Candlestick Patterns

The hammer is the most famous bullish candle in trading. After a hammer, price was higher less often than after an ordinary day.

That result comes from testing 26 well-known candlestick patterns against every company in the S&P 500, counted only on the days it was actually in the index, from January 2002 to September 2026. That is 1,012 companies and more than three million trading days. Every pattern was counted the same way and reported the same way, whether the answer was flattering or not.

What you will get from this book

• A rule for every pattern. Not "a smallish body with a longish shadow," but a definition exact enough that you can look at any chart and say yes or no.
• What each candle actually records. Learn to read the four prices behind every candle, and where reading stops and storytelling begins.
• What happened next, for all 26. How often price was higher one, three, five and ten days after each pattern, compared with an ordinary day.
• Which famous patterns point the wrong way. Six of the 26 show a difference that held up. Three point the way they are taught. Three point the opposite way, and those three are among the best known in the subject.
• Six questions to ask of any trading claim, including the claims in this book.
• Two reference cards you can photograph and keep beside your screen.

How this book is different

Most candlestick books teach by example: a well-chosen chart where the pattern worked. This one counts every occurrence.

• Like is compared with like. Many patterns can only appear after a big move, so they inherit whatever follows big moves. Each pattern is compared with days that had already moved just as far. Seven patterns that look like signals turn out to be price moves wearing a name.
• The bar was set before the results came in. With 26 patterns tested, some would look like findings by luck alone, so the bar was raised to allow for that.
• No survivor bias. Companies that were later dropped from the index, merged or went under are counted for every day they were in it.
• The failures are printed too. Patterns that showed nothing, patterns too rare to measure, and patterns that came close but would not hold still are all reported in full.
• Everything needed to check it is inside. The exact rules, every result and the full method are in the appendices.
• Plain English throughout. Written for a reader who has never looked closely at a candle, with more than 80 figures, a glossary and an A-Z pattern index.

Patterns covered include

The hammer, hanging man, inverted hammer and shooting star · the doji, dragonfly doji and gravestone doji · the spinning top and marubozu · engulfing and harami patterns · dark cloud cover and the piercing line · tweezer tops and bottoms · the morning and evening stars · three white soldiers and three black crows · and more.

This is not a trading system, and it will not tell you when to buy or sell. It tells you what these 26 patterns have actually done, so you can decide what they deserve in your own trading.

Candlestick Patterns is part of the Reading the Charts Series by Dean Cross.