Single Candlestick Patterns (Doji, Hammer, Shooting Star)

The Doji is a candlestick where the opening and closing prices are virtually identical, creating a candle with a very small or nonexistent body. It represents indecision in the market — buyers and sellers are evenly matched. A Doji appearing after a sustained trend often signals exhaustion and a potential reversal. Several Doji variations exist: the long-legged Doji (long upper and lower wicks), the dragonfly Doji (long lower wick, no upper wick), and the gravestone Doji (long upper wick, no lower wick).

The Hammer is a bullish reversal pattern characterized by a small body at the top of the candle with a long lower wick (at least twice the body length) and little to no upper wick. It typically appears at the bottom of a downtrend and signals that sellers pushed prices significantly lower during the period, but buyers regained control and drove the price back near the open. When a hammer appears at a key support level in gold, it is considered a strong buying signal.

The Shooting Star is the bearish counterpart to the hammer, featuring a small body at the bottom with a long upper wick and minimal lower wick. It appears at the top of an uptrend and indicates that buyers pushed prices higher but sellers overpowered them, forcing the close back near the open. In gold trading, shooting stars at resistance levels — especially near round numbers or all-time highs — often precede meaningful pullbacks.

The key to successfully trading single candlestick patterns is confirmation. Rather than acting immediately on the pattern, experienced traders wait for the next candle to confirm the reversal signal. A hammer followed by a strong bullish candle, or a shooting star followed by a bearish candle, significantly increases the reliability of the signal.