Candlestick patterns

It comes after a decline.

The lower wick is at least twice as long as the body; the upper wick is so short it's barely there.

The story: sellers pushed price down one more time, but buyers were waiting at that level and carried it almost back to the open.

It's the hammer's mirror image: it comes after a rally.

The upper wick is at least twice as long as the body; the lower wick is very short.

The story: buyers tried higher one more time, but sellers were waiting up there.

So far you've been reading candles. Now you'll make a decision: Buy, Wait or Sell.

The right side of the chart is behind a curtain: that's where the future candles are. Once you decide, they're revealed one by one.

Every trade risks the same amount: 1R. If price moves 1R against you, you're stopped out; if not, the trade closes at the last candle's close.

Waiting is an option too. If price doesn't move clearly in one direction, that's the right decision.

The open and close are at almost the same price, so the body shrinks to a thin line.

The wicks can stretch both ways: buyers and sellers both tried, and neither won.

A doji asks "what happens now?" It doesn't answer.

A doji at the top of a long rally shows buyers hesitating for the first time. It's a warning.

A doji in the middle of a range is just more indecision in a market that's already undecided. It says almost nothing.

Either way, a doji isn't a reason to trade until the candle after it confirms.

It takes two candles: first a red one, then a green one whose body completely covers the red body.

The story: yesterday sellers won; today buyers took back everything they lost, and then some.

It means the most at the end of a decline, or at a low where price has turned before.

The mirror image: first a green candle, then a red candle that swallows its body whole.

At the end of a rally, it shows all the buyers' work wiped out in a single candle.