Understanding advanced candlestick strategies is essential for traders who want to elevate their technical analysis and gain deeper insight into market psychology. While basic patterns like pin bars and engulfing candles are useful, advanced candlestick techniques incorporate multi-bar formations, contextual analysis, and confirmation tools to significantly increase precision and reliability.

This guide covers several high-probability candlestick strategies with advanced entry techniques, confluence setups, and risk management tips to help you trade with confidence.

1. Three Bar Reversal Strategy

Structure:

• Candle 1: Continuation of existing trend
• Candle 2: Rejection candle (e.g. pin bar or inside bar)
• Candle 3: Strong reversal in the opposite direction

How to trade:

• Wait for Candle 3 to close beyond the high/low of Candle 1
• Place stop-loss beyond Candle 2 wick
• Ideal in trending markets at pullbacks or major support/resistance

Best used with:
Trendlines, moving averages, RSI divergence

2. Fakey (False Breakout) Strategy

Structure:

• Inside bar followed by a breakout candle
• The breakout fails and price reverses hard in the opposite direction

How to trade:

• Enter after the false breakout is confirmed by a strong reversal candle
• Place stop-loss beyond the high/low of the fakeout wick
• Use in range-bound or news-driven conditions

Best used with:
Key horizontal levels, high-impact news, volume spikes

3. Three Inside Up / Down Strategy

Bullish Three Inside Up:

• Candle 1: Large bearish candle
• Candle 2: Small bullish candle within Candle 1
• Candle 3: Bullish candle closing above Candle 1’s high

Bearish Three Inside Down:

• Candle 1: Large bullish candle
• Candle 2: Small bearish candle within Candle 1
• Candle 3: Bearish candle closing below Candle 1’s low

Entry:

• After confirmation candle close
• Stop-loss below Candle 2 (bullish) or above (bearish)
• High-probability in trend reversals

Best used with:
Trend exhaustion signals, EMA confluence, structure breaks

4. Multi-Timeframe Engulfing Strategy

Concept:
Use higher-timeframe engulfing candles to guide lower-timeframe entries.

Steps:

• Identify bullish/bearish engulfing candles on the daily or 4H chart
• Drop to 1H or 15M for precision entry (e.g. pullback, breakout, or inside bar entry)
• Enter on momentum continuation

Advantages:

• Higher accuracy
• Tight stop-loss
• Scalable across multiple instruments

Best used with:
RSI, Fibonacci retracement, S/R zones

5. Evening and Morning Star Variations

Morning Star (Bullish):

• Candle 1: Bearish
• Candle 2: Small-bodied Doji or spinning top
• Candle 3: Strong bullish candle closing above Candle 1’s midpoint

Evening Star (Bearish):

• Candle 1: Bullish
• Candle 2: Indecision candle
• Candle 3: Strong bearish candle

Trading Plan:

• Use on Daily or 4H charts for swing entries
• Confirm with trendline or RSI divergence
• Stop-loss beyond star wick, TP at next S/R zone

6. Marubozu Momentum Strategy

Structure:

• Full-bodied candle with little to no wicks
• Reflects one-sided dominance by buyers or sellers

Entry:

• Enter at the close or on 50% retracement of the Marubozu candle
• Set stop-loss beyond the opposite end of the candle
• Works best during breakouts or trend continuation

Best used with:
Breakout zones, EMA bounces, volume confirmation

7. Advanced Doji Reversal Cluster

Concept:
A single Doji is indecision. But a cluster of 2–3 Dojis near a major level signals a strong reversal.

How to trade:

• Wait for breakout candle after the cluster
• Trade in direction of the breakout
• Works well in exhausted trends or range tops/bottoms

Best used with:
Support/resistance, RSI divergence, Bollinger Band edges

Best Practices for Advanced Candlestick Trading

• Context is king: Always analyse trend, momentum, and key zones first
• Confluence increases probability: Combine patterns with indicators and structure
• Avoid random candles: Isolated patterns without context are often traps
• Risk management is vital: Set stop-loss beyond invalidation levels and target at least 2:1 R:R
• Timeframes matter: Use 4H and Daily for swing trades, 15M–1H for intraday entries

Conclusion: Trading with Advanced Candlestick Strategies

Mastering advanced candlestick strategies allows traders to read the market like a language—understanding not just the pattern, but the sentiment and psychology behind it. When combined with structure, confirmation, and discipline, these techniques can provide consistently high-probability entries across all markets and timeframes.

To gain hands-on experience applying these advanced strategies in live markets, enrol in our professional Trading Courses at Traders MBA and take your technical skills to the next level.