Candlestick anatomy and patterns

What it is

A candle's body spans the distance between the open and the close. Its wicks — sometimes called shadows — show how far price travelled beyond the body before coming back. The full distance from low to high is the candle's range.

Large bodies suggest directional acceptance: price moved and stayed. Long wicks suggest rejection: price went somewhere and was pushed back. A close near the high or the low tells you who held control as the interval ended.

How to spot it

Single-candle shapes worth having a name for:

• Doji — open and close nearly equal. Indecision; the interval resolved almost nowhere.
• Spinning top — small body, wicks both sides. Also indecision, with two-sided activity.
• Hammer — small body near the top, long lower wick. Downside was rejected within the interval.
• Inverted hammer — small body near the bottom, long upper wick, appearing after a decline.
• Shooting star — same shape as an inverted hammer but after an advance; upside was rejected.
• Hanging man — hammer shape appearing after an advance rather than a decline.
• Marubozu — almost no wicks. One side controlled the whole interval.

Why people watch it

Multi-candle shapes add a second interval of information. A bullish engulfing candle fully covers the prior candle's body; a harami is the reverse, a small body contained inside the previous one. Morning and evening stars are three-candle sequences where the middle candle stalls and the third reverses. Three white soldiers and three black crows describe three consecutive strong closes in one direction. Inside and outside bars describe whether a candle's range sits within or beyond its predecessor's.

Treat all of these as a vocabulary layer — a compact way to describe what price did — not as a signal generator.

Confirmation

A candle shape becomes interesting only when its location does. The hierarchy that matters is: location first, then the prior trend, then the level it is reacting to, then confirmation, then volume.

A hammer in the middle of a random range is noise. The same hammer after a decline into a well-tested support zone, followed by a close back above that zone, is a description of rejection at a level that mattered.

Invalidation

If the next candle closes back through the shape's low — for a bullish reading — the rejection did not hold and the interpretation is done. Naming the shape does not extend its life.

Common mistakes

• Naming a candle and stopping there, as though the name were the analysis.
• Calling every small-bodied candle a doji regardless of where it appears.
• Treating a hammer as bullish without checking whether anything was there to reject.
• Counting a candle pattern and an indicator that both derive from the same price move as two independent confirmations.