Recently, I’ve been working on technical analysis in the stock market again and realized that many people’s understanding of candlestick charts still stays at a superficial level. To be honest, since 1990 when the domestic stock market opened, candlestick charts have been used directly, but after all these years, our research on candlestick charts is still not deep enough.

I’ve discovered an interesting phenomenon: many traders habitually rely on one or two classic candlestick patterns or indicators to make decisions, often leading to pitfalls. Technical analysis is indeed a necessary approach, but it’s ultimately just a reference tool, not a Bible. In actual trading, you must be flexible and adaptable, not rigidly follow patterns.

Candlestick charts (also called Yin-Yang candles) originated from rice market trading during Japan’s Tokugawa shogunate era, used to track rice price fluctuations, and later introduced into the stock market. The reason for their popularity is that they are intuitive, three-dimensional, can relatively accurately predict future trends, and clearly reflect the balance of bullish and bearish forces.

Did you know? There are actually 48 candlestick patterns, divided into 24 bullish and 24 bearish patterns. These 48 candlestick patterns may seem complicated at first glance, but the core logic is just a few points: the larger the real body of a bullish candle, the stronger the buying pressure, generally indicating a bullish outlook; longer lower shadows suggest stronger buying, longer upper shadows indicate stronger selling. The logic for bearish candles is the opposite.

However, what’s truly useful in practical trading are the candlestick combination patterns. For example, the Morning Star appearing at the end of a downtrend usually signals a reversal; the Evening Star is a warning sign during an uptrend. Three consecutive bullish days of red three soldiers generally indicate a bullish outlook; the Three Black Crows pattern, on the other hand, appearing with consecutive bearish candles at high levels, suggests a potential decline. The gap jump of two crows, where bulls fail to make progress over two days, often signals a good time to take profits and exit.

Therefore, mastering these 48 candlestick patterns is helpful, but don’t rely on them blindly. Combine volume, other indicators, and even market sentiment for a much more accurate judgment. Technical analysis is like that—there’s never an absolute right or wrong, only specific situations that require specific analysis.