Recently, I discussed technical analysis with some friends and found that many people's understanding of candlestick patterns still stays at a superficial level. I thought about organizing some practical insights.

It's interesting to note that our country’s stock market has been using candlestick charts since 1990 when trading started. Back then, research on candlestick patterns was mainly based on Japanese methods, with scattered studies on the statistical regularities of single, double, and multiple candlestick formations, but no systematic framework was ever established. To this day, many people’s understanding of candlestick charts remains insufficiently deep.

I have to be honest: although indicators and candlestick analysis are essential tools in stock trading, these technical tools are ultimately just references. Don’t think that spotting a classic candlestick pattern or a commonly used indicator alone can lead to definitive conclusions. In actual trading, flexibility and adaptability are key— the same pattern can behave completely differently under different market conditions.

Candlestick charts originated in Japan’s Edo period, initially used to record daily rice price fluctuations. Later, they were introduced into the stock market and gradually became popular in Southeast Asia. Their popularity stems from being intuitive and three-dimensional, capable of relatively accurately predicting future market trends, and clearly showing the strength comparison between bulls and bears.

Candlestick patterns are divided into 24 types of bullish (yang) and 24 types of bearish (yin) candles, totaling 48 types. Bullish candles mainly include small bullish, medium bullish, large bullish, and doji (cross) patterns, each further divided into six variations. A larger real body indicates stronger buying pressure, generally suggesting the market will rise; a longer lower shadow indicates strong buying momentum, often leading to an upward move; a longer upper shadow suggests strong selling pressure, and the market may decline. The logic for bearish candles is similar: larger real bodies indicate stronger selling, usually leading to a decline.

Among practical candlestick combinations, I value these five the most.

- Morning Star appears at the end of a downtrend: the first day has a long bearish candle, the second day gaps down with a doji or hammer pattern, and the third day has a long bullish candle recovering lost ground—this signals a reversal.
- Evening Star is the opposite: appearing during an uptrend, the first day has a long bullish candle, the second day gaps up with a doji or hammer, and the third day has a long bearish candle—this indicates a potential exit point, often an excellent selling opportunity.

- The Three White Soldiers is a bullish signal: three consecutive days of new highs in closing prices, with the opening price within the previous day’s real body and closing near the day’s high.
- The Three Black Crows is the opposite: during an uptrend, three consecutive long bearish candles, each closing below the previous day’s low, indicating further decline potential.
- The Gap Up Three Soldiers is more special: it often appears at market tops, with prices gapping higher but closing lower each day, signaling weakening bullish momentum. At this point, it’s wise to consider taking profits or reducing positions.

In short, mastering these candlestick pattern combinations can help you better understand market rhythm, but don’t treat them as absolute truths. Combining them with volume and other indicators will improve your judgment. The market is always changing, and our job is to stay flexible amid these changes.