🎯 In 30 seconds: A single candle tells you how one session went: who pushed, who gave up and where price settled. The doji, hammer, shooting star, marubozu and spinning top are names for common outcomes. Each needs a precise definition, the right trend before it, and a later candle that confirms it. On their own they are weak evidence, so use them as a reason to look closer and as a place to set a stop.
Why one candle can matter
Every candle records a short contest. The open and close show where the session started and ended. The wicks show how far each side pushed before being pushed back.
A named candle matters only when that contest is unusual for its spot on the chart. A hammer in the middle of a quiet range says almost nothing. The same hammer after ten falling sessions, sitting on old support, says sellers drove price down hard and then lost control before the close. For a refresher on the four prices, see Reading price bars.
Measure, do not eyeball
Two people will disagree about whether a candle is a hammer unless they agree on numbers first. Write each rule as a ratio of the candle’s own parts:
- Range. High minus low.
- Body. The distance between open and close, ignoring direction.
- Wicks. The distance from the body to the high, and from the body to the low.
It also helps to compare the range with the average range of recent candles, often measured with ATR (see Volatility tools). The cutoffs below are common conventions, not laws. Pick yours in advance and keep them fixed so your results can be counted.
The doji family
A doji is a candle whose open and close are nearly the same. A typical coded rule is a body no larger than 5 to 10 percent of the range. Neither side won by the close.
- Plain doji. Short wicks of similar length. Mild indecision.
- Long-legged doji. Long wicks both ways. Both sides pushed hard and both failed.
- Dragonfly doji. Body at the top, long lower wick. Sellers pushed down and buyers took it all back.
- Gravestone doji. Body at the bottom, long upper wick. Buyers pushed up and sellers took it all back.
A doji matters most after a long run in one direction, because it is the first session where the leading side made no progress. Inside a sideways range, dojis are common and mean little.
Spinning top, marubozu and high wave
- Spinning top. A small body, about a third of the range or less, with wicks on both sides. A pause.
- High wave. A spinning top with very long wicks and a large range. A nervous, two-sided market.
- Marubozu. A long body with little or no wick, for example each wick under 5 percent of the range, and a range above the recent average. One side controlled the session from first trade to last.
A marubozu out of a long base can mark the start of a move. The same candle after a long, stretched run can be the last burst of late buyers. Location decides which.
Hammer, hanging man, shooting star and inverted hammer
These four share one idea: a long wick on one side, a small body at the other end, and almost no wick beyond the body.
- Hammer. Lower wick at least twice the body, upper wick under about 10 percent of the range, body in the top third. It must follow a decline.
- Hanging man. The same shape after a rise. Sellers pushed price well down during the session, even though the close recovered.
- Shooting star. Upper wick at least twice the body, body in the bottom third. It must follow a rise.
- Inverted hammer. The shooting star shape after a decline. The weakest of the four.
Where the candle must appear
A reversal candle needs something to reverse. Testable ways to define the trend before it:
- Price closed lower on most of the last 5 to 10 sessions (for a hammer) or higher (for a shooting star).
- The close is below a falling 20-day moving average, or above a rising one.
- The candle made the lowest low, or highest high, of the last 10 to 20 sessions.
A candle that also lands on a known support or resistance zone deserves more attention than one in open space.
Confirmation, entry, stop and target
Confirmation means a later candle agrees with the signal. For a hammer, a strict version is a later close above the hammer’s high; a looser one is a close above its body. Single candles have no measured target, so people aim for the nearest resistance or support, or for a multiple of the risk.
Worked example (hypothetical stock XYZ). After an eight-day slide, XYZ prints a hammer: open $49.50, high $50.20, low $46.00, close $50.00. The body is $0.50 and the lower wick $3.50, seven times the body.
| Step | Rule | Price |
|---|---|---|
| Confirmation | Next close above the $50.20 high | Closes at $51.00 |
| Entry | Buy at the confirming close | $51.00 |
| Stop | Just under the hammer low | $45.90 |
| Target | Old resistance | $56.00 |
| Reward to risk | $5.00 against $5.10 | About 1 to 1 |
The long wick that makes the hammer convincing also puts the logical stop far away. Here the target barely covers the risk. A trader could pass, wait for a pullback toward the hammer’s body, or trade smaller. Sizing is covered in Building a trade plan.
How these candles fail
- No follow-through. The next candles drift sideways and never confirm.
- A close beyond the extreme. A close below a hammer’s low, or above a shooting star’s high, means the idea is wrong.
- No real trend before it. A hammer after two red candles in a choppy range reverses nothing.
- News days. A long wick on an earnings day may reflect one event more than a shift in supply and demand.
| Candle | Shape rule | Must follow | Wrong if |
|---|---|---|---|
| Doji | Body 10% of range or less | A clear run either way | Trend resumes past the doji |
| Hammer | Lower wick 2x body or more, body in top third | A decline | Close below the hammer low |
| Hanging man | Same as hammer | A rise | Close above its high |
| Shooting star | Upper wick 2x body or more, body in bottom third | A rise | Close above the star high |
| Marubozu | Wicks under 5% each, range above average | A base or fresh breakout | Price retraces the whole body |
What to check before trusting one
- Is the trend before it real, by a rule you wrote down?
- Is it at support, resistance or a moving average?
- Is its range larger than normal, and was volume above average (see Reading volume)?
- Does the higher time frame agree?
- Has this pattern done better than a random day on this stock before?
- A hammer and a hanging man look identical. What separates them? Answer: The trend before the candle: a decline for a hammer, a rise for a hanging man.
- A candle has a $4.00 range, a $0.30 body near the top and a $3.40 lower wick. Does it fit the hammer shape? Answer: Yes. You still need a prior decline and confirmation.
- Where does a typical stop go on a shooting star trade? Answer: Just above the shooting star’s high.
- Why can a convincing hammer still be a poor trade? Answer: Its long lower wick puts the stop far away, so the risk can match or exceed the distance to resistance.
Sources
- Steve Nison, Japanese Candlestick Charting Techniques (1991).
- Marshall, Young and Rose (2006), “Candlestick technical trading strategies: Can they create value for investors?” Journal of Banking and Finance. Did not find that the candle strategies tested added value on large U.S. stocks.
- David Aronson, Evidence-Based Technical Analysis (2007).
- Moneydesks Technical Analysis tool: Candle patterns and the Pattern record tab.