Classic Candlestick Patterns: Technical Guide for Traders

1. Bullish Engulfing (Bullish Engulfing)

The Bullish Engulfing pattern appears after a bearish trend. It is characterized by a small red candle (bearish) followed by a larger green candle (bullish) that completely engulfs the body of the previous one. This formation signals a possible reversal towards a bullish trend.

Technical Features:

• The second candle should open below the close of the first one.
• The closing of the second candle must exceed the opening of the first
• Greater reliability when it appears at support levels or with high volume
• Approximate success rate: 70% when forming in oversold areas

2. Bearish Engulfing Pattern (Bearish Engulfing)

This pattern emerges at the end of a bullish trend. It consists of a small green candle followed by a larger red candle that completely engulfs the body of the previous one. It indicates a possible reversal towards a bearish trend.

Confirmation Signals:

• The second candle must open above the close of the first
• The close of the second candle must be below the open of the first.
• Greater effectiveness when it coincides with resistance levels or divergences
• Especially relevant after prolonged periods of rising without corrections

3. Hammer Pattern (Hammer)

The Hammer forms at the bottom of a bearish trend. It features a small body with a long lower shadow, indicating that after intense selling pressure, buyers managed to reclaim much of the lost ground. It suggests a possible bullish reversal.

Key Elements:

• The lower shadow must be at least 2-3 times the size of the body
• The body can be green or red, although it is more powerful if it is green.
• Almost nonexistent or very small upper shadow
• It works better when it appears after a sharp price drop

4. Shooting Star Pattern (Shooting Star)

The Shooting Star appears at the top of a bullish trend. It has a small body and a long upper shadow, indicating strong selling pressure after a brief bullish impulse. It often signals an imminent bearish reversal.

Identification Points:

• The upper shadow must be at least 2-3 times the size of the body
• The body is located at the lower end of the candle's price range.
• Minimal or nonexistent lower shadow
• Increased effectiveness when it appears at historical highs or significant resistances

These four patterns represent fundamental tools for technical analysis on trading platforms. Their correct identification, combined with other indicators such as volume and support/resistance levels, can significantly enhance the accuracy of market entries and exits.