Glossary · Candlestick patterns

Reversal pattern

A chart or candlestick formation suggesting a trend may be ending and turning, such as a hammer, an engulfing or a double top.

By Sky Trade editorial teamUpdated November 5, 2026

Reversal patterns are shapes in price that traders associate with the end of a trend. They come in two scales. Candlestick reversals — the hammer, shooting star, engulfing, morning and evening star — involve one to three candles. Chart reversals — double tops and bottoms, head and shoulders — develop over many candles.

All of them share three requirements that are easy to forget:

Something to reverse. A pattern without a preceding trend is just a shape.
A meaningful location, such as support, resistance or a round number.
Confirmation. A reversal is only a candidate until price follows through.

The most important misunderstanding is that reversal patterns predict reversals. They describe a moment when a reversal becomes possible. Most trends survive several such patterns before they actually end, so trading every one against the trend is a systematic way to lose.

Shorter timeframes produce many more patterns and far more noise, and on Sky Trade's OTC instruments every pattern appears by chance on a randomly generated path. Treat patterns as a timing filter within a plan. See hammer and hanging man and morning star and evening star.

Example

EUR/USD falls 60 pips to support at 1.0800 and prints a bullish engulfing on M15; the next candle closes higher, confirming it. A similar pattern two hours earlier, at no particular level, had failed.

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