Multi-candle patterns provide more confirmation than single candles because they show a sequence of events rather than a single moment of price action. Where a pin bar shows rejection in one period, an engulfing pattern shows rejection confirmed by follow-through in the next period. Where a doji shows indecision, a morning star shows that indecision resolved into a clear directional move. More confirmation means higher probability — and in trading, higher probability setups are always preferable.
Engulfing Patterns
The engulfing pattern is the most widely used two-candle reversal pattern in forex price action. It requires two candles: the first in the direction of the existing trend, the second moving in the opposite direction and completely engulfing the first — meaning the second candle's body opens beyond and closes beyond the entire body of the first candle.
Prior trend: downtrend Candle 1: bearish — closes below its open Candle 2: bullish — opens below candle 1 close AND closes above candle 1 open The second candle completely engulfs the first. Buyers overwhelmed sellers in one period. Signal: potential reversal from bearish to bullish trend.
The bearish engulfing pattern is the mirror image — forming at the top of an uptrend, with a bullish candle followed by a bearish candle that completely engulfs it. The larger the second candle relative to the first, and the more clearly it forms at a key level, the more significant the signal.
The Inside Bar
An inside bar is a two-candle pattern where the second candle — the inside bar itself — has a range (high to low) that is completely contained within the range of the first candle (the mother bar). The inside bar makes a lower high and a higher low than the mother bar — it is nestled inside.
Inside bars signal a pause in momentum — the market is consolidating after a strong move, gathering energy for the next directional push. A breakout of the inside bar in either direction — above the mother bar high or below the mother bar low — signals the direction of the next move.
Setup: Strong bullish trend, inside bar forms. Entry option 1 (aggressive): Buy at the open of the candle after the inside bar. Stop: below inside bar low. Entry option 2 (conservative): Buy stop above the mother bar high. Only triggers if bullish breakout. Stop: below inside bar low.
The Morning and Evening Star
The morning star is a three-candle bullish reversal pattern. It requires a strong bearish candle, followed by a small-bodied candle (the star — which can be a doji or a candle with a small body gapping slightly away from the first candle), followed by a strong bullish candle that closes well into the body of the first bearish candle.
The three candles tell a complete story: sellers were dominant (candle 1), the market became indecisive — the selling momentum stalled (candle 2), and buyers stepped in decisively (candle 3). The larger the third candle and the deeper it penetrates into the first candle, the stronger the reversal signal.
Morning Star (bullish reversal): Forms at the bottom of a downtrend. C1: Large bearish candle. C2: Small body — indecision or gap. C3: Large bullish candle — closes into the body of C1. Signal: Downtrend may be reversing. Evening Star (bearish reversal): Forms at the top of an uptrend. C1: Large bullish candle. C2: Small body — indecision or gap. C3: Large bearish candle — closes into the body of C1. Signal: Uptrend may be reversing.
Three White Soldiers and Three Black Crows
Three white soldiers is a three-candle continuation or reversal pattern consisting of three consecutive bullish candles, each opening within the body of the previous candle and closing progressively higher, with small or no upper wicks. It signals strong, sustained buying pressure over three consecutive periods.
Three black crows is the mirror — three consecutive bearish candles, each opening within the prior candle's body and closing progressively lower, with small or no lower wicks. Both patterns are most significant when they appear after a period of consolidation or at a key turning point.
Three consecutive large candles in one direction also mean the move may be overextended. Three white soldiers appearing after an already long uptrend at a key resistance level may signal exhaustion rather than continuation. Always consider context — where in the trend are you, and what levels are nearby?