Over three centuries ago, rice-futures traders noticed the repetitive patterns in candlestick charts, which predicted future price movements in the commodity contracts traded. It should be noted that candlestick analysis is somewhat more sensitive than regular daily chart analysis in that it generates more signals. Given this profusion of signals, it is important to be aware of when those patterns appear in the trend so that more or less weight can be assigned to them in your analysis. If a candlestick reversal pattern appears at the end of an extended trend, you tend to believe it more than a reversal pattern that appears at the beginning of a new trend.

Patterns formed using multiple candlesticks tend to carry more weight than single candlestick patterns. We will begin with analysis of specific, well-known single-candlestick formations, which will become part of multicandlestick formations as we progress.

The „doji“, as illustrated in the below figure, is a warning signal. It signifies equal strength between those who are bullish and those who are bearish on a security (or whatever is the subject of the candlestick study). As such, the doji by itself can indicate an uncertain future, since neither the bulls nor the bears have the upper hand. When the doji appears in multicandlestick formations, it makes those formations more accurate in their prediction of future price action.