The Signal Lantern

Every multi-candle pattern begins as a single candle. The trader who can read the story of one session — whether it whispers exhaustion or screams conviction — holds the edge before the pattern completes. This guide covers the eight single-candle signals that form the foundation of all candlestick analysis.

1. The Anatomy of a Candle

Before interpreting patterns, you must understand the language of the candle itself. Each session produces four prices — Open, High, Low, Close — and the relationship between them creates the candle's real body and shadows (or wicks).

Bullish
Close > Open

Bearish
Close < Open

Open: First traded price
High: Session peak
Low: Session trough
Close: Last traded price
Real Body: Range between Open and Close
Shadows: Price rejection beyond the body

Signal Flag: The Body-Shadow Ratio

The real body shows who won the session — bulls (white/green) or bears (black/red).
The upper shadow reveals where sellers rejected higher prices.
The lower shadow reveals where buyers defended lower prices.
Color alone is insufficient. A small white body after a downtrend means less than a large white body.

2. The Doji Family — Equilibrium at Extremes

A Doji forms when Open and Close are equal (or nearly so), producing a cross with little to no real body. The Doji represents a tug-of-war where neither side wins — and at the end of a sustained trend, that deadlock often signals exhaustion.

Four Variants of the Doji

Variant	Structure	Meaning
Standard Doji	Small cross, moderate shadows	General indecision; significance increases after sustained moves
Long-Legged Doji	Very large upper and lower shadows, close near midpoint	Extreme intraday volatility ending in deadlock; very dramatic
Gravestone Doji	Long upper shadow, no lower shadow, open/close at the low	Price rallied then collapsed — bearish reversal at tops
Dragonfly Doji	Long lower shadow, no upper shadow, open/close at the high	Price sold off then recovered — bullish reversal at bottoms

Signal Flag: Doji Validation Rules

A Doji in the middle of a trend is indecision, not a trade signal.
A Doji at the end of a sustained trend is a high-probability reversal warning.
Confirmation by the next candle is essential. Never trade a Doji alone.
The Gravestone and Dragonfly variants provide directional bias; the Standard and Long-Legged variants require more context.

"A Doji represents an equilibrium between supply and demand, a tug of war that neither the bulls nor bears are winning." — Candlestick Patterns (Every trader should know), Page 2

3. The Hammer & Hanging Man — The Keel Touch

The Hammer and Hanging Man are structurally identical — small real body at the upper end of the range, long lower shadow at least twice the size of the body, and little to no upper shadow. Their meaning depends entirely on where they appear.

Hammer vs. Hanging Man

Feature	Hammer (Bullish)	Hanging Man (Bearish)
Trend Context	After a definite downtrend	After a definite uptrend
Body Color	White preferred, but either works	Black preferred, but either works
Lower Shadow	≥ 2× the real body	≥ 2× the real body
Upper Shadow	None or very small	None or very small
Confirmation	Next candle shows continued buying	Next candle shows continued selling
Psychology	Sellers exhausted; buyers defended the low	Buyers pushed up; sellers emerged intraday

Signal Flag: The Keel Touch Rules

The lower shadow must be at least twice the size of the real body. A 1.5× shadow is not a Hammer.
The body must sit at the upper end of the session's range (near the high).
Confirmation is mandatory. A Hammer without a bullish follow-through is just a failed breakdown.
In automated systems, entry triggers on a close above the Hammer's high.

Try it: A Hammer in an uptrend is not a Hammer — it is a Hanging Man. For the full reversal narrative that follows a Hammer, see The Three-Day Gale.

4. The Shooting Star & Inverted Hammer — Failed Breakouts

Like the Hammer and Hanging Man, the Shooting Star and Inverted Hammer are mirror images. Both feature a small real body at the lower end of the range with a long upper shadow (≥ 2× body). The difference is trend context.

Shooting Star vs. Inverted Hammer

Feature	Shooting Star (Bearish)	Inverted Hammer (Bullish)
Trend Context	After a definite uptrend	After a sustained downtrend
Upper Shadow	≥ 2× the real body	≥ 2× the real body
Lower Shadow	None or very small	None or very small
Psychology	Buyers gapped/rallied but could not sustain; profit-taking collapsed price	Trapped longs capitulated into strength, but buyers absorbed supply
Reliability	High — gap-up-and-fail is strong warning	Moderate — requires confirmation more than Hammer

The Shooting Star is one of the strongest single-candle top reversal signals because the gap-up-and-fail structure traps the last bullish buyers. The Inverted Hammer is less reliable than the standard Hammer because the upper shadow shows buying interest that was rejected, not a successful defense of a low.

5. The Marubozu — Full Sail Conviction

Marubozu means "close-cropped" in Japanese. It is a candle with a large real body and minimal or no shadows — a session where one side held complete control from open to close.

Marubozu Types

White/Green Marubozu: Open at the low, close at the high. No upper or lower shadow. Signals extreme bullish conviction — buyers never let price dip below the open.

Black/Red Marubozu: Open at the high, close at the low. No upper or lower shadow. Signals extreme bearish conviction — sellers dominated every minute of the session.

Partial Marubozu: Missing only one shadow (e.g., no lower shadow but a small upper shadow). Still signals directional bias, but with some intraday rejection.

Signal Flag: Full Sail Rules

A full Marubozu on high volume often marks the start of a sustained move.
If there is follow-through early the next day, the stock is likely to trend for several more sessions.
In breakout trading, a Marubozu closing above resistance with no upper shadow means sellers were completely absent.
Marubozu candles are the building blocks of Three White Soldiers and Three Black Crows.

Contrast: The Marubozu is the opposite extreme of the Doji. Where the Doji has no body (maximum indecision), the Marubozu has maximum body (maximum conviction). For the three-candle patterns built from Marubozu candles, see The Three-Day Gale.

6. Spinning Tops & High Waves — The Calm Between Swells

A Spinning Top or High Wave candle has a small real body (open and close near each other) with long upper and lower shadows that significantly exceed the body length. Color is irrelevant. These candles signal indecision — a lack of consensus about direction.

Signal Flag: Reading the Calm

After a strong trend, a Spinning Top is often the first sign of exhaustion. Tighten stops.
In a ranging market, Spinning Tops are normal noise — ignore them.
Combined with low volume, traders are expressing disinterest.
Combined with high volume, the market is genuinely confused — a significant move often follows.
In trend-following systems, a Spinning Top should trigger a "no new positions" filter.

The Spinning Top is the Doji's louder cousin. Where a Doji says "complete deadlock," a Spinning Top says "violent argument, no winner." Both demand the same response from the disciplined trader: reduce exposure and wait for clarity.

7. Common Mistakes

The Reefs Below

Mistake 1: Ignoring trend context. A Hammer in an uptrend is a Hanging Man — a bearish signal, not bullish. Always confirm the prevailing trend before classifying a pattern.

Mistake 2: Trading the Doji alone. A Doji is indecision, not direction. It requires confirmation from the next session.

Mistake 3: Forgetting shadow ratios. A candle with a lower shadow of 1.5× body is not a Hammer. The 2× rule exists for a reason — it measures the degree of rejection.

Mistake 4: Chasing Marubozu without volume. A full-body candle on anemic volume can be a trap. Conviction requires participation.

Mistake 5: Treating Spinning Tops as reversals in all contexts. In a range, they are noise. In a trend, they are warnings. Context is everything.

8. Psychology — Reading the Watchman's Flame

The single-candle patterns reveal the emotional state of the market in one session:

Doji: Fear and greed are balanced — the market is holding its breath.
Hammer: Sellers panicked, then buyers stepped in with confidence. The low was tested and defended.
Hanging Man: Buyers pushed higher, but sellers emerged and nearly took control. The uptrend is fragile.
Shooting Star: Early buyers were trapped. The breakout failed, and profit-taking accelerated.
Marubozu: One faction dominated completely. There was no meaningful opposition.
Spinning Top: Neither side trusts the direction. The market is waiting for news, earnings, or a catalyst.

The trader who reads these emotions correctly — who sees the keel touch before the hull breaches — can position before the crowd recognizes the shift.

Next: Single candles are the alphabet. Two-candle patterns are the vocabulary. Learn how pairs of candles tell a richer reversal story in The Turning Tide.