Learn the stock market › Candlesticks and patterns › Lesson 2 of 6
The ten most common candlestick patterns
Why the rules matter
Books show the patterns as pictures, and pictures can be read many ways. To count them, each pattern has to be written as a rule. Here are the rules we used. Body, wicks and range mean the same as in the last lesson. By trend we mean that the close on the day before the pattern's first candle was lower (a downtrend) or higher (an uptrend) than ten trading days earlier.
Doji. The body is at most a tenth of the day's range. It is said to show that buyers and sellers were evenly matched. It doesn't point either way, so it has no figure for whether it held.
Hammer. The body is at most a third of the range, the lower wick at least twice the body and the upper wick no longer than the body, after a downtrend. The price was pushed down during the day but came back. Said to point up.
Hanging man. The same shape as the hammer, but after an uptrend. Said to point down.
Shooting star. The hammer upside down: the upper wick at least twice the body and the lower wick no longer than the body, after an uptrend. Said to point down.
Bullish engulfing. After a downtrend, a red day followed by a green day whose body is larger and covers the whole red body. Said to point up. Bearish engulfing is the mirror image after an uptrend.
Morning star. Three days after a downtrend: a red day with a body of at least half its range, a day with a small body, at most 30% of its range, and a green day with a body of at least half its range that closes above the middle of the first body. Said to point up. The evening star is the mirror image after an uptrend.
Three white soldiers. Three green days in a row, each with a body of at least half its range and a higher close than the day before. Said to point up. Three black crows are three such red days going down.
A real example
The latest bullish engulfing among the 20 companies, with a week after it, came in Oracle on Oct 20, 2026. A week later the price stood −0.5% from that day's close.
Oracle: bullish engulfing on Oct 20, 2026
One example says nothing about how often a pattern works. The latest hammer with a week after it came in Microsoft on Oct 30, 2026, and over the next week the price went +1.7%. So we counted them all.
How often did the patterns hold?
We looked for the ten patterns on every trading day of the 20 largest US companies since 2010, 81,335 days. Held means that five trading days later the price stood higher than when the pattern was complete, for the patterns said to point up, or lower, for those said to point down. Ordinary week is the same thing counted from every day of the same company.
| Pattern | Times | Held a week | Ordinary week |
|---|---|---|---|
| Doji | 7,908 | – | – |
| Hammer | 1,586 | 54.9% | 56.1% |
| Hanging man | 2,275 | 43.2% | 43.7% |
| Shooting star | 1,834 | 45.4% | 43.8% |
| Bullish engulfing | 1,079 | 57.3% | 56.0% |
| Bearish engulfing | 1,916 | 43.6% | 43.8% |
| Morning star | 424 | 59.0% | 56.2% |
| Evening star | 516 | 43.8% | 43.6% |
| Three white soldiers | 858 | 56.6% | 56.2% |
| Three black crows | 591 | 43.8% | 43.9% |
None of the patterns differed from an ordinary week by more than chance tends to give, and none did after a month either. The patterns said to point up held about as often as the stocks rose in an ordinary week, and those said to point down held about as rarely as the stocks fell.
Look at the Ordinary week column. The stocks rose in an ordinary week 56.1% of the time, so a pattern that points up seems to hold more often than one that points down simply because stocks rise more often than they fall. Counting how often a pattern held without comparing it with an ordinary week is how people fool themselves.
The patterns aren't rare either. A doji came about once every 10 days in each company, and a hammer once every 48.
What it means
The patterns are a way to describe what a day or a few days looked like, and their names make them easy to remember.
As a forecast they were no better than an ordinary day in these numbers.
The test has limits: it covers today's largest companies, the rules are ours, and other rules can give other answers. The study on technical analysis runs the same kind of test on RSI, moving averages and MACD.
Test yourself
A hammer shows up after a downtrend. What do the numbers say?
More numbers are on the Oracle stock page.