If you're new to trading, candlestick charts might look like a confusing collection of colorful rectangles. But don’t worry—by the end of this guide, you’ll understand exactly how to read them like a pro.

Candlestick charts are one of the most powerful tools for traders. They show price movements, trends, and market sentiment in a way that’s easy to interpret—once you know what to look for.

Whether you're trading stocks, forex, or cryptocurrencies, mastering candlestick patterns will help you make better trading decisions. And if you're aiming to join a proprietary trading firm like Hive PT, this knowledge is essential for passing evaluations and managing risk.

1. What Are Candlestick Charts? (A Brief History)

Candlestick charts originated in 18th-century Japan (used by rice traders) and were popularized in the West by Steve Nison in the 1990s.

Unlike line charts (which only show closing prices), candlesticks display:

• Open price

• Close price

• High price

• Low price

This makes them far more useful for spotting trends, reversals, and market psychology.

2. How to Read a Single Candlestick

Each candlestick has three main parts:

A. The Body (Real Body)

• Represents the opening and closing prices within a time frame (1 min, 1 hour, 1 day, etc.).

• Green (or white) body = Price closed higher than it opened (bullish).

• Red (or black) body = Price closed lower than it opened (bearish).

B. The Wicks (Shadows)

• The thin lines above and below the body show the highest and lowest prices during that period.

• Long upper wick = Buyers pushed price up, but sellers brought it back down.

• Long lower wick = Sellers pushed price down, but buyers recovered it.

C. Candlestick Color Variations

• Some platforms use blue for bullish, red for bearish.

• Crypto traders often use green/red.

Example:
📈 Bullish Candle → Open at $100, Close at $110 → Green body.
📉 Bearish Candle → Open at $100, Close at $90 → Red body.

3. The 8 Most Important Candlestick Patterns (With Examples)

Now, let’s look at the most powerful candlestick patterns that traders use to predict price movements.

A. Bullish Patterns (Signaling a Potential Price Rise)

1. Hammer

   • Looks like: Small body, long lower wick.

   • Meaning: Sellers pushed price down, but buyers strongly reversed it.

   • Best used in: Downtrends (signals a possible reversal).

2. Bullish Engulfing

   • Looks like: A small red candle followed by a larger green candle that "engulfs" it.

   • Meaning: Buyers overpowered sellers aggressively.

   • Best used in: Reversals after a downtrend.

3. Morning Star

   • Looks like: A long red candle, a small indecision candle (Doji), then a long green candle.

   • Meaning: Bearish trend is losing steam, bulls take over.

B. Bearish Patterns (Signaling a Potential Price Drop)

4. Shooting Star

   • Looks like: Small body, long upper wick.

   • Meaning: Buyers tried to push price up, but sellers rejected it.

   • Best used in: Uptrends (signals a possible reversal).

5. Bearish Engulfing

   • Looks like: A small green candle followed by a larger red candle.

   • Meaning: Sellers took control from buyers.

6. Evening Star

   • Looks like: A long green candle, a Doji, then a long red candle.

   • Meaning: Bullish trend is weakening, bears take over.

C. Neutral Patterns (Indecision)

7. Doji

   • Looks like: A cross (open and close are almost the same).

   • Meaning: Market is undecided—could signal a reversal.

8. Spinning Top

   • Looks like: Small body, equal upper & lower wicks.

   • Meaning: Neither buyers nor sellers are in control.

4. How to Trade Using Candlestick Patterns (Real Examples)

Example 1: Trading a Hammer in a Downtrend

• Scenario: Bitcoin has been falling for days. Suddenly, a Hammer forms.

• Action: Wait for next candle to confirm reversal → Enter long.

• Stop Loss: Below the Hammer’s low.

Example 2: Bearish Engulfing at Resistance

• Scenario: Stock hits a resistance level + forms a Bearish Engulfing.

• Action: Short sell or exit longs.

• Stop Loss: Above the engulfing candle’s high.

5. Common Mistakes Beginners Make (And How to Avoid Them)

❌ Trading every single pattern → Only trade high-probability setups.
❌ Ignoring the trend → A Hammer in an uptrend is less meaningful than in a downtrend.
❌ No confirmation → Always wait for the next candle before entering.
❌ Overtrading small timeframes → Start with daily or 4-hour charts for reliability.

6. How Hive PT Helps Traders Master Candlestick Analysis

At Hive PT, we provide:
🔥 Free educational resources (webinars, guides).
🔥 Real-time trading simulations to practice candlestick strategies.
🔥 Funding opportunities for traders who prove their skills.

Want to trade professionally? Join Hive PT’s funded trader program today!

Final Thoughts

Candlestick charts are a trader’s best friend—once you learn them, you’ll spot opportunities faster and avoid bad trades.

Next Steps:
✔ Practice on a demo account.
✔ Combine candlesticks with support/resistance.
✔ Join Hive PT to trade with real capital.

Now, go ahead and analyze some charts—happy trading! 🚀

Ready to take your trading to the next level? Sign up with Hive PT today and get funded!