Candlestick Patterns

Overview of 61 candlestick patterns -- bullish, bearish, and reversal signals.

What are Candlestick Patterns?

Candlestick patterns are specific formations of one or more candles that traders use to anticipate what might happen next. A single candle has four prices -- open, high, low, close -- and the relationship between them creates a visual shape. When certain shapes appear in sequence, especially at key levels like support or resistance, they are treated as signals.

Candlestick charting originated with Japanese rice traders in the 1700s and was popularized in Western markets by Steve Nison in the 1990s. Today they are the default chart type on most trading platforms, including Simula.

Anatomy of a Candle

Every candle has two parts: the body (the thick rectangle between open and close) and the shadows (thin lines extending above and below the body to the high and low). The upper shadow shows the highest price reached during the candle. The lower shadow shows the lowest.

A bullish candle closes above its open (buyers won). A bearish candle closes below its open (sellers won). The shadows show how far the price stretched before settling at the close.

The body tells you who won -- buyers or sellers. A bullish candle (close above open) means buyers pushed the price up from where it started. A bearish candle (close below open) means sellers pushed it down. The shadows tell you how far the price reached before being pushed back.

How Simula Detects Patterns

Simula uses TA-Lib's pattern recognition algorithms to detect all 61 candlestick patterns automatically. Each pattern outputs one of three values on every candle:

+100 -- bullish signal detected
0 -- no pattern detected
-100 -- bearish signal detected

You can use these signals as entry or exit conditions in your backtests. For example, "enter long when CDL_HAMMER = +100" would enter a long position whenever a Hammer pattern is detected.

Bidirectional patterns

Some patterns can signal either direction depending on the preceding trend. An Engulfing pattern outputs +100 when it appears after a downtrend (bullish engulfing) and -100 when it appears after an uptrend (bearish engulfing). The signal value tells you which variant was detected.

Pattern Categories

The 61 patterns in Simula are organized into four groups:

Reversal -- Bullish (15 patterns)

Patterns that appear at the end of a downtrend and signal a potential shift upward. Includes well-known patterns like Hammer, Morning Star, and Three White Soldiers.

See all 15 bullish reversal patterns >

Reversal -- Bearish (12 patterns)

Patterns that appear at the end of an uptrend and signal a potential shift downward. Includes Shooting Star, Evening Star, and Three Black Crows.

See all 12 bearish reversal patterns >

Bidirectional, Continuation & Gap (28 patterns)

Bidirectional reversal patterns (like Engulfing and Harami) that signal in either direction depending on context. Continuation patterns (like Marubozu and Three-Line Strike) that confirm the existing trend. Gap patterns that involve price gaps between candles.

See all 28 bidirectional, continuation & gap patterns >

Indecision (6 patterns)

Patterns where neither buyers nor sellers dominated the candle. The Doji family, Spinning Top, and High-Wave candle. These signal uncertainty, not direction.

See all 6 indecision patterns >

Realistic Expectations

Single patterns are weak signals

A candlestick pattern by itself is one piece of evidence, not a complete trading strategy. A Hammer pattern at a random location in a downtrend does not guarantee a reversal. The same Hammer at a known support level, confirmed by rising volume and a bullish RSI divergence, is a much stronger case. Patterns work best as confirmation within a broader strategy, not as standalone signals.

When backtesting candlestick patterns, be aware that results can vary significantly depending on the asset, timeframe, and market regime. A pattern that works on daily stock charts may behave differently on 5-minute forex charts. Testing across different conditions helps separate robust patterns from ones that only worked in a specific environment.

The Penetration Parameter

Seven patterns in Simula accept a penetration parameter that controls how much the second candle must overlap with the first to qualify as a match. The patterns with this parameter are: Morning Star, Morning Doji Star, Evening Star, Evening Doji Star, Dark Cloud Cover, Abandoned Baby, and Piercing Line. The default is 0.3 (30% overlap). Higher values make the detection stricter (fewer signals), lower values make it looser (more signals).

Where to Go Next

Bullish Reversal Candlestick Patterns -- 15 patterns signaling a potential shift from downtrend to uptrend.

Bearish Reversal Candlestick Patterns -- 12 patterns signaling a potential shift from uptrend to downtrend.

Candlestick Patterns: Bidirectional, Continuation & Gap -- 28 patterns that depend on trend context, confirm continuations, or involve price gaps.

Indecision Candlestick Patterns -- 6 patterns reflecting market uncertainty.