Pattern is a tool for changing control in the market

A pattern is not just a visual combination of candles — it is an objective reflection of the psychological struggle between buyers and sellers. Each price formation tells a story about who currently controls the market. The more candles comprise the pattern, the higher the probability that a genuine reversal will occur rather than a temporary pullback.

Professional traders know that a pattern is not a magic button for profit, but rather an early signal of a shift in the balance of power. Successfully using these models requires understanding their nature and applying them correctly within the context of the current trend.

What a pattern is and why confirmation is critical

First, let’s clarify the basics: a pattern is a specific sequence of price movements indicating a change in trend direction. However, the main mistake beginners make is entering a position immediately upon noticing the formation of a pattern.

A pattern is only a hypothesis of a reversal. It needs to be confirmed. Without a confirming signal, you risk entering a false reversal, which could lead to losses. The simple rule is: wait for the candle to close that confirms the change in direction, then enter.

Single-candle models as initial signals of a reversal

Let’s start with the simplest patterns. They consist of one candle and are considered early signals. Single-candle formations require special attention — by themselves, they do not justify an entry.

Hammer forms at the bottom of a downtrend and consists of a small body at the top with a long lower shadow (at least twice the body size). This indicates that sellers pushed the price down, but buyers bought the dip. Entry is only made after the next bullish candle closes, ideally at a support level.

Shooting Star — the opposite of the hammer pattern, forms at the top of an uptrend. A small body at the bottom with a long upper shadow suggests that the attempt to push the price higher was rejected by the market. Entry is made after bearish confirmation, especially if RSI is in the overbought zone.

Hanging Man visually resembles a hammer but appears at the trend’s top. It is not an independent entry signal — you need to wait for a strong bearish candle after it, especially if it is at a resistance zone.

Two-candle patterns and control shift

When a pattern consists of two candles, the signal becomes much more reliable. Two-candle models provide clear confirmation that control over the market has shifted from one group of traders to another.

Engulfing — one of the most powerful patterns. The second candle completely engulfs the body of the first, indicating dominance by one side. Bullish engulfing after a decline signals buyers are ready to take control. Entry is at the close of the second candle or on a pullback of 30–50%.

Piercing Line shows a reversal upward. The second candle opens below the first but closes above its midpoint. This pattern is a clear signal that selling pressure has weakened. It works best when RSI exits the oversold zone.

Dark Cloud Cover — the bearish counterpart of piercing. The second bullish candle closes below the midpoint of the first bearish candle, indicating a return of control to sellers. Especially effective at trend tops.

Harami differs from other models in that it is not an immediate reversal but a sign of weakening of the current trend. A small candle inside the body of a larger one can indicate market uncertainty. It’s best to use Harami not for entry but to prepare for a major move, waiting for a breakout of the pattern’s range.

Three-candle patterns as the most reliable reversal formations

When a pattern is a combination of three candles, the error probability significantly decreases. Three-candle models are considered the clearest and most reliable signals.

Morning Star — a classic bullish reversal. It consists of a long bearish candle, then a small candle (indecision), and ends with a strong bullish candle. Entry is after the close of the third candle, preferably at a support level. Such reversal patterns often precede medium-term moves.

Evening Star — the mirror opposite of the Morning Star, indicating a reversal downward. Forms at trend tops and is especially reliable with RSI divergence.

Three White Soldiers — a powerful shift of control to bulls. Three large green candles with minimal shadows. However, do not enter at the highest levels without a correction. It’s better to wait for a pullback after the second or third candle.

Three Black Crows — an aggressive bearish reversal. Three strong red candles with closes near the lows. Especially effective after a prolonged rise and at key resistance levels.

Abandoned Baby — a rare but highly accurate pattern. It features a doji in the middle with gaps on both sides, indicating a complete change in market psychology. Entry is after the third candle, and this pattern is excellent for positional trading.

Synthesizing patterns is key to successful trading

Now, the most important point: a pattern is just one piece of the puzzle. The best trades occur when the candle formation aligns with technical levels and additional indicators.

Any pattern can be reinforced by:

• Support and resistance levels — confirming the significance of the reversal
• RSI — use divergences and overbought/oversold signals
• EMA 21 and EMA 50 — indicating the overall trend direction
• Trading volume — increasing volume confirms the strength of the reversal

Remember: a pattern is a tool for understanding the market, not a guarantee of profit. Every position requires proper risk management and a clear exit plan. By combining candlestick analysis with support levels, multiple confirmations, and risk control, patterns can become a truly powerful weapon in your trading arsenal.