Candlestick patterns that actually matter

A short guide to the candlestick patterns worth recognising — doji, hammer, engulfing, harami — and the market psychology behind each.

Doji: indecision

A doji forms when open and close are nearly equal — the candle has wicks but almost no body. It says: by session end, neither buyers nor sellers got control. After a long trending move, a doji is a pause sign. After a range, it is noise.

Hammer and shooting star: tested levels

A hammer has a small body at the top of the candle and a long lower wick. It says price tried to go down, found buyers, and snapped back. At support, a hammer is a reversal cue worth noticing. The mirror — shooting star — has a long upper wick and small body at the bottom: price tried to go up, found sellers.

Critically, both patterns require context. A hammer in the middle of nowhere is noise. A hammer right at a support level that has held twice before is the textbook signal.

Engulfing: shift in control

A bullish engulfing pattern is a down candle followed by an up candle whose body fully covers the previous body. Sellers had the prior session; buyers took it back completely on the next. The bearish engulfing is the mirror. Engulfing patterns are the strongest single-candle reversal signal in classic Western candlestick reading.

How Signodex uses candlestick patterns

Signodex's AI Deep Analysis describes recognized candle patterns where they appear and explains the context: "A bullish engulfing has formed at the 200-day moving average, the second test of this level this quarter." It will not tell you to act on them — but it will name them and explain the psychology, in your language.