Candlestick Charts for Beginners (2025): How to Read Patterns Like a Pro

Candlestick charts are where technical analysis truly begins.

Each tiny box and line packs alpha — open, close, highs, lows, sentiment, and momentum shifts — all at a glance. Yet for most beginners, they might as well be hieroglyphs.

Let’s change that.

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This guide breaks down what candlesticks are, how to read them, and why patterns like Doji, Hammer, and Engulfing matter.

If you’re new to trading crypto, consider this your chart-reading cheat code.

Anatomy of a Candle

Each candlestick shows price action over a set period — whether that’s 1 minute, 5 minutes, an hour, or a day.

Body: This is the thick part. It shows the range between the open and close.
Wicks (or shadows): The thin lines above and below the body. The top wick marks the session high, and the bottom wick marks the session low.
Color: Bullish candles are usually green or white (close > open). Bearish candles are red or black (close < open).

Quick reads:

Big body → strong momentum
Long wick → rejection or volatility
Tiny body + long wicks → indecision

Must-Know Candlestick Patterns

Doji 🌌

A Doji forms when the open and close prices are almost identical — meaning buyers and sellers battled, but no one won.

Image source: Forex.com

Signal: Market indecision, often appearing near potential reversals or turning points.
Context: If a Doji appears after a strong uptrend, it could signal exhaustion.

Types of Doji:

Long-Legged Doji: Massive tug-of-war; total uncertainty.
Dragonfly Doji: Buyers rejected lower prices → bullish sign.
Gravestone Doji: Sellers rejected higher prices → bearish sign.

Hammer 🔨

A single-candle pattern with a small body near the top and a long lower wick.

Image source: Forex.com

Signal: Bullish reversal. Buyers stepped in after sellers pushed too far.
Context: Only valid after a downtrend. The long lower wick shows buyers stepping in hard.

👉 Watch out: An Inverted Hammer (same structure, but wick on top) is also bullish in a downtrend, but needs stronger confirmation.

Engulfing 🤯

An Engulfing pattern is made up of two candles, and the second one completely swallows the first. It’s a clear signal that momentum just flipped sides.

Image source: Medium.com

🟢 Bullish Engulfing: A small red candle followed by a large green one that wraps around it. Buyers took control — hard.
🔴 Bearish Engulfing: A small green candle, then a bigger red one. Sellers just slammed the brakes on the rally.

💡 Pro tip: The bigger the engulfing candle compared to the first, the stronger the reversal signal.

Patterns Need Context

No pattern is an island.

That Doji? It means nothing if it’s floating in chop.

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That Hammer? Useless in a sideways market. Patterns are tools, not signals to YOLO.

Here’s what makes a pattern trustworthy:

Trend Context: Is it appearing after a real move? A Hammer in a clear downtrend > Hammer in sideways range.
Volume: Spike in volume on a reversal pattern = stronger conviction.
Support/Resistance: A Doji or Engulfing near a key level is worth noting.
Confirmation: Don’t just trade the shape. Wait for the next candle to confirm the direction.

Check out our on-chain data guide for how to pair patterns with network insights.

Real Chart Example

Visual learners, here’s how it looks in the wild:

Downtrend into support zone.
Hammer candle prints with long lower wick.
Next candle breaks above Hammer’s high on volume.

That’s a long trigger.

Now imagine the same setup in an illiquid micro-cap. Be cautious. As we covered in our piece on crypto liquidity black holes, pattern reliability drops when books are thin.

Quick Reference Table

Pattern	Signal Type	Looks Like	Best Context
Doji	Neutral	Small body, long wicks.	After trend, near levels.
Hammer	Bullish	Small body, long lower wick.	After downtrend.
Inverted Hammer	Bullish	Small body, long upper wick.	After downtrend.
Bullish Engulfing	Bullish	Big green wraps small red candle.	After pullback.
Bearish Engulfing	Bearish	Big red wraps small green candle.	After rally.