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The piercing line is also a two-stick pattern, made up of a long red candle, followed by a long green candle. A slight variation of this pattern is when the second day gaps up slightly following the first long up day. Everything else about the pattern is the same; it just looks a little different.

• Sometimes there’s a pushback — spurts of price strength — making it look almost like a reverse stair-stepper.
• Inside the formation of the candle, there is considerable selling pressure to begin with.
• This is a dramatic example to really show you the concept.
• This reversal pattern is either bearish or bullish depending on the previous candles.

Jump forward to today and candlestick charts are the go-to for most traders. Bullish candlestick patterns can be reversals after a bearish trend or continuations after an already established bull rally. As a day trader, I rely on candlestick patterns to find the best trade setups for my strategy. If the next candle fails to make a new high (above the dark cloud cover candlestick) top candlestick patterns for day trading then it sets up a short-sell trigger when the low of the third candlestick is breached. This opens up a trap door that indicates panic selling as longs evacuate the burning theater in a frenzied attempt to curtail losses. Short-sell signals trigger when the low of the third candle is breached, with trail stops set above the high of the dark cloud cover candle.

History of Candlestick Charts

The pattern is confirmed by a bullish candle the next day. A bullish engulfing line is the corollary pattern to a bearish engulfing line, and it appears after a downtrend. Also, a double bottom, or tweezers bottom, is the corollary formation that suggests a downtrend may be ending and set to reverse higher. Similar to the engulfing pattern, the Piercing Line is a two-candle bullish reversal pattern, also occurring in downtrends.

Confirmation comes with a long, dark candle the next day. A proper education in price action wouldn’t be complete without understanding when, how, and where to go long on a stock. Dark Cloud Cover is the opposite of a bullish reversal pattern called Piercing Line. For the bearish pattern, it must first have a solid green or white bar continuing the uptrend.

Evening Star Example

In a bullish trend, we call them bullish candlesticks, while in a bearish trend, we call them bearish candlesticks. Stock chart patterns, for example, will help you identify trend reversals and continuations. You will usually find two themes in your chart analysis, breakouts and and reversals. The former is when the price clears a pre-determined level on your chart.

For example, if the price hits the red zone and continues to the upside, you might want to make a buy trade. It could be giving you higher highs and an indication that it will become an uptrend. Whether you’re day trading stocks or forex with price patterns, these easy to follow strategies can be applied across the board. In the first candle, price opens high and closes lower – typical with a downtrend when sellers are dominant. The Shooting Star candlestick pattern is easy to spot on a chart. On a daily chart – one candlestick represents the total price movement in one day.

Trading platforms

FCEL is a perfect example of this bearish candlestick pattern on the 5-min chart. Notice that the stock is trending downward from the pre-market. It is also struggling with VWAP, the red indicator line on the chart below. Marubozu Candlestick – Marubozu candlestick is the one with only a real body and no upper and lower shadows.

Since Steve Nison introduced them to the West with his 1991 book ‘Japanese Candlestick Charting Techniques’, their popularity has surged. All the information on this website – – is provided for informational and educational purposes only and should not be taken as investment advice. The morning star prints so often in charts, and it is easy to spot. Immediately, sellers drive the price towards the opening price.

Heikin-Ashi vs Candlestick Charting

IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority. You have to apply to be a part of the Challenge … But if you’re accepted, you’ll have access to the best trading chat room, live trading sessions, webinars, DVDs, and so much more. You can’t find a better, more engaged trading community anywhere. Like the previous soldier pattern, this forceful pattern doesn’t always present a good trading opportunity. Anything less than a 50% cover, and there’s no good reason to believe the bears are really in charge.

This tells you the last frantic buyers have entered trading just as those that have turned a profit have off-loaded their positions. Short-sellers then usually force the price down to the close of the candle either near or below the open. Panic often kicks in at this point as those late arrivals swiftly exit their positions. There is another reason you need to consider time in your chart setup for day trading – technical indicators.

Which Candlestick Pattern Is the Most Reliable?

Dark cloud cover candles should have bodies that close below the mid-point of the prior candlestick body. This is what distinguishes from a doji, shooting star or hanging man bearish reversal pattern. The prior candle, dark cloud candle and the following confirmation candle compose the three-candle pattern.