Candlestick patterns in context: engulfing, hammer, shooting star, doji, inside bar

Learn five common candlestick patterns and, more importantly, when they matter: at a level, in the right trend context, confirmed by the close. Gold example.

TA 1: Beginner Lesson 4 of 4 · 3 min read

⚠️ Risk warning: CFDs and leveraged forex are complex instruments with a high risk of losing money rapidly. Most retail accounts lose money. This content is education only, not investment advice or a recommendation.

Five common candlestick patternsBullish engulfingHammerShooting starDojiInside barA pattern means more at a level and in context. On its own it is not a signal.
Five common candlestick patterns Illustrative chart: drawn data, not real prices.

You learnt how to read a single candle in Charts and candlesticks. A candlestick pattern is one to three candles that show a shift in who is in control. The pattern is the easy part; the context is what matters.

Five patterns worth knowing

  • Bullish / bearish engulfing: the body of a candle completely covers the previous candle’s body, in the opposite direction.
  • Hammer: a small body near the top and a long lower wick, after a fall. Sellers pushed price down and buyers pushed it back.
  • Shooting star: the reverse of a hammer, a long upper wick after a rise.
  • Doji: open and close almost equal. It shows indecision, not direction.
  • Inside bar: the whole candle sits inside the previous one’s range: a pause, often before a larger move either way.

Context first

The same hammer means very different things in the middle of nowhere and at a tested support zone. Ask three questions:

  1. Where is it? At a support or resistance zone, a demand or supply zone, or nowhere special?
  2. What is the trend on this and the higher timeframe?
  3. Is it complete? A pattern only exists once the candle has closed. A hammer halfway through the day can end as a big red candle.
Worked example: gold (XAU/USD), daily. The figure uses drawn prices. Gold falls from about 3,990. In the middle of the fall a doji appears (A) and another candle forms a hammer shape above support (C), but neither is at a level, and the decline continues. At the support zone of about 3,876–3,890, a bullish candle engulfs the previous red one (B). That is a pattern at a level, after a long fall. Price then rallies into the old lows around 3,924–3,936, which now act as resistance.

Daily candles and broker time

Daily candles depend on when your broker’s day starts and ends. Some brokers show a small Sunday candle, which changes how Monday’s pattern looks. Compare patterns on the same platform you trade on.

Educational only. Candlestick patterns are not reliable signals on their own, and no pattern guarantees a move.

🛠️ Practice task

  1. Open gold on the daily chart in TradingView or MT5 and mark the nearest support and resistance zones.
  2. Scroll back and find five of the patterns from this lesson. Mark each one as “at a level” or “not at a level”.
  3. For each, note what happened over the next five candles. Write what you notice; do not count wins.
  4. Repeat on Saudi Aramco (2222) daily and compare.

🎯 Mark this chart

Study the drawing, pick the letter, then check. This exercise does not count toward your progress; the quiz below does.

Gold daily: which candle matters most?3,8993,9393,980XAU/USD · D1Support zoneOld lows, now resistanceABCD
Gold daily: which candle matters most? Illustrative chart: drawn data, not real prices.
Which candle is the most meaningful bullish pattern in context?

Show answer

B: the bullish engulfing candle at the support zone. B is a clear pattern after a long decline and right at a support zone. A shows only indecision in the middle of a trend, C is at no level, and D runs into the old lows that now act as resistance.

Gold daily: which candle matters most?3,8993,9393,980XAU/USD · D1Support zoneOld lows, now resistanceABCD✓ Engulfing at support
Solved: B, the engulfing candle at support Illustrative chart: drawn data, not real prices.

✍️ Quick quiz

Check what you learned. Your answers stay in this browser.

1. What defines a bullish engulfing pattern?

Show answer

A green body that completely covers the previous red body. The body of the second candle engulfs the body of the first, in the opposite direction.

2. What does a doji show?

Show answer

Indecision: open and close almost equal. A doji shows balance between buyers and sellers in that period, not direction.

3. Which hammer deserves more attention?

Show answer

One at a tested support zone after a decline. Location and context give the pattern meaning.

4. When does a candlestick pattern exist?

Show answer

Only once the candle has closed. Before the close the candle can still change shape completely.