15 Candlestick Patterns Every CFD Trader Should Know
From dojis to engulfing patterns, these candlestick formations signal potential reversals and continuations in CFD markets. The core formations, what they.
Why Candlestick Patterns Matter
Candlestick patterns visualise the battle between buyers and sellers. Each pattern tells a story about who is in control and whether momentum is shifting. While no pattern is 100% reliable, combining 2-3 patterns with support/resistance levels dramatically improves win rates.
Reversal Patterns
- Doji: Open and close are nearly equal — indecision, potential reversal
- Hammer: Small body, long lower wick at bottom of downtrend — bullish reversal
- Shooting Star: Small body, long upper wick at top of uptrend — bearish reversal
- Bullish Engulfing: Large green candle completely covers previous red candle — strong bullish reversal
- Bearish Engulfing: Large red candle covers previous green — strong bearish reversal
- Morning Star: Three-candle bottoming pattern — bullish reversal
- Evening Star: Three-candle topping pattern — bearish reversal
Continuation Patterns
- Rising Three Methods: Strong trend with small counter-trend candles inside — continuation
- Falling Three Methods: Bearish version — continuation down
- Bullish Harami: Small green candle inside large red — trend continues up
- Inverted Hammer: Long upper wick after downtrend — potential reversal
How to Use Patterns in CFD Trading
Never trade a pattern in isolation. Always look for confluence: a bullish engulfing at a support level, a hammer at a Fibonacci retracement, a doji at a resistance level. The pattern is the trigger; the level is the context. Context always wins.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70-80% of retail investor accounts lose money when trading CFDs. Backtesting does not guarantee future results. Always consider whether you can afford the potential loss of your capital.