5 Candlestick Patterns Every Gold Trader Should Know
A candlestick shows four prices for a period of time: open, high, low and close. Read together, a few candles can show who won the battle between buyers and sellers. Patterns are not magic signals. They work best as confirmation at a level you already identified. Here are the five that matter most.
Reading a single candle
- The body is the distance between open and close. A big body means one side was in control.
- The wicks show prices that were reached but rejected. A long lower wick means sellers pushed price down and buyers pushed it back up.
- The colour shows direction: bullish (close above open) or bearish (close below open).
1. Pin bar (hammer and shooting star)
A small body with one long wick, at least twice the size of the body. A pin bar with a long lower wick at support (a hammer) shows buyers rejecting lower prices. A long upper wick at resistance (a shooting star) shows sellers rejecting higher prices.
How to trade it: enter after the candle closes, with the stop loss beyond the tip of the wick.
2. Engulfing candle
A candle whose body completely covers the body of the previous candle, in the opposite direction. A bullish engulfing at support shows buyers took over decisively. A bearish engulfing at resistance shows the opposite.
How to trade it: enter on the close or on a small pullback into the engulfing candle, stop beyond its low (for buys) or high (for sells).
3. Inside bar
A candle whose high and low are both inside the previous candle's range. It shows a pause and building pressure. In a trend, a break of the inside bar in the trend direction often starts the next leg.
How to trade it: place an order just beyond the mother candle's high or low in the direction of the trend.
4. Doji
Open and close are almost the same price, leaving a very small body. A doji shows indecision. On its own it means little. After a strong move into a key level, it can be the first sign that momentum is fading.
How to trade it: wait for the next candle to confirm direction before acting.
5. Morning star and evening star
A three-candle reversal. A morning star is a strong bearish candle, then a small indecisive candle, then a strong bullish candle closing well into the first one. It forms at the bottom of a move. The evening star is the bearish mirror image at the top.
Context beats the pattern
The same pin bar means very different things in the middle of nowhere and at a strong daily level. Before trusting any pattern, check:
- Location: is it at support or resistance?
- Trend: does it agree with the higher-timeframe market structure?
- Timeframe: patterns on the 1-hour and 4-hour charts are more reliable than on the 1-minute chart.
- Session and news: a pattern formed during thin Asian trading or seconds before NFP deserves less trust.
Key takeaways
- Wicks show rejection, bodies show control.
- Use patterns as confirmation at levels you already marked, not as signals on their own.
- Always place the stop loss beyond the pattern, then size the trade with the lot size calculator.
This article is general education, not financial advice. Trading involves substantial risk, and you can lose more than you expect. Only trade with money you can afford to lose.