A beginner's guide to the most common crypto candlestick patterns.

Understanding Candlestick Anatomy

1. Each candlestick displays four critical price points: the open, high, low, and close.

2. The rectangular body represents the range between the open and close prices.

3. A green (or white) body indicates the close was higher than the open — a bullish signal.

4. A red (or black) body shows the close was lower than the open — a bearish signal.

5. Wicks or shadows extend above and below the body to mark the session’s highest and lowest traded prices.

Bullish Reversal Patterns

1. The Hammer forms after a downtrend with a small body near the top of the candle and a long lower wick — at least twice the length of the body.

2. The Bullish Engulfing appears as a large green candle that completely covers the prior red candle’s body — signaling strong buying pressure.

3. The Piercing Line consists of a red candle followed by a green candle that opens below the prior low but closes above the midpoint of the red body.

4. The Morning Star is a three-candle pattern: a long red candle, a small indecisive candle (often a doji), and a long green candle closing well into the first red body.

Bearish Reversal Patterns

1. The Shooting Star emerges after an uptrend — it has a small body near the bottom and a long upper wick, suggesting rejection of higher prices.

2. The Bearish Engulfing features a large red candle that swallows the prior green candle’s entire body — indicating aggressive selling momentum.

3. The Evening Star is a three-candle formation: a long green candle, a small-bodied candle (often a doji), and a long red candle closing deep into the first green body.

4. The Dark Cloud Cover begins with a long green candle, followed by a red candle opening above the prior high but closing below the midpoint of the green body.

Continuation Patterns

1. The Rising Three Methods starts with a long green candle, followed by three small-bodied candles staying within the range of the first candle, and ends with another long green candle.

2. The Falling Three Methods mirrors the rising version in a downtrend — beginning and ending with long red candles, with three small-bodied candles contained within their range.

3. Doji patterns, especially the standard Doji and Long-Legged Doji, reflect market indecision and often precede breakouts when appearing mid-trend.

4. The Spinning Top has a small body with nearly equal-length wicks on both sides — showing tight consolidation before continuation.

Practical Application in Crypto Markets

1. Bitcoin and Ethereum charts frequently display these patterns during high-volume sessions, especially around major exchange listings or ETF news events.

2. Altcoin pairs like SOL/USDT or AVAX/USDT show amplified candlestick signals due to higher volatility and lower liquidity.

3. Traders often combine candlestick analysis with volume spikes — for instance, a Bullish Engulfing accompanied by 2x average volume increases reliability.

4. Timeframe selection matters: daily candles offer stronger validity than 5-minute candles, though intraday traders rely heavily on 15- and 60-minute patterns.

5. Exchanges such as Binance and Bybit provide built-in candlestick pattern scanners — yet manual verification remains essential to avoid false triggers from pump-and-dump activity.

Frequently Asked Questions

Q: Can candlestick patterns work reliably on low-cap altcoins?A: Yes, but with increased noise — patterns on coins with market caps under $100M often suffer from wash trading and artificial volume, requiring stricter confirmation criteria.

Q: How do I distinguish a Hammer from a Hanging Man?A: Both share identical structure — small body near the top with long lower wick — but context defines them. A Hammer occurs after a downtrend; a Hanging Man appears after an uptrend.

Q: Do candlestick patterns function the same on futures versus spot charts?A: Structure remains identical, but futures charts may show exaggerated wicks due to funding rate effects and liquidation cascades — particularly visible during BTC price gaps.

Q: Is there a minimum timeframe where candlestick analysis becomes statistically meaningful?A: Studies of BTC/USDT on Binance show patterns on 4-hour and daily charts yield above-55% win rates over 1,000 observed instances; 1-minute and 5-minute patterns fall below 48% without additional filters.