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📈 Mastering Candlestick Patterns: Complete Guide to Reversal & Continuation Strategies
With this final part, we conclude our in-depth exploration of candlestick patterns, focusing on advanced three-candlestick reversal patterns and the continuation pattern – Marubozu. This comprehensive guide will equip you with essential knowledge for identifying and executing high-probability trades using candlestick formations.
🌟 Morning Star & Evening Star: Strong Reversal Patterns
☀️ Morning Star: A Bullish Reversal Signal
A Morning Star is a three-candlestick bullish reversal pattern that appears after a downtrend.
📌 Characteristics: 1️⃣ First Candle: A large red (bearish) candle, signaling strong selling pressure. 2️⃣ Second Candle: A small-bodied candle (can be red or green) that gaps down, indicating indecision. 3️⃣ Third Candle: A large green (bullish) candle that closes above the 50% level of the first candle.
🎯 How to Trade a Morning Star?
Identify the pattern after a strong downtrend.
Mark the high and low of the pattern.
Enter a long trade when the price breaks above the high of the third candle.
Set a stop-loss below the low of the second candle.
📍 Example:
National Aluminium formed a Morning Star, followed by a strong bullish move.
🌙 Evening Star: A Bearish Reversal Signal
An Evening Star is the bearish counterpart of the Morning Star, signaling a potential downtrend after a strong upward move.
📌 Characteristics: 1️⃣ First Candle: A large green (bullish) candle, showing strong buying. 2️⃣ Second Candle: A small-bodied candle (can be red or green) that gaps up, indicating indecision. 3️⃣ Third Candle: A large red (bearish) candle that closes below the 50% level of the first candle.
🎯 How to Trade an Evening Star?
Identify the pattern after a strong uptrend.
Mark the high and low of the pattern.
Enter a short trade when the price breaks below the low of the third candle.
Set a stop-loss above the high of the second candle.
📍 Example:
National Aluminium also formed an Evening Star, leading to a strong bearish move.
📌 Key Takeaway: Morning Star & Evening Star patterns are rare but highly reliable. When they appear, they offer a strong confirmation of trend reversals.
🔥 Marubozu: The Only Continuation Candlestick Pattern
Unlike reversal patterns, the Marubozu pattern indicates strong trend continuation.
📌 What is a Marubozu?
A single large candle with very small or no wicks.
Shows strong momentum in one direction (bullish or bearish).
Often accompanied by high volume, confirming strength.
🟢 Bullish Marubozu:
No lower shadow (or very small wick).
Opens near the low and closes near the high.
Indicates strong buying momentum.
🎯 How to Trade Bullish Marubozu? ✔ Mark the high and low of the Marubozu candle. ✔ Enter the trade when the price breaks above the high of the Marubozu. ✔ Set stop-loss at the 50% level of the Marubozu’s body.
📍 Example:
HAL Stock: Formed a Bullish Marubozu, signaling a strong uptrend continuation.
🔴 Bearish Marubozu:
No upper shadow (or very small wick).
Opens near the high and closes near the low.
Indicates strong selling pressure.
🎯 How to Trade Bearish Marubozu? ✔ Mark the high and low of the Marubozu candle. ✔ Enter the trade when the price breaks below the low of the Marubozu. ✔ Set stop-loss at the 50% level of the Marubozu’s body.
📍 Example:
M&M Finance: Formed a Bearish Marubozu, leading to a strong downtrend.
📌 Key Takeaway: Marubozu is a strong continuation pattern. It does NOT follow the "4-candle confirmation rule" like reversal patterns.
🎯 Final Key Takeaways from This Course
🚀 The 6 Most Powerful Candlestick Patterns for Trading Success ✔ Hammer & Inverted Hammer – Bullish reversal signals. ✔ Bullish Engulfing & Bearish Engulfing – Strong reversal patterns. ✔ Dark Cloud Cover & Piercing Pattern – Moderate reversal signals. ✔ Morning Star & Evening Star – Reliable but rare reversal signals. ✔ Marubozu – The only continuation pattern.
📌 Trading Rules to Follow: ✅ Always confirm reversal patterns within 4 candles. ✅ Place stop-loss properly—below/above the pattern to minimize risk. ✅ Use the Supertrend indicator for trailing stop-loss and maximizing gains. ✅ Never trade patterns with more than a 4% stop-loss (daily chart). ✅ Practice manually identifying patterns—don't rely on AI scanners alone.
💡 Next Steps: How to Apply This Knowledge?
🔹 Revisit this guide and take notes on key patterns. 🔹 Practice spotting these patterns on historical charts. 🔹 Follow a structured trade plan—mark key levels, wait for confirmation, and execute with discipline. 🔹 Attend live trading sessions and apply your learning in real-time markets.
🔚 Final Words: Master Candlestick Trading with Discipline & Patience
Understanding candlestick patterns is an essential skill for traders, but success depends on discipline, risk management, and continuous learning. This guide has equipped you with the most powerful candlestick formations, their trading strategies, and real-world applications.
📌 Remember: No pattern works 100% of the time, but when used correctly with proper risk management, they can significantly improve trading accuracy and profitability.
🚀 Now it’s your turn—start practicing, refine your skills, and become a master of candlestick trading!
💡 If you found this guide helpful, make sure to share it with fellow traders and continue your journey toward trading excellence!
🎯 Happy Trading! 🏆📈
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