How to read candlestick charts is something I’ve been asked about quite often recently, so I’ve reorganized it again. Honestly, whether you understand this or not can significantly change the accuracy of your chart analysis.

Explaining it from the basic structure, candlesticks are made up of the body and the wick. The body shows the relationship between the opening and closing prices—if it’s white or green, it suggests an upward (bullish) move, and if it’s black or red, it suggests a downward (bearish) move. The wick represents the high and low during the period. Up to here, most people already know.

What’s important is pattern recognition. In particular, patterns that suggest a reversal are something you’ll see repeatedly in real trading. For example, a hammer has a long lower wick and a small body, suggesting an upward reversal; on the other hand, a hanging man has a long upper wick and suggests a downward reversal. These are useful on their own, but when you look at them in combination, their accuracy improves.

And personally, I feel the Bearish Engulfing pattern is fairly reliable. It consists of 2 candlesticks, where the second bearish candle completely engulfs the previous bullish candle. When this pattern appears, it’s worth monitoring with a focus on a potential shift into a downtrend. Conversely, a Bullish Engulfing suggests the possibility of an upward move.

Three-candlestick patterns such as the Morning Star and Evening Star are also important. The Morning Star suggests an upward reversal in the order of a bearish candle, a small-bodied candle, and a bullish candle. The Evening Star suggests a downward reversal with the opposite sequence.

However, there is something you should be careful about here. Candlestick patterns—including the Bearish Engulfing—are not certain. So you must always make your judgment in combination with other technical indicators such as moving averages and RSI. Only when multiple pieces of evidence line up does the confidence in your trading decision increase.

In reality, the only way to get better at reading candlestick charts is to practice repeatedly. By becoming familiar with the patterns, you’ll be able to spot market turning points early. You can practice sufficiently with Gate’s chart tools, so it’s a good idea to regularly observe various candlestick patterns and refine your own decision criteria. As your market analysis accuracy improves, you’ll be able to make more informed trading decisions.