Two-candle patterns
Engulfing candles, inside bars and tweezers.
Two candles, one story
Sometimes one candle isn't enough to tell the story. You need to read two candles side by side, like two panels of a comic. Here are the most common two-candle patterns.
Engulfing candles
"Engulf" means to swallow up completely. In an pattern, the second candle's body is so big it covers the whole body of the first candle, and it's the opposite color.
Bullish engulfing. After a fall, a small red candle is followed by a big green candle whose body swallows the red one. The story: sellers were in charge yesterday, but today buyers took over completely and pushed price past where sellers started. It's a clue.
Bearish engulfing. After a rise, a small green candle is followed by a big red candle that swallows it. Buyers were in charge, then sellers took over completely. It's a clue.
The bigger the second candle compared to the first, the stronger the message. A tiny candle swallowing an even tinier one doesn't say much.
The inside bar
An is a candle whose whole range, wicks included, fits inside the candle before it. Its high is lower than the last high, and its low is higher than the last low.
The story: the market is taking a breath. After a big move, nobody is pushing hard either way. Traders watch which side price breaks out of next. An inside bar by itself doesn't say up or down. It says "something is about to happen."
Tweezers
are two candles in a row with the same high or the same low, like the two tips of a pair of tweezers.
- Tweezer bottom: two candles with lows at almost the same price, after a fall. Sellers tried to push lower twice and hit the same wall both times. It can be a sign of a floor.
- Tweezer top: two candles with highs at almost the same price, after a rise. Buyers hit the same ceiling twice.
Tweezers mean more when the first candle and the second candle are opposite colors, like a red candle followed by a green one at a bottom.
How traders use them
Two-candle patterns follow the same rule as single candles: place matters. A bullish engulfing pattern right on a floor that held before is worth noticing. The same pattern in the middle of a messy chart is just two candles.
What goes wrong
- In fast markets, engulfing candles show up all the time and many lead nowhere.
- On very short timeframes, like 1-minute charts, these patterns appear constantly and mean much less.
- Like any pattern, they fail. They're clues, not promises.
Remember
- Engulfing: the second body swallows the first body, in the opposite color.
- Inside bar: a candle that fits inside the one before it. The market is taking a breath.
- Tweezers: two candles with the same high or the same low.
- These patterns mean more at a floor or a ceiling.
Check yourself
1. What happens in a bullish engulfing pattern?
2. What does an inside bar tell you?
3. Two candles in a row have lows at almost the same price after a fall. What's that called?
Next lesson: Three-candle patterns
Money Tree School is education, not financial advice. Examples use made-up or historical numbers to show how things work; they are not recommendations to buy or sell anything. Markets can lose money.