Level 2 · Lesson 5 / 15 · English
Candlestick Patterns
3 min reading · Exercises take additional time
0 of 15 lessons completed for this visit
Candlestick patterns describe arrangements of bodies and shadows. Doji, hammer and engulfing formations are useful vocabulary for discussing hesitation or a change in short-term price behaviour. None is a standalone promise of reversal.
What you will learn
- Describe doji, hammer and engulfing geometry
- Distinguish body engulfing from full-range engulfing
- Define a pattern before testing
Illustrative educational chart · Not live market data
Single-candle descriptions
A doji has a close near its open relative to its range; the threshold must be defined before testing. A hammer-shaped candle has a small body near the top of its range and a relatively long lower shadow. Location matters: the same geometry inside a quiet range is not automatically a reversal setup. Candle names alone do not establish statistical performance.
Multiple-candle descriptions
A bullish engulfing body opens at or below the previous bearish close and closes at or above the previous open under one common definition. Other definitions differ, so state the one used. Body engulfing does not require the new high and low to engulf every prior extreme. Small differences in provider candles can change pattern classifications.
Turn patterns into testable rules
Specify trend context, minimum body and wick ratios, the interval close and an invalidation level. Then test a broad sample including failed patterns and realistic costs. Do not draw only successful examples after seeing the result. Gaps and rapid moves can make a planned entry or stop unavailable.
Key terms
- Doji
- A candle with open and close close together under a stated threshold.
- Engulfing body
- A body covering the previous body under a defined convention.
Hypothetical worked example · Not live market prices
Worked chart study · Candlestick Patterns
- Prior bearish body: open 1.1040, close 1.1010.
- Next body: open 1.1005, close 1.1045; this covers the prior body.
- Its classification does not tell you the next candle’s direction. A close below the candidate’s low may challenge a reversal scenario.
| Observation | Illustrative value / meaning |
|---|---|
| Prior body | 1.1010–1.1040 |
| Next body | 1.1005–1.1045 |
| Conclusion | Body engulfing, outcome unknown |
Simplified educational calculations. Costs, slippage and provider-specific adjustments apply where relevant; these are not actual returns.
Common mistakes to avoid
- Changing the stated chart rule after seeing the outcome instead of recording a new test.
- Treating a historical description as a guaranteed future result or ignoring execution costs.
- Skipping the timeframe, source or invalidation condition before drawing a conclusion.
Lesson summary
Candlestick patterns describe arrangements of bodies and shadows. Doji, hammer and engulfing formations are useful vocabulary for discussing hesitation or a change in short-term price behaviour. None is a standalone promise of reversal. Use an explicit rule, consider contrary evidence and practise without risking real money.
Practical exercise
Define numeric hammer ratios, then find both a successful and an unsuccessful hypothetical outcome. Explain why hindsight examples are insufficient evidence.
Knowledge check
Check your understanding
Results apply to this attempt only and are not saved to a student account. No certificate is issued.
Answer all questions correctly and complete the exercise. Progress follows you between Academy pages for this visit only; it is not saved to an account and resets on reload.
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