Which candle is a hammer?

Small body on top, lower wick 2+ times the body, after a fall. A hammer is a long lower wick and a small body at the top, after a fall. A long upper wick after a rise is a shooting star.

How do you check a bullish engulfing?

The green body fully covers the previous red candle’s body. Engulfing compares bodies: open and close. Wicks don’t count. The colours differ and the second body is bigger and covers the first completely.

A doji shows up in the middle of a sideways market, with no level. What do you do?

Nothing: without context it’s just a pause. A doji matters after a strong move or at a level. In a range it adds nothing. A pattern without context is noise.

Candle patterns

Lesson 3 of 23 in the course “Technical Analysis”. Free, with animations and a quiz.

Hammer and shooting star

A hammer has a small body on top and a long lower wick, at least twice the body: sellers pushed, buyers bought it all back. It matters at the bottom, after a fall. A shooting star is its mirror at the top after a rise: a long upper wick, buyers got knocked out. These are the definitions from Nison’s book.

Engulfing

Two candles. The second body fully covers the first body, and the colours differ. A bullish engulfing after a fall: yesterday sellers, today buyers took it all and more. Bearish is the opposite, at the top. Wicks don’t count, only bodies.

Doji

A doji is a candle where the open almost equals the close. It’s a draw, indecision. In the middle of a calm market a doji means nothing. After a long rise at resistance it’s a sign buyers are tired. Nison advises waiting for the next candle: it shows who won.

Context is everything

A pattern doesn’t work on its own, only in the right spot. A hammer at support after a fall is a strong signal. The same hammer in the middle of the chart is noise. A three-question check: is there a level, was there a move before the candle, did the next candle confirm. Now you’ll find patterns yourself on a practice chart.

Check yourself

Which candle is a hammer?
Correct answer: Small body on top, lower wick 2+ times the body, after a fall. A hammer is a long lower wick and a small body at the top, after a fall. A long upper wick after a rise is a shooting star.
How do you check a bullish engulfing?
Correct answer: The green body fully covers the previous red candle’s body. Engulfing compares bodies: open and close. Wicks don’t count. The colours differ and the second body is bigger and covers the first completely.
A doji shows up in the middle of a sideways market, with no level. What do you do?
Correct answer: Nothing: without context it’s just a pause. A doji matters after a strong move or at a level. In a range it adds nothing. A pattern without context is noise.

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