Candlestick Patterns Explained: Doji, Hammer, Engulfing

September 19, 2026 · 6 min read

Almost every crypto chart you will see is made of candlesticks. Each one packs four prices into a single shape, and certain shapes have names that traders talk about. This guide shows how to read a candle and explains five of the best-known patterns, along with an honest look at how far they can be trusted.

How to read one candlestick

A candle covers a fixed period, such as one minute or one hour. It shows four prices:

• Open: the price at the start of the period.
• Close: the price at the end.
• High and low: the extremes reached in between, drawn as thin lines called wicks (or shadows).

The thick part is the body, running from open to close. By common convention a green candle means the price closed higher than it opened, and a red one means it closed lower. A long body shows strong movement in one direction. A long wick shows that the price went far and was pushed back.

Five patterns you will see often

Doji

The open and the close are practically the same, so the body is a thin line, often with wicks on both sides. It says that buyers and sellers pushed the price around and ended in a stalemate. A doji after a long move can hint that the momentum is fading, but on its own it only says "indecision".

Hammer

A hammer has a small body near the top and a long lower wick, at least about twice the size of the body. The price dropped sharply during the period, but buyers pushed it back up before the close. Traders watch for it after a decline, where it can suggest that sellers are running out of steam.

Shooting Star

The mirror image of a hammer: a small body near the bottom and a long upper wick. Buyers drove the price up, but sellers pushed it back down before the close. It is watched after a rise, where it can suggest that buying pressure is fading.

Bullish Engulfing

Two candles. A small red candle is followed by a larger green candle whose body completely covers the red body. It shows that buyers overpowered sellers within one period, and traders often read it as a possible turn from down to up, especially after a fall.

Bearish Engulfing

The opposite: a small green candle followed by a larger red candle that swallows its body. It is read as sellers taking control and a possible turn from up to down, especially after a rise.

Patterns are context, not signals

This is the part beginners often skip. A pattern is a description of what just happened, not a promise of what comes next. Some things to keep in mind:

• Location matters. A hammer at a level where price has bounced before means more than a hammer in the middle of nowhere.
• Wait for confirmation. Many traders want the next candle to move in the expected direction before acting.
• Smaller timeframes are noisier. On a 1-minute chart, patterns appear constantly and many fail. Higher timeframes such as 1 hour or 1 day tend to be more meaningful.
• Evidence is mixed. Research on how well candlestick patterns predict prices is inconclusive, and crypto's sharp moves produce plenty of false signals.
• Combine with risk control. Even a good-looking setup fails often. Decide your stake and exit point before you enter (see scalping basics).

A quick way to practice

Open a live chart, switch on pattern labels, and watch what happens after each Doji, Hammer or Engulfing pattern. Note how often the price really follows through and how often it does not. Thirty examples will give you a more honest feel for the limits than any book. When you want to test an idea with a position, do it with virtual money first, as described in Crypto Paper Trading: How to Practice With Virtual Money.

This article is educational and not financial advice. Candlestick patterns do not predict prices reliably.