Body = open to close, wicks = the extremes. Long wicks show where price was rejected.
A pattern counts only after its candle closes, and only at a level you marked earlier.
Put the stop beyond the pattern’s wick and size the trade from that distance.
Anatomy of a candle
Every candle has four prices. Take an EURUSD 1h candle that opened at 1.0840, rose to 1.0861, fell to 1.0832 and closed at 1.0856. The body runs from 1.0840 to 1.0856: buyers won the hour. The upper wick to 1.0861 shows price was pushed back from the high; the lower wick to 1.0832 shows sellers tried and failed.
Read a candle as a short story. A big body with small wicks is a decisive period. A small body with long wicks is a fight with no clear winner. A long wick on one side shows where price was rejected.
Five patterns worth learning
- Doji. Open and close almost equal. Indecision; after a strong move it can mark a pause.
- Hammer. Small body at the top, long lower wick, after a fall. Sellers pushed price down and buyers took it back.
- Shooting star. The mirror: small body at the bottom, long upper wick, after a rise. Buyers were rejected.
- Bullish engulfing. A rising candle whose body covers the whole body of the falling candle before it.
- Bearish engulfing. A falling candle whose body covers the whole body of the rising candle before it.
These five cover most of what the longer pattern lists say in other words. Learn them well before adding more.
Context matters more than shape
A hammer in the middle of nowhere means little. The same hammer on a support zone you marked on the 4h chart, after a pullback in an uptrend, tells you something: buyers defended a level that mattered before.
Three checks before you act on any pattern:
- Location. Is it at a level you marked earlier?
- Closed. Has the candle closed? Until it does, a hammer can still turn into a big falling candle.
- Timeframe. Patterns on 1h and above carry more weight than the same shape on 1m.
From pattern to order
Say a 1h hammer forms on support with a low at 1.0812 and a high at 1.0838. One plan is a buy stop at 1.0840, just above the high, so you only enter if buyers follow through. The stop loss goes below the wick, at 1.0808. That is 32 pips.
On a $10,000 account at 0.5% risk you can lose $50. At $10 per pip per lot, 32 pips cost $320 per lot, so the volume is $50 ÷ $320 ≈ 0.15 lots. In the ticket, Risk % does this sum for you, and Risk at SL should show about $50.
The same patterns read the same way on XAUUSD, BTCUSDT or GBPJPY. What changes is the size of the candles, and so the size of the position.
Common mistakes
- Trading every pattern. Most patterns form away from any level. Skip them.
- Jumping in early. Acting before the candle closes turns a pattern into a guess.
- A stop inside the wick. The wick is where price was rejected; a stop inside it is easy to reach.
- Ignoring the calendar. A pattern minutes before high-impact news can be wiped out by one candle. Check the Calendar tab first.
Quiz
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Trading basics in the MyFundedCapital Terminal checklist
Rules as of 17 Oct 2026. Tick each line before your next session.
1. What is the difference between market, limit and stop orders?
- A market order buys at the ask and sells at the bid, so you pay the spread the moment you enter.
- A limit waits for a better price; a stop waits for price to prove a move. Neither is sure to fill.
- Add a stop loss before you send any order; the ticket shows what it costs against both loss limits.
2. How do you read a price chart?
- Each candle is one period: its body runs from open to close, its wicks to the high and low.
- Read top-down: direction on 1D or 4h, structure on 1h, entry on 15m or lower.
- Your planned stop shows on the chart as a line, so you see the risk before you send.
3. Which candlestick patterns should a beginner know?
- Body = open to close, wicks = the extremes. Long wicks show where price was rejected.
- A pattern counts only after its candle closes, and only at a level you marked earlier.
- Put the stop beyond the pattern’s wick and size the trade from that distance.
4. What are support and resistance levels?
- Mark levels on 1D and 4h first; they carry more weight than levels found on 1m.
- A broken resistance often turns into support on the retest, and the other way round.
- Stops go beyond the zone with a buffer; a stop on the line is where many others sit too.
5. How do you identify a trend in trading?
- Structure first: higher highs and higher lows up, lower highs and lower lows down.
- The higher timeframe sets the direction; the lower one only times the entry.
- A break of the last higher low puts an uptrend in question; it does not prove a reversal.
6. What are moving averages and how do you use them?
- The period counts candles, not days: a 50 EMA on 1h averages the last 50 hourly closes.
- Use the slope for direction and the line as a zone in pullbacks, not as a precise signal.
- Moving averages lag. Your stop still goes beyond structure, never just past the line.
7. What is the RSI indicator and how do you read it?
- RSI measures momentum, not value. “Overbought” is not a sell signal by itself.
- In an uptrend RSI tends to hold above the middle; in a downtrend below it.
- Use RSI to confirm a setup at a level in the trend direction, never alone.
8. What is the MACD indicator and how does it work?
- Above zero, the faster average is above the slower one: the trend leans up. Below zero, down.
- A shrinking histogram warns that momentum is fading before a crossover appears.
- MACD is built from moving averages, so it confirms; it does not predict.
9. How do you use the ATR indicator to set a stop loss?
- ATR measures how far price usually moves per candle. It says nothing about direction.
- A stop tighter than one normal candle is often hit by noise, not by a failed idea.
- When ATR rises, the stop widens and the volume shrinks. The dollars at risk stay the same.
10. How do you confirm a trading signal before you enter?
- A signal needs context, location and a trigger. One of the three alone is a guess.
- Use one tool per job; three oscillators agreeing are one opinion, not three.
- Expert advisors and trading bots are allowed only by agreement: write to support first.
11. What is the risk-reward ratio in trading?
- R:R = distance to the stop : distance to the take profit. Both come from the chart.
- At 1:2 about one winner in three breaks even before costs; at 1:1 you need one in two.
- Set the target at the next level. A ratio you want is not a ratio the chart offers.
12. Where should you place a stop loss?
- The chart sets the stop’s place; your risk per trade sets the size. Never the other way round.
- Every order should carry a stop; the ticket warns when the loss is not limited.
- Move a stop only in your favour, and only for a reason on the chart.
13. How do you size a position in the MyFundedCapital Terminal?
- Size from the stop and a fixed risk; the volume is the result, not the starting point.
- Risk % mode sizes from a share of equity and shows Risk at SL before you send.
- Fit to limits is a ceiling. Your own risk per trade is usually far below it.
14. What should you record in a trading journal for every trade?
- Write the reason before you enter; reasons written afterwards tend to fit the result.
- Measure results in R, so trades of different sizes and markets compare fairly.
- Review once a week on a day you are not trading, and change one thing at a time.
15. How do you place your first trade step by step?
- Rehearse in the free demo: live prices and the real rules, no sign-up, orders switched off.
- Plan on the chart first; open the ticket only when entry, stop and target are clear.
- Read Risk at SL and the daily and overall limits before and after, then send.
myfundedcapital.com/learn/
Questions
Do candlestick patterns work on gold and crypto?
They read the same on any market in the Terminal. XAUUSD and BTCUSDT candles are usually larger in dollars, so the stop is wider and the volume smaller for the same risk.
Should I act on a pattern before the candle closes?
No. Until the candle closes its shape can change completely. Wait for the close, then decide.
Related lessons
- How do you read a price chart?Trading basics in the MyFundedCapital TerminalBeginner3 min
- What are support and resistance levels?Trading basics in the MyFundedCapital TerminalEssential3 min
- How do you confirm a trading signal before you enter?Trading basics in the MyFundedCapital TerminalIntermediate3 min
Tools and rules
Rules shown here come from the help center and the live rulebook; your program terms apply.
