Technical Analysis·Candlestick Patterns
Single-Candle Reversal Patterns
One Candle Can Change Everything
Some of the most powerful reversal signals come from a single candle. The doji, hammer, shooting star, and their relatives appear at turning points in markets across all timeframes and asset classes. Recognizing them quickly is a core technical skill. These patterns work because they reveal a sudden shift in the balance of power between buyers and sellers — a shift that often marks the beginning of a new directional move.
Single-candle reversal patterns are especially valuable because they provide the earliest possible warning of a trend change. While multi-candle patterns require two or three periods to form, a single candle at the right location can give you a one-period head start over traders waiting for more confirmation. That speed advantage translates directly into better entry prices and tighter stop losses.
Single-candle reversals · location is destiny
The Doji Family
Definition
Doji
A candle where the open and close prices are virtually identical, leaving a tiny or nonexistent body. It represents perfect market equilibrium — buyers and sellers are exactly matched. Significance increases at major highs and lows. A doji after a long trend is far more meaningful than a doji in a sideways range.
Doji variations
The standard doji has wicks on both sides. The long-legged doji has very long wicks — extreme indecision. The gravestone doji has a long upper wick and no lower wick — price rejected hard from highs (bearish at tops). The dragonfly doji has a long lower wick and no upper wick — price rejected from lows (bullish at bottoms).
Four doji · same family, different signals
| Doji Type | Shape Description | Location | Signal |
|---|---|---|---|
| Standard Doji | Tiny body, equal wicks above and below | At support or resistance | Indecision — wait for next candle direction |
| Long-Legged Doji | Tiny body, extremely long wicks both sides | After extended moves | Extreme indecision — high probability of reversal |
| Gravestone Doji | No body at bottom, long upper wick only | At market tops / resistance | Bearish reversal — buyers completely rejected |
| Dragonfly Doji | No body at top, long lower wick only | At market bottoms / support | Bullish reversal — sellers completely rejected |
| Four-Price Doji | Single horizontal line, no wicks | Any location (rare) | Complete absence of activity — typically illiquid periods |
Real-world example: Gravestone doji on USD/CHF
In March 2023, USD/CHF rallied to the 0.9440 resistance zone on the daily chart. The candle that day printed a textbook gravestone doji — price spiked to 0.9440 during the London session but was driven all the way back to the open by the New York close. The next three candles were bearish, and the pair dropped 150 pips over the following week. The gravestone doji at resistance was the earliest reversal signal available.
Hammer & Hanging Man
Definition
Hammer
A candle with a small body at the top and a lower wick at least 2x the body length. Appears at the bottom of a downtrend. Signals that sellers pushed price down but buyers drove it back up — exhaustion of selling pressure. The hammer is one of the most reliable single-candle reversal patterns when it appears at established support levels.
Definition
Hanging Man
Identical shape to a hammer — small body at the top, long lower wick — but appears at the top of an uptrend. Despite the bullish-looking wick, it signals that sellers are beginning to overpower buyers. Bearish reversal signal. The name comes from the candle's visual resemblance to a hanging figure.
How to Trade a Hammer at Support
- 1
Identify the downtrend
Confirm that price has been in a clear downtrend — a series of lower highs and lower lows. The hammer only has meaning as a reversal if there is a trend to reverse.
- 2
Locate a key support level
The hammer should form at a significant support zone — a previous swing low, Fibonacci level, round number, or trendline. A hammer in the middle of nowhere is far less reliable.
- 3
Confirm the candle shape
The lower wick must be at least 2x the body length. Ideally 2.5-3x. The upper wick should be tiny or nonexistent. The body color matters less, but a green (bullish) body is stronger.
- 4
Wait for confirmation
The next candle should close above the hammer's high. This is your entry trigger. Do not enter before confirmation — many hammers fail without follow-through.
- 5
Set your stop and target
Stop loss goes below the hammer's low (the wick tip). Target is the next resistance level or a 1:2 risk-reward minimum. Some traders use the distance from the hammer's low to its high as the measured move target.
A
Hammer (Bullish)
- Appears after a downtrend
- Small body at the TOP of the candle
- Lower wick = 2x body or more
- Signals buyer absorption of selling
- Stronger if body is green
- Confirm with next candle closing higher
- Best at horizontal support or Fibonacci levels
- Win rate improves on H4 and daily timeframes
B
Hanging Man (Bearish)
- Appears after an uptrend
- Same shape as hammer
- Small body at TOP, long lower wick
- Signals sellers starting to overwhelm buyers
- Stronger if body is red
- Confirm with next candle closing lower
- Best at horizontal resistance or round numbers
- Requires more confirmation than a hammer
Hanging man reliability
The hanging man is generally considered less reliable than the hammer. Because its long lower wick shows buyers stepping in, many traders require stronger confirmation (such as a gap down or large bearish candle the next day) before acting on a hanging man signal. Never short solely on a hanging man without additional confluence.
Shooting Star & Inverted Hammer
Definition
Shooting Star
Small body at the bottom of the candle with a long upper wick (2x body or more). Appears at the top of an uptrend. Buyers pushed price high but sellers drove it back down — failed breakout above resistance. Bearish reversal. The shooting star is the mirror image of the hammer and is one of the most visually distinctive reversal candles.
Definition
Inverted Hammer
Identical shape to shooting star but appears at the bottom of a downtrend. Despite the bearish-looking upper wick, it signals buyers are testing higher prices. Bullish potential — confirm with the next candle. The logic is that buyers are beginning to challenge seller dominance, even though they could not hold the highs.
Real-world example: Shooting star on EUR/GBP
In July 2023, EUR/GBP formed a shooting star on the daily chart at the 0.8700 resistance zone. Price spiked intraday to 0.8720 but closed at 0.8685 — well below the open. The long upper wick signaled aggressive seller rejection. Over the next two weeks, the pair declined to 0.8550, a move of over 150 pips. Traders who recognized the shooting star at resistance had an early entry into a high-conviction short.
Shooting star at resistance: long upper wick showing rejection of highs — confirms the bearish reversal that followed.
Entry
0.6525
Stop
0.6490
Target
0.6610
Hammer candle on the AUD/USD H4 chart at the 0.6500 support zone. Lower wick was 3x the body length, showing aggressive buyer absorption. Entry above the hammer's high at 0.6525, stop below the wick at 0.6490, target at the next resistance zone at 0.6610. R:R of approximately 1:2.4.
Knowledge check
A hammer candle appears after a 3-week downtrend on EUR/USD. The next candle closes strongly bullish. What does this signal?
Backtested Reliability of Single-Candle Patterns
Not all single-candle patterns are created equal. Extensive backtesting across forex, equities, and commodities has revealed significant differences in reliability. The following table summarizes approximate win rates when patterns appear at key support/resistance levels with proper confirmation.
| Pattern | Context | Approximate Win Rate | Average R:R |
|---|---|---|---|
| Hammer at support | After 5+ candle downtrend, at horizontal S/R | 58-65% | 1:1.8 |
| Shooting star at resistance | After 5+ candle uptrend, at horizontal S/R | 55-62% | 1:1.7 |
| Gravestone doji at resistance | At major weekly/daily resistance | 52-58% | 1:1.5 |
| Dragonfly doji at support | At major weekly/daily support | 54-60% | 1:1.6 |
| Hanging man at resistance | After uptrend, at resistance | 48-54% | 1:1.3 |
| Inverted hammer at support | After downtrend, at support | 50-56% | 1:1.4 |
Improve your win rate
These win rates increase by 5-10 percentage points when you add confluence: a Fibonacci level aligning with horizontal support, RSI divergence confirming the reversal, or the pattern forming at a moving average. The candle pattern alone is a signal; confluence transforms it into a high-probability setup.
Knowledge check
Which of these single-candle patterns is generally considered LEAST reliable as a standalone reversal signal?