significance: A spinning top shows indecision with both buyers and sellers active but neither gaining control. It suggests potential trend weakening or consolidation.
Strategy Example:
{
"entryConditions": {
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "spinning_top",
"operator": "detected"
},
{
"type": "indicator_value",
"indicator": "ATR",
"period": 14,
"operator": "below",
"value": 2.0
}
],
"logicalOperator": "AND",
"confirmationCandles": 2
}
}
Best Used With:
- Range-bound markets
- Consolidation periods
- Waiting for breakout confirmation
Two-Candle Patterns
Bullish Engulfing
Type: Bullish Reversal
Detection Criteria:
- First candle: Bearish (red/black)
- Second candle: Bullish (green/white)
- Second candle's body completely engulfs first candle's body
- Second candle opens below first candle's close
- Second candle closes above first candle's open
- Appears after a downtrend
Visual Representation:
Candle 1 Candle 2
┌─┐ ┌─────┐
│ │ │ │
│ │ │ │
└─┘ │ │
│ │
└─────┘
Significance: The bullish engulfing pattern shows a strong shift from selling to buying pressure. The second candle's larger body indicates buyers have overwhelmed sellers.
Strategy Example:
{
"entryConditions": {
"positionType": "long",
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "bullish_engulfing",
"operator": "detected"
},
{
"type": "price_indicator",
"priceType": "close",
"indicator": "SMA",
"period": 50,
"operator": "above"
},
{
"type": "indicator_value",
"indicator": "MACD",
"operator": "above",
"value": 0
}
],
"logicalOperator": "AND"
}
}
Best Used With:
- Support levels
- Oversold conditions
- Trend reversal confirmation
Bearish Engulfing
Type: Bearish Reversal
Detection Criteria:
- First candle: Bullish (green/white)
- Second candle: Bearish (red/black)
- Second candle's body completely engulfs first candle's body
- Second candle opens above first candle's close
- Second candle closes below first candle's open
- Appears after an uptrend
Visual Representation:
Candle 1 Candle 2
┌─────┐
│ │
┌─┐ │ │
│ │ │ │
│ │ │ │
└─┘ └─────┘
Significance: The bearish engulfing pattern shows a strong shift from buying to selling pressure. The second candle's larger body indicates sellers have overwhelmed buyers.
Strategy Example:
{
"entryConditions": {
"positionType": "short",
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "bearish_engulfing",
"operator": "detected"
},
{
"type": "price_indicator",
"priceType": "close",
"indicator": "SMA",
"period": 50,
"operator": "below"
},
{
"type": "indicator_value",
"indicator": "MACD",
"operator": "below",
"value": 0
}
],
"logicalOperator": "AND"
}
}
Best Used With:
- Resistance levels
- Overbought conditions
- Trend reversal confirmation
Three-Candle Patterns
Morning Star
Type: Bullish Reversal
Detection Criteria:
- First candle: Large bearish candle
- Second candle: Small body (can be bullish or bearish) that gaps down
- Third candle: Large bullish candle that closes above midpoint of first candle
- Appears after a downtrend
Visual Representation:
Candle 1 Candle 2 Candle 3
┌─┐ ┌─────┐
│ │ │ │
│ │ ┌─┐ │ │
│ │ └─┘ │ │
└─┘ └─────┘
Significance: The morning star is a strong bullish reversal pattern. The small middle candle shows indecision, and the third candle confirms buyers have taken control.
Strategy Example:
{
"entryConditions": {
"positionType": "long",
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "morning_star",
"operator": "detected"
},
{
"type": "indicator_value",
"indicator": "RSI",
"period": 14,
"operator": "below",
"value": 35
},
{
"type": "indicator_indicator",
"indicator1": "MACD",
"indicator2": "MACD_Signal",
"operator": "crosses_above"
}
],
"logicalOperator": "AND",
"confirmationCandles": 1
}
}
Best Used With:
- Strong support levels
- Oversold indicators
- Volume confirmation on third candle
Evening Star
Type: Bearish Reversal
Detection Criteria:
- First candle: Large bullish candle
- Second candle: Small body (can be bullish or bearish) that gaps up
- Third candle: Large bearish candle that closes below midpoint of first candle
- Appears after an uptrend
Visual Representation:
Candle 1 Candle 2 Candle 3
┌─────┐ ┌─┐
│ │ │ │
│ │ ┌─┐ │ │
│ │ └─┘ │ │
└─────┘ └─┘
Significance: The evening star is a strong bearish reversal pattern. The small middle candle shows indecision at the top, and the third candle confirms sellers have taken control.
Strategy Example:
{
"entryConditions": {
"positionType": "short",
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "evening_star",
"operator": "detected"
},
{
"type": "indicator_value",
"indicator": "RSI",
"period": 14,
"operator": "above",
"value": 65
},
{
"type": "indicator_indicator",
"indicator1": "MACD",
"indicator2": "MACD_Signal",
"operator": "crosses_below"
}
],
"logicalOperator": "AND",
"confirmationCandles": 1
}
}
Best Used With:
- Strong resistance levels
- Overbought indicators
- Volume confirmation on third candle
Pattern Combinations with Indicators
High-Probability Setups
Hammer + RSI Oversold
{
"entryConditions": {
"positionType": "long",
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "hammer",
"operator": "detected"
},
{
"type": "indicator_value",
"indicator": "RSI",
"period": 14,
"operator": "below",
"value": 30
},
{
"type": "price_indicator",
"priceType": "close",
"indicator": "SMA",
"period": 200,
"operator": "above"
}
],
"logicalOperator": "AND",
"confirmationCandles": 1
}
}
Bullish Engulfing + Volume Surge
{
"entryConditions": {
"positionType": "long",
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "bullish_engulfing",
"operator": "detected"
},
{
"type": "indicator_value",
"indicator": "Volume",
"operator": "above",
"value": 1500000
},
{
"type": "indicator_indicator",
"indicator1": "EMA",
"period1": 20,
"indicator2": "EMA",
"period2": 50,
"operator": "above"
}
],
"logicalOperator": "AND"
}
}
Morning Star + MACD Bullish
{
"entryConditions": {
"positionType": "long",
"conditions": [
{
"type": "candlestick_pattern",
"pattern": "morning_star",
"operator": "detected"
},
{
"type": "indicator_indicator",
"indicator1": "MACD",
"indicator2": "MACD_Signal",
"operator": "crosses_above"
},
{
"type": "indicator_value",
"indicator": "ADX",
"period": 14,
"operator": "above",
"value": 25
}
],
"logicalOperator": "AND",
"confirmationCandles": 1
}
}
Pattern Detection Tips
Confirmation Candles
Always use confirmation candles (1-2) after pattern detection to reduce false signals:
{
"entryConditions": {
"conditions": [...],
"confirmationCandles": 2
}
}
Timeframe Considerations
- 1m-5m: Patterns are less reliable, use with strong indicator confirmation
- 15m-1h: Good balance of reliability and frequency
- 4h-1d: Most reliable patterns, fewer false signals
Volume Confirmation
Patterns with above-average volume are more reliable:
{
"type": "indicator_value",
"indicator": "Volume",
"operator": "above",
"value": 1000000
}
Trend Context
- Reversal patterns work best at trend extremes
- Continuation patterns (marubozu) work best in established trends
- Indecision patterns (doji, spinning top) work best at support/resistance
Pattern Reliability
High Reliability (70%+ success rate with confirmation)
- Morning Star (at support)
- Evening Star (at resistance)
- Bullish Engulfing (at support)
- Bearish Engulfing (at resistance)
Medium Reliability (60-70% success rate)
- Hammer (at support)
- Shooting Star (at resistance)
- Marubozu (in trend)
Lower Reliability (50-60% success rate)
- Doji (requires strong confirmation)
- Spinning Top (requires strong confirmation)
Common Mistakes to Avoid
- Trading patterns in isolation - Always combine with indicators and support/resistance
- Ignoring trend context - Reversal patterns need a trend to reverse
- No confirmation - Wait for confirmation candles to reduce false signals
- Wrong timeframe - Use higher timeframes for more reliable patterns
- Ignoring volume - Patterns with volume confirmation are more reliable