Every candle has four data points: Open, High, Low, Close (OHLC)

       │  ← Upper Wick (High)
     ┌─┴─┐
     │   │ ← Body (distance between Open and Close)
     └─┬─┘
       │  ← Lower Wick (Low)

Bullish Candle (Green)

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• Open at the BOTTOM of the body
• Close at the TOP of the body
• Buyers pushed price higher — closed above where it opened
• The larger the body, the stronger the buying pressure

Bearish Candle (Red)

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• Open at the TOP of the body
• Close at the BOTTOM of the body
• Sellers pushed price lower — closed below where it opened
• The larger the body, the stronger the selling pressure

What Wicks Tell You

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• Long upper wick on a bullish candle → buyers tried to push higher but sellers rejected it at the top
• Long lower wick on a bearish candle → sellers tried to push lower but buyers rejected it at the bottom
• Very short or no wick (Marubozu) → one side had complete control for the entire candle

Before trading any pattern, first assess the strength of the individual candles you see.

Strong Candles

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• Large body relative to recent candles
• Small or no wicks (decisive move — no rejection)
• Close near the high (bullish) or low (bearish) of the candle
• Higher-than-average volume

Weak Candles

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• Small body (indecision, balance between buyers and sellers)
• Large wicks relative to body (rejection at extremes)
• Close near the middle of the candle’s range
• Lower-than-average volume

Candle Size Context

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Always compare a candle to the average candle size in that area. A “large” candle on a chart with normally small candles is a strong signal. The same candle on a chart with even larger candles is not as significant.

An Engulfing Pattern is a two-candle formation where the second candle’s body completely engulfs the first candle’s body (open to close).

It signals a decisive shift in momentum from one side to the other.

Bullish Engulfing

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• Candle 1: Small bearish (red) candle
• Candle 2: Large bullish (green) candle whose body completely covers candle 1’s body
• Meaning: Sellers pushed price down on day 1, but buyers came in with such force on day 2 that they overwhelmed the entire day 1 move
• Signal: Bullish reversal or continuation of uptrend

Bearish Engulfing

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• Candle 1: Small bullish (green) candle
• Candle 2: Large bearish (red) candle whose body completely covers candle 1’s body
• Meaning: Buyers pushed price up on day 1, but sellers overwhelmed the entire move on day 2
• Signal: Bearish reversal or continuation of downtrend

Entry Rules for Engulfing

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Bullish Engulfing Entry:
Entry:  Above the engulfing candle high (on the next candle open)
Stop:   Below the engulfing candle low (below the low of candle 2)
Target: Next key resistance level

Real Example — Bitcoin Daily:
At support zone $68,500, a small red candle forms (candle 1)
Next day: large green candle opens at $68,450, closes at $70,200 — engulfs candle 1 completely
Entry: $70,300 | Stop: $68,100 | Target: $73,000

Key Rule: Context Matters

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An engulfing candle at a random location is weak. An engulfing candle at a:

• Key support/resistance level
• Demand or supply zone
• VWAP or Volume Profile POC
• Fibonacci golden zone

…is a high conviction setup.

An Inside Bar is a candle whose entire range (high to low) fits inside the previous candle’s range (high to low). The previous larger candle is called the “Mother Bar.”

What It Means

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The market is pausing. After a strong move (the Mother Bar), price contracts into a tight range. This represents indecision — neither buyers nor sellers are taking control.

But that indecision is temporary. The coiled energy often releases as a strong breakout in one direction.

How to Trade the Inside Bar

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Breakout Method (trend-following):

In an uptrend, price makes a strong bullish Mother Bar
Inside Bar forms the next candle
Entry: Buy when price breaks above the Inside Bar high
Stop: Below the Mother Bar low
Target: Next key resistance

Example — Bitcoin 4H:
Mother Bar: strong green candle from $64,000 to $66,500
Inside Bar: entire range stays between $65,200–$66,300
Price breaks above $66,300 → Breakout entry
Stop: $63,800 (below Mother Bar) | Target: $69,500

Fade Method (counter-trend at extremes): Used at key resistance/support when the breakout is expected to fail. Less common — requires more experience.

Inside Bar Quality Criteria

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• Mother Bar should be a strong, decisive candle (not a doji)
• Inside Bar should be significantly smaller than the Mother Bar
• Inside Bars that form at key levels have the highest probability
• Multiple consecutive inside bars = even more compressed energy = stronger eventual breakout

A Doji is a candle where the open and close are nearly the same price, resulting in a very small or nonexistent body. The candle’s story: buyers and sellers fought all session and ended exactly where they started.

Types of Doji

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Standard Doji — open ≈ close, wicks roughly equal on both sides → Pure indecision. Wait for the next candle to determine direction.

Long-Legged Doji — very long wicks on both sides, tiny body in the middle → Extreme indecision. High volatility session with no winner. Expect a directional move next.

Dragonfly Doji — open ≈ close ≈ high (tiny upper wick), long lower wick → Bullish signal at support. Sellers tried to push price down but buyers completely recovered.

Gravestone Doji — open ≈ close ≈ low (tiny lower wick), long upper wick → Bearish signal at resistance. Buyers tried to push price up but sellers completely rejected it.

How to Trade Doji

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A Doji alone is not a trade signal. It becomes a signal when it appears:

• At a key support level (especially Dragonfly Doji → bullish)
• At a key resistance level (especially Gravestone Doji → bearish)
• After a prolonged trend (potential exhaustion signal)

The candle after the Doji confirms the direction. Trade in the direction of the confirmation candle.