# Candlestick & Pattern Analysis

## What Type of Trader Are You?

Before diving into candlesticks, you need to know which timeframe suits your personality. The candles you look at depend entirely on your trading style.

| Style | Timeframe | Hold Period | Risk | Reward | Stress | Best For |
|---|---|---|---|---|---|---|
| **Position Trader** | Weekly / Monthly | Months to years | Low | Low (slow) | Low | Long-term investors, relaxed personality |
| **Swing Trader** | Daily / Weekly | Days to weeks/months | Low-Med | Medium (takes time) | Low-Med | Patient traders, don't need daily results |
| **Day Trader** | 5min / 15min / 1hr | Within the day | Med-High | Higher (faster) | Higher | People who thrive on pressure |
| **Scalper** | 1min / 5min | Minutes to hours | High | High (immediate) | Very High | Adrenaline lovers, decisive under pressure |

**Key insight:** Your personality determines which style works. If you love roller coasters and spontaneity → scalping/day trading. If you prefer the beach and reading → swing/position trading. The educator started as a day trader (loved the rush, got fast feedback for learning), then transitioned to position trading as his life and priorities changed.

**Match your chart timeframe to your style:** Position trader = weekly/monthly. Swing trader = daily/weekly. Day trader = daily/hourly. Scalper = 1min/5min.

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## Anatomy of a Candlestick

Each candle gives four pieces of data: **Open, Close, High, Low.**

- **Body** = range between open and close
- **Wicks/Shadows** = the high and low extremes the price reached during the period
- **Green/White** = closing price was HIGHER than opening price (bullish)
- **Red/Black** = closing price was LOWER than opening price (bearish)

**Multi-timeframe unpacking:** A single daily candle can be unpacked by looking at the hourly/5min charts within that day. A bullish engulfing on the daily might show a clear downtrend reversal on the hourly. A bearish shooting star on the daily might show a strong downtrend on the 1-minute. This helps you understand what's actually happening inside each candle.

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## Candlestick Patterns

### Reference Charts

| Bullish | Bearish |
|---|---|
| [![Bullish candles 1](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/scaled-1680-/nnZD830emxKI8Ndx-image.png)](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/nnZD830emxKI8Ndx-image.png) | [![Bearish candles 1](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/scaled-1680-/McpFQL6FVpnb1kpU-image.png)](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/McpFQL6FVpnb1kpU-image.png) |
| [![Bullish candles 2](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/scaled-1680-/F7dFK4FVbJwiT1vU-image.png)](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/F7dFK4FVbJwiT1vU-image.png) | [![Bearish candles 2](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/scaled-1680-/1OfsUnC9Eksqqo6F-image.png)](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/1OfsUnC9Eksqqo6F-image.png) |
| [![Bullish candles 3](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/scaled-1680-/LE5cANO8OE9yzs9h-image.png)](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/LE5cANO8OE9yzs9h-image.png) | [![Bearish candles 3](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/scaled-1680-/7tWTfLrCAfRJIODK-image.png)](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/7tWTfLrCAfRJIODK-image.png) |

No pattern works all the time — they represent tendencies, not guarantees. Always confirm with volume and other indicators.

### Single Candle Patterns

**Marubozu ("Bald Head"):** No or minimal wicks — open/close IS the high/low. Bullish marubozu = intense buying pressure throughout the session. Bearish marubozu = intense selling pressure. These are powerful trend confirmation candles.

**Hammer / Shooting Star:** Long wick at one end, small body. Hammer (bullish) = long lower wick at bottom of downtrend, buyers stepped in hard. Shooting Star (bearish) = long upper wick at top of uptrend, sellers pushed price back down. Can be either colour.

**Spinning Tops / Dojis:** Short body centered between long upper and lower wicks. Neutral — represents indecision between bulls and bears. What matters is the candle that follows: big green after a doji = bulls won. Big red = bears won.

### Multi-Candle Patterns

**Bullish/Bearish Engulfing:** Two candles where the second completely engulfs the first. Bullish engulfing at bottom of downtrend = reversal signal (buyers overwhelmed sellers). Bearish engulfing at top of uptrend = reversal signal. Look for high volume to confirm.

**Inside Bar (Harami):** Small candle completely inside the previous candle's range. Shows the trend is pausing — indecision. The next candle determines direction.

**Morning Star / Evening Star:** Three-candle reversal pattern. Morning star (bullish) = long red → doji/small body → long green. Evening star (bearish) = long green → doji/small body → long red. The doji shows the battle, the third candle shows who won.

### Volume with Candlestick Patterns

- **Reversal patterns** (engulfing, hammers, stars) should have HIGH volume to confirm
- **Climax/exhaustion** candles at the end of trends often show extreme high volume
- **Trend confirmation** candles (marubozu) should be accompanied by strong volume in the trend direction

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## Chart Patterns

[![Chart patterns overview](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/scaled-1680-/KMW45WuwOmez3qgn-image.png)](https://pdb.conorbriggs.com.au/uploads/images/gallery/2026-01/KMW45WuwOmez3qgn-image.png)

**ASX Trader's honest take: "If I had to drop one lesson from the entire course, it would be this one."** He's not a chart pattern trader — patterns can go either way and markets sometimes do the opposite because everyone is watching the same pattern. However, patterns complement other tools and provide useful common language.

**The key principle:** Don't just trade because you see a pattern. Unpack what's under the hood — it's all market structure. If you can identify pivot points and market structure, you don't technically need to know pattern names. But knowing the language helps communicate with other traders.

### Continuation Patterns

#### Triangles

Converging price ranges showing a pause in the trend. Three types:

**Symmetrical:** Both lines converging at equal slopes. No directional bias — neutral consolidation. Direction depends on the breakout.

**Ascending:** Horizontal resistance + rising support (buyers stepping in higher each time). ~80% probability of upside breakout. Eventually sellers get exhausted.

**Descending:** Horizontal support + falling resistance (sellers stepping in lower each time). Eventually buyers get exhausted and it breaks down.

**Elliott Wave connection:** Triangles occur before the FINAL wave (wave 5 / excess phase). After a triangle breakout, expect one last push, then a correction. This is why triangle breakouts can trap retail traders — the move after the triangle might be short before rolling over.

**Breakout vs fake-out:** If a triangle breaks out and comes back within the pivot, it was likely a fake-out or a short excess phase. Check volume — breakout should be on high volume. Also check for divergence from the start to end of the triangle.

#### Flags & Pennants

Flags are short consolidation periods against the trend direction after a sharp impulse move (the "pole"). They're strong continuation patterns.

**Bull Flag:** Uptrend → sharp move up (pole, high volume) → consolidation down (flag, low volume) → breakout continuation (high volume). The flag should NOT retrace past the Fib 382 (maybe 500 max). If it goes to 618, it's too deep — it's not a flag, it's a weak trend.

**Bear Flag:** Downtrend → sharp move down → consolidation up to the zag zone (302-618) on low volume → breakdown on high volume.

**Pennants:** Same as flags but the consolidation forms a small symmetrical triangle instead of a channel. Also shouldn't retrace past 382.

#### Cup & Handle

Continuation pattern: prior uptrend → rounded bottom (the cup) → small pullback (the handle, which is basically a bull flag) → breakout. Handle should retrace to Fib 382, max 500. Handle must form on lowering volume. Breakout on increasing volume. Measured target = depth of the cup projected upward from the breakout.

#### Darvas Box (Rectangle)

Sideways consolidation with equal highs and equal lows. When it breaks out, check: is volume confirming? If breakout comes back within → liquidity grab (check OBV — was it going up on lowering volume?). If it breaks out and continues with strong volume → genuine breakout.

### Reversal Patterns

#### Head & Shoulders / Inverse H&S

**A head & shoulders is just a failure swing.** Shoulder, head, shoulder = higher high, higher low, higher high, then lower high (the right shoulder fails to reach the head), then breaks the neckline.

**Advanced H&S with volume and divergence:**
- Left shoulder forms on increasing volume
- Head forms on LOWERING volume (weakness) + bearish divergence from left shoulder to head on RSI
- Right shoulder forms on LOWERING volume (dumb money buying the dip)
- Neckline break should come on increasing volume (sell pressure confirms)
- Measured target = distance from neckline to head

The neckline doesn't have to be horizontal — it can be diagonal.

**Fractals:** Each wave can have its own mini head & shoulders. Multiple small H&S patterns combine to form one large H&S (accumulation → public → excess → correction).

#### Wedges (ASX Trader's Favourite)

Converging trend lines both moving in the same direction (unlike triangles where they move in different directions).

**Falling Wedge (Bullish):** Both lines sloping down but converging. Tension builds as the trend tightens. Breakout to the upside on increasing volume. **ASX Trader's favourite pattern** — gives phenomenal risk:reward because you can enter on the breakout and place a tight stop loss. Target = back to the top of where the wedge started. Look for bullish divergence on both OBV and RSI as it comes down the wedge.

**Rising Wedge (Bearish):** Both lines sloping up but converging. Uptrend getting weaker. Should be going up on decreasing volume. Breakdown on strong volume.

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## Multi-Timeframe Candlestick Analysis

1. **Identify primary trend** on higher timeframes (daily, weekly, monthly)
2. **Confirm on lower timeframes** — look for consistent patterns aligning with the primary trend
3. **Spot entry/exit points** on even lower timeframes (15min, 5min) for precise entries
4. **Detect confluences** — a bullish reversal pattern on the daily, supported by a similar pattern on the 4-hour, with increased volume = strong setup

Example: A bullish engulfing on the daily = look inside and you might see a double bottom on the hourly. Two reversal signals confirming each other across timeframes.

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## Advanced Pattern Analysis — Combining Everything

The real power of patterns comes from combining them with volume and divergence:

**For reversal patterns (H&S, wedges):**
- Look for divergence on BOTH RSI and OBV as the pattern forms
- The reversal candles should have high volume
- The continuation into the pattern should show lowering volume (weakness)
- When you get divergence on price momentum AND volume momentum, plus a change of market structure = high probability setup

**For continuation patterns (flags, triangles, boxes):**
- The consolidation should happen on lowering volume
- The breakout should happen on increasing volume
- OBV should confirm the breakout (if OBV doesn't break out with price, it's likely a fake-out)
- Triangles = one more push before a correction (excess phase), so trade with awareness it might be short