As the name suggests, single candlestick patterns are formed by just one Japanese candlestick. It means a single trading action can already be considered as a trading signal for further price movement. In most cases, single candlestick patterns either indicate potential market reversals or periods of indecision on the market.
Below are some of the most common single candlestick patterns.
Doji
Doji is a candle with a tiny body, where the opening and the closing prices are virtually equal, and the tails (top and bottom shadows) are long.
Variations of Dojis look like a cross, an inverted cross, a plus sign, a T-letter, or an inverted T.
At the end of trends, Dojis can be analyzed as a single candlestick pattern. They can also be a part of larger candlestick formations, such as Morning Star, Evening Star, Bullish Abandoned Baby, and Bearish Abandoned Baby.
Signal:
By itself, Doji is neutral. The way it forms shows indecision between the buyers and the sellers. Occurring after a trend, Doji can signal a reversal:
- If Doji forms after a downtrend, it may indicate a reversal upward.
- If Doji forms after an uptrend, it may indicate a reversal downward.
Formation:
A non-existent Doji’s body shows that neither buyers nor sellers outweigh. The parties are in a “standoff”. So the price does not move.
Dojis are relatively rare and not considered very reliable.
A Dragonfly Doji is a variation of a Doji that looks like a letter T. A Gravestone Doji, just the opposite, is a reversed T-shape. Both signal reversal of the existing trend.
Spotting a Doji where a trend might start exhausting itself, be sure to check the confirmation candles that solidify the reversal.
Spinning Top
Spinning Top is a single candlestick chart pattern, which consists of a candle with a small body, and equal length long tails (shadows) on the top, and bottom.
Spinning Top is similar to Doji, but it does have a real body. As a result, a candle forming the Spinning Top can be bullish or bearish, depending on whether it closed higher, or lower than it opened.
Signal:
Just like a Doji, a Spinning Top signals indecision and a potential reversal.
- If a Bullish Spinning Top is formed after a downtrend, it signals a reversal upward.
- If a Bearish Spinning Top occurs during an uptrend, it typically signals a reversal downward.
In most cases, the color of a Spinning Top does not matter. The key is the shape and the fact that it follows a trend.
Formation:
When a Spinning Top forms, the trend traders may be losing their confidence. Both bears, and bulls have tried to move the price in different directions (long shadows). Yet neither of them had an upper hand as the price eventually closes near the level it opened.
Spinning Tops are more common than Dojis. The indecision signaled by a Spinning Top may be followed by some flat movement on a chart. A potential reversal should be confirmed by the following candle in the direction of the reversal.
Marubozu
Marubozu consists of a long-bodied candle with very small tails or no tails at all. Unlike many other single candlestick patterns, the trend preceding a Marubozu does not matter much.
Signal:
A Marubozu signals a strong movement in one direction that is likely to continue.
- A Bullish Marubozu indicates that the price is likely to continue moving up.
- A Bearish Marubozu indicates that the price is likely to continue moving down.
If a Marubozu candle is bullish, even if it occurred during a downtrend, it shows that the sentiment has now changed to bullish. The opposite also applies to a Bearish Marubozu.
Formation:
A long body with no tails means that one side of the market has controlled the entire period when the candle was forming.
For example, in a 4-hour Bullish Marubozu, the buyers were dominating the entire 4-hour period. Furthermore, a 1-day Bearish Marubozu means that the sellers were so strong the entire day that the price has closed at the day’s low.
The success of trade using Marubozu depends on the ability to identify that Marubozu is forming. Since it’s a long candle, entering into a position after the candle has closed may be more risk-averse, yet a lot of the movement in the desired direction may have been already exhausted.
Entering into a position while a Marubozu is still forming is riskier as the expectation might not come to fruition. When the open price is equal to the low and the current price is equal to the candle’s high, at the moment, it may indicate that a Bullish Marubozu is on the way. On the other hand, the open price being equal to the high and the current price being equal to the low may indicate that a Bearish Marubozu is forming.
Hammer
Hammer is a single candlestick chart pattern, consisting of one small-bodied candle with a short or no tail (shadow) on one side and a long tail on another side. A regular Hammer is a candle with a long bottom tail (the candle shape looks like a hammer.)
Conversely, an Inverted Hammer has a long tail on top.
Both regular and Inverted Hammer takes place during a downtrend. It is important because two other identical-looking single candlestick chart patterns occur in an uptrend. They are called Hanging Man and Shooting Star.
Even though a prior downward price trend is essential for a candle to be a Hammer or an Inverted Hammer, the candle itself can be either bullish or bearish.
Signal:
Hammer and Inverted Hammer signal a potential defeat of sellers and bottom out of a downward trend. A reversal should be confirmed by the following bullish candle.
Formation:
A Hammer’s short body and a long lower tail show that sellers were strong in the market during the period. Yet, their efforts were all absorbed by the buyers, who managed to bring the close price near the level it had opened.
An Inverted Hammer’s short body and a long upper tail show that the buyers were making a real effort to push the price up during the period. However, the sellers did not let them, and the candle closed at the price near its open.
In both cases, sellers could not take the price lower since whoever wanted to sell — already did. Hence, buyers were left to dominate in the market and will likely push the price up.
Hanging man/Shooting Star
Both Hanging Man and Shooting Star represent a single candlestick chart pattern, consisting of one small-bodied candle with a short tail or no tail on one side and a long tail on the other.
The tail is typically at least two times larger than the real body of the candle.
- A Handing Man is a candle with a long bottom tail.
- A Shooting Star is a candle with a long tail on top.
Both Hanging Man and Shooting Star occur in an uptrend. A prior uptrend is what distinguishes them from the identical-looking Hammer and Inverted Hammer.
Picturing an image of a “Hanging Man”, and a “Shooting Star” as something that occurs above your head, you can remember that both patterns follow an uptrend. Both of them can be either bullish or bearish.
Signal:
Hanging Man and Shooting Star indicate that buyers are losing their strength to sellers, who are likely to take over and reverse the trend downwards. The reversal needs to be confirmed by the following bearish candle.
Formation:
As a Hanging Man forms in an uptrend, its short body and a long bottom tail show the growing selling interest in the market. The buyers were trying to maintain the rising trend, but they could not counter a major sell-off, and their power was only enough to close the candle near the price level it opened.
A Shooting Star’s short body and a long upper tail show that the buyers made a strong push for the price to keep going up. But the sellers did not let them, and the candle closed at the price near its open.
With both candles occurring in an uptrend, they show that the buyers are losing their grip and whoever wanted to buy – already did. Therefore, sellers were left to rule the market, and they are likely to push the price down.
Disclaimer: For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.
