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Not all wills are alike. There are actually four main kinds and one of them may be right for you. Sure, writing a will can be an easy task to put off until “someday.” But what if the worst were to happen before “someday?” That could mean a complicated and emotionally draining legal process for your loved ones. Creating a will not only can provide peace of mind for your loved ones after you die — it can also provide peace of mind for you right now.

The simple definition of a will is a document that states your final wishes. This alone was sufficient a century ago, when many people had limited property to pass down. But in the modern era, when “property” encompasses everything from the contents of your long-forgotten storage unit to the crypto you decided to buy on a whim, a simple will may not encompass your complex life.

Not only that, but a will is a document that only takes effect after you die. But what if you were medically unable to make decisions? Modern end-of-life documents encompass your wishes if you were medically or otherwise unable to make decisions on your own. Among these documents is one that also has the world “will” in its name.

4 Kinds of Wills

As you begin estate planning, you’ll likely come across four common types of wills. These are:

•   A simple will

•   A joint will

•   A testamentary trust will

•   A living will

Let’s look at each type of will more closely.

What Is a Simple Will?

A simple will may be the type of will that pops into your mind when you hear the word “will.” This will can:

•   State how you want your property bequeathed upon death

•   Provide guardianship specifications for minors

Upon death, a simple will is likely to go through a legal process known as probate to divide assets. Sometimes, in the case of high-net-worth individuals, probate can be expensive. (For those with complex situations and a positive net worth, a trust can help handle those what-ifs. It can transfer assets out of your estate and into the trust, which can be advantageous in terms of taxes.)

However, in many situations, a simple will can provide peace of mind for people in good health. Later, these individuals may want to take on more complex estate planning, but a will provides a good foundation when it comes to making sure guardians are named and property is divided according to your wishes.

A simple will can be created through online templates, and the cost can be zero dollars to several hundred dollars. More expensive online options may come with support from an attorney who can help answer questions. Once created, a will then needs to be made legal according to state laws. This may include signing the will in front of witnesses. You may also want to have it notarized. Having a hard copy of the will, as well as people who know how to access it in case of your death, can ensure the will is found in a timely manner.

Recommended: How to Make a Will: 7 Steps

What Is a Joint Will?

A joint will functions in much the same way as a simple will, except it is a will created by two people, usually who are married to each other. It merges their wishes into a single legal document. In many cases, this kind of will dictates that property will be left entirely to the surviving partner. Here’s the catch, though: Upon death, property will be distributed in the manner dictated by the will. The surviving person does not have the ability or authority to make changes to what the will says once the initial spouse has died.

This can sound streamlined, especially if couples were planning to leave everything to each other anyway. But this type of will can cause headaches. For example, if the surviving spouse has more children or gets remarried, it can be almost impossible to provide for additional people not named in the initial, joint will.

There could be problems even if the surviving spouse does not remarry. For example, if the marital home is considered an asset to be given to the couple’s children upon the death of both of the will’s creators, it may be impossible for the surviving spouse to sell a home to downsize.

One alternative that may suit married couples is to create two individual wills. This may provide a greater degree of flexibility and better achieve the desired effect without ruling out all of life’s what-ifs.

What Is a Testamentary Trust Will?

A testamentary trust will is usually part of big-picture estate planning. It is a document that creates a trust that goes into effect when you die. This trust can outline how certain types of property will be divided. A testamentary trust can have certain stipulations (for example, someone only inherits X piece of property when they reach Y age). This can also be used for people with minors or dependents to help ensure that wishes are followed.

What’s more, a testamentary trust can also help provide for pets. Because a pet can’t own property, naming your “fur baby” within a will can set up a legal headache. But a testamentary trust can ensure that your pet will be provided for according to your wishes.

It’s worth noting that a testamentary trust will go through the probate process, and it may not have the same tax benefits for recipients as other types of trusts. Weighing the pros and cons of different trust options can be helpful before settling on the best one for your situation.

What Is a Living Will?

This is a hard topic to think about, but what if you were in an accident and were knocked unconscious? What if you were undergoing treatment for a serious medical condition and couldn’t fully grasp the options offered to you? There’s a way to put a trusted relative or friend in the decision-making role. A living will, which is also known as an advance directive, specifies your wishes if you were medically incapacitated or unable to make or communicate decisions about your medical care. It also stipulates who your healthcare proxy, also known as a medical power of attorney, would be to make medical decisions on your behalf.

If you are creating a living will, you may also want to create a power of attorney document. This designates a person — who may or may not be the same person as your healthcare proxy — who has the right to make financial decisions on your behalf. Having a living will can cover unexpected situations that may occur before death and can be an integral part of end of life planning.

Recommended: How to Write a Will Online: 8 Steps

The Takeaway

While end of life planning can be a challenging or sad endeavor, it’s an important step in making sure your assets are directed where you want them to go and that other important wishes are executed as you want. There are four main types of wills to help you legally record your plans; more than one may suit your needs. And you can decide to use online services or work in person with an attorney.

In either case, making a will can give you peace of mind right now — and help smooth things along for your loved ones in the future during a difficult time.

When you want to make things easier on your loved ones in the future, SoFi can help. We partnered with Trust & Will, the leading online estate planning platform, to give our members 20% off their trust, will, or guardianship. The forms are fast, secure, and easy to use.

Create a complete and customized estate plan in as little as 15 minutes.

Photo credit: iStock/LaylaBird

SOPRO-Q425-018

Credit card churning describes when you open and then close a credit card account to snag sign-up rewards. Given how much competition there is for your business as a card holder, there are many enticing offers out there of cash, points, miles, and more. Some people may be tempted to try to grab those freebies and bonuses, but this practice comes with pros and cons.

Read on to learn about credit card churning and whether it’s something you should ever try.

What Is Credit Card Churning?

Credit card churning occurs when you open and close credit card accounts for the sole purpose of earning a sign-up bonus. The trick is to do it over and over again, with several credit cards. The end goal is to earn as many rewards as you can. In other words, you are maximizing your eligibility for points and prizes.

Types of Sign-up Bonuses

Of course, there is no such thing as a free lunch or a free reward. Being rewarded usually costs you. In order to earn the credit card rewards, you are typically required to spend a certain amount of money on that credit card, and it has to be done within the first few months (in most cases, three months).

The way you’re lured into a sign-up bonus is by earning a large amount of rewards by spending only a small amount. This usually happens only with a new credit card as a “welcome” offer. If you are careful about what and where you spend, you may be able to save money and get rewarded in the meantime. However, as you’ll learn below, this practice can also have its downsides.

Can You Win at Credit Card Churning?

If you want to try to get rewarded via credit card churning, there are some important best practices to be aware of.

Pay Off Your Balance in Full Each Billing Period

This is a good tip even if you’re not gunning for reward points. If you don’t pay off your balance at the end of the month, the rewards you earn will wind up being a net loss as credit card interest rates take their toll. There is no bigger credit card churning buzzkill than taking months or even years to pay off the debt you accumulate racking up charges to earn a sign-up bonus.

While on this subject, remember that paying off your credit card balance in full every month will keep away the interest charges that accrue when you don’t make a full monthly payoff.

Look at it this way: When it comes to credit card churning, it’s you against the credit card companies. You want to reap their rewards but not open yourself up to suffocating debt and high-interest charges.

Credit card churning can work if the consumer hits the rewards thresholds, but practice responsible spending. If you’re someone who doesn’t manage credit card debt well or tends to overspend just to cash in on the rewards, it might be better to steer clear of credit card churning.

Make Your Credit Card Payment on Time

Don’t be even a day late. Late fees can be a budget buster, and they can damage the credit rating you’ve worked so hard to keep strong. If other credit providers see a pattern of late payments, they may not be so fast to offer you their credit card, which means no rewards, or give you their best rates.

An excellent way to avoid late payments is to schedule automatic payments through your debit card, or checking or savings accounts. This way, you just set it and forget it!

Have a Plan for Your Rewards

Enjoying the rewards you earn may mean so much more to you when you have a short-term goal for how to use them. Perhaps the points are for airline miles or a vacation destination. Maybe you can use them toward a new wardrobe or the latest electronics. Keeping your eyes on the prize will prevent you from squandering your reward points on something forgettable or regrettable. Stay strong.

Don’t Bite Off More Than You Can Chew

Fight the temptation to get greedy. New credit cards with amazing reward offers are a dime a dozen. They’re like buses: Another one will come along soon.

Think about where you may be in a few short months if you take on too many credit cards and too much debt. That won’t be worth any amount of reward points. Only use the number of cards that you can comfortably manage.

Focus on Credit Card Fees

Credit card companies tend to be selective about what they promote to you. The reward offer may come with annual fees, transfer fees, and other charges. If your card requires an annual fee, ask yourself if acquiring it and paying fees is worth the reward points.

Shop Around

Be extremely selective in choosing your rewards-based credit cards. The competition among credit card companies for your business is intensely competitive. Take your time, and wait for the best offer.

Be Wary of No-Interest Credit Cards

It certainly sounds tempting to get a credit card that charges zero interest, and as long as you plan to pay off your balance in full every month, you’re already ahead.

However, this type of offer for a balance transfer credit card can bite you in the back end with extremely high-interest rates when the period expires or a “transfer charge” when transferring your high-interest credit cards.

Charges like that could equal the same amount of money you would be paying in the interest you thought you were passing by. Be sure you’re aware of the pros and cons of no-interest cards.

Read the Fine Print

Always read the fine print. That amazing offer may have some exclusions and exceptions and other unpleasant surprises. Find out which of the reward rules are subject to change and if there are any expiration dates or winning rewards. If you are not great at reading the fine print, find somebody close to you who is, or call the credit card customer service line and get your answers.

Protect Your Credit Score

A credit score is an overview of your credit history and payback behavior. Making timely monthly payments and not defaulting on any of your credit cards or loans, and you’ll likely be on the right path. It also helps to keep your debt utilization ratio (how much your balance is versus your credit limit) low; no more than 30% at most.

Always consider your credit score before you consider credit card churning. Recognize that if you apply for new credit cards, a hard credit inquiry will be conducted. This will temporarily lower your credit score a bit.

Be Organized

When it comes to credit card churning, always stay organized and aware. Know exactly what the offer is and what you need to do to get it. Know the deadline for spending the money that will make you eligible for the rewards.

Keep up on your progress toward your rewards goal: How much more do you have to spend and how much more time do you have before the offer expires? Again, avoid the pitfall of impulse spending just to get your reward.

When to Avoid Credit Card Churning

Think of credit card churning possibly as a privilege you have to earn rather than a right that doesn’t require prior deliberation. If you fall into any of these following categories, think twice before opening another credit card.

The biggest takeaway here is if you have credit card debt, it doesn’t make sense to continue to rack up debt in the name of credit card churning. Instead, it’s best to make a plan to get out of credit card debt ASAP.

If Your Credit is Bad

Credit card rewards are meant for customers with good-to-excellent credit, not for customers with late payments or delinquent accounts. Think of this as an opportunity to build your credit score. Once you do, you may be eligible for some offers.

If You’re About to Take on More Debt

Are you about to sign a mortgage or are on the verge of a car or school loan? Applying for extra credit cards for the sake of their rewards will more than likely affect your credit score, as noted above. Each hard credit inquiry will lower your score temporarily. The constant nature of credit card churning can possibly stand in the way of your loan request or result in you being offered a higher interest rate than you would be with a higher score.

If you’re thinking about credit card churning, wait until after you secure that all-important loan or at least wait until your loan is approved, your payments are underway, and your monthly budget adjusts to the debt increases.

If You Don’t Use a Credit Card That Often

Not overusing a credit card can show good discipline. However, your lack of credit card usage may mean you’re not a good candidate to try credit card churning. In some cases, credit cards will only grant you rewards if you spend a certain amount of money, which means increasing your spending (and your debt). You might feel “obligated” to use plastic more than you would otherwise.

If You’re Already Earning Rewards on Your Credit Cards

Some credit cards offer travel points and other rewards, without you having to get into a spending contest.

If you are pretty disciplined about your monthly spending and careful about avoiding too much debt, you’ll probably already steadily earn points and rewards on the credit cards you have. Call customer service and ask what you are eligible for.

If This Is Your First Credit Card

Usually, getting your first credit card is a chance to prove that you are responsible with credit. You can use that first card to spend wisely and pay your balance in full each month. This can build your credit score and keep your finances on the straight and narrow.

If you get involved with credit card churning right off the bat, it could lead to trouble that you don’t need when you’re first establishing credit. Building a credit score once it’s damaged can take a long time and can stand in the way of the things you may want and need to buy. Wait until you’re further along in the credit game, and when you’re earning money to handle a bit more debt.

If You Tend to Overspend

Know yourself. If you’re the type who tends to overdo it when using plastic and can’t resist BOGO sales and the like, proceed with caution. Getting a large number of credit cards can leave you open to running up a tab on many of them and accruing too much debt. In other words, if you are in the habit of overspending, think twice.

Too Much Credit Card Debt?

If you have accumulated too much credit card debt, whether or not churning is a factor, there are several ways you might deal with it:

•  Investigate debt payoff techniques, such as the avalanche and snowball methods.

•  Consider a balance-transfer card to give yourself a breather from high interest rates and a chance to pay down your balance.

•  Explore a debt consolidation personal loan to simplify payments and possibly reduce the interest you pay. These personal loans can come in amounts from hundreds of dollars to $100,000.

•  Pursue debt counseling from a qualified provided; some nonprofits offer free or low-cost services.

Recommended: Debt Consolidation Calculator

The Takeaway

Credit card churning involves opening and closing credit card accounts to snag rewards. This practice can be harmful as it can lead to taking on too much debt and lowering your credit score. If you do find yourself with considerable credit card debt, you might look into a balance transfer credit card, debt counseling, or repaying the debt with a lower-interest personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

How to get free from the cycle of debt?

If you are stuck in a cycle of debt, you might try budgeting, debt consolidation loans, and using techniques like the avalanche or snowball method to pay off what you owe.

What is credit card churning?

Credit card churning is the practice of opening and then quickly closing credit card accounts to snag bonuses and rewards that the issuer offers, such as cash back, a sign-up bonus, or discounts.

What are downsides of credit card churning?

Each time you apply for a new credit card, a hard credit inquiry is likely triggered, temporarily lowering your credit score by several points. Also, credit card churning can involve fees and may encourage overspending to reach certain usage milestones.

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SOPL-Q425-026

Shrinkflation is the practice of reducing the size or amount of a product in a given package while maintaining the same sticker price. It is a hidden form of inflation that allows companies to boost or protect their profit margins, particularly when facing rising production costs. For consumers, it means they are effectively paying more for less. According to a LendingTree analysis of nearly 100 household products from 2019 to 2024, a third have shrunk in size.

Shrinkflation relies on the fact that shoppers are more likely to pick up on a direct price increase than a subtle reduction in a product’s size. However, shrinkflation contributes to overall inflation. To keep your grocery bills from escalating, it’s important to understand how to spot and avoid being deceived by shrinkflation.

Why Does Shrinkflation Happen?

First, let’s take a step backwards. Why is it called “shrinkflation” anyway?

When companies shrink their products and thereby inflate the price, that’s shrinkflation. For instance, perhaps you notice that the 14-ounce bag of pretzels you used to buy is now 12 ounces…while the price has stayed the same.

Once you understand how it works, it’s pretty easy to understand why companies shrinkflate their products, as sneaky a tactic as it is. By offering less of their product at the same (or even a higher price), companies can protect their profit margins.

This, in turn, can help them battle rising production costs, competition from other companies, or simply drive more profits — which, in the end, is generally the main goal of every for-profit company.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

Examples of Shrinkflation

To avoid implicating any specific brand, let’s use an imaginary example to demonstrate how shrinkflation works and how you might notice it as a consumer.

•   Say you’re at the grocery store, and you’re about to buy your favorite bottle of pomegranate juice. It’s a little pricey, but you love the taste — and besides, it’s good for you.

•   You pick up the bottle, expecting to pay $8 for your typical 16 ounces. The bottle looks the same and costs the same, but it feels different in your hand. Still, you go ahead and purchase it.

•   When you get home, you notice that the almost-empty bottle in your fridge is just a little bit bigger than the new bottle. When you look closely, you notice the new bottle actually has 14.5 ounces, not 16.

You’ve just been shrinkflated.

Is Shrinkflation Temporary?

Shrinkflation isn’t new. According to research by the U.S. Government Accountability Office, product downsizing has been happening for over a decade. It spiked in 2015, was at its lowest during the pandemic years, and started trending up again in early 2022, amidst increasing inflation.

However, because shrinkflation usually occurs gradually, many consumers don’t even recognize it’s happening. Instead, they just slowly see their grocery bills and household expenses increase. If companies were transparent and sold the same amount of product at a higher price, you’d likely notice — and perhaps balk — while you were putting the item in your shopping cart.

With shrinkflation, companies can get a financial boost without (hopefully) triggering any consumer pushback. But careful, observant shoppers may still pick up on this sneaky business tactic.

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Is Shrinkflation Illegal?

Shrinkflation is generally legal. However, more than a dozen U.S. states and territories have recently instituted laws requiring the unit price be disclosed on products. This is helpful to consumers because when a product’s size decreases but its price stays the same, the unit price increases. The unit price label makes this increase more visible, allowing consumers to identify hidden price hikes and make informed choices.

Even without widespread labelling, customers appear to be catching on. According to an April 2025 survey by CivicScience, 81% of grocery shoppers say they’ve noticed shrinkflation recently.

Recommended: 7 Tips to Managing Your Money Better

Tips for Noticing Shrinkflation

Here are some tips and tricks that can help you detect and stay ahead of shrinkflation.

1. Pay Attention to Your Receipts

Although plenty of us forego paper receipts entirely, keeping them can actually be very instructive, particularly when it comes to avoiding shrinkflation. Keeping and comparing receipts, especially for products you buy often, may help tip you off to shrinkflation more quickly than you’d otherwise notice on your own. (Plus, you may get a better picture of how much you actually spend on groceries, as opposed to how much you expect to.)

2. Make a Price-Inclusive Grocery List

If you’re really serious about beating the shrinkflation machine, grab that receipt you kept and make your next grocery list — with the approximate price you paid next to each item. That way, you’ll notice shrinkflation before it even happens as you’re about to put the item in your cart.

You can update this on a monthly basis or so to stay abreast of any shrinkflation moves, should companies roll out new, smaller-sized products for the same or a higher price.

3. Pay Attention to Price-Per-Unit When Shopping

One of the most effective ways to beat shrinkflation is to ignore the overall price of a product and focus on its unit price — the cost per ounce, pound, or item. While it may not be listed on the label, this information is typically printed on the shelf tag at the grocery store. Alternatively, you can quickly do the math yourself: Use your phone’s calculator to divide the product’s price by its quantity (for example, $3.60 /12 ounces = $0.30 per ounce). Choosing larger sizes, opting for store brands, or buying in bulk can result in a lower price per unit, which can help you spend less on food.

Should You Buy Shrinkflated Products?

Generally speaking, nobody likes to feel like they’re being deceived. But only you can decide whether or not the juice is worth the squeeze, so to speak, when it comes to buying from a company that employs this tactic.

•  If you really, really love that brand of pomegranate juice (or any other product), you may just put up with it… and adjust your budget accordingly.

•  If you strongly feel that this tactic is deceptive and it’s taking a substantial chunk out of your checking account, it may be time to find brands that don’t engage in this practice.

•  You might decide to buy generic brands, or to shop at a warehouse or wholesale club store. There, you may benefit from economies of scale — and stock up on your favorite items before their prices potentially go up.

Recommended: Passive Income Ideas to Help You Earn Money

The Takeaway

Shrinkflation is the practice of consumer goods being sold in smaller packages than in the past for the same or a higher price. In other words, your money doesn’t stretch as far. While frustrating, shrinkflation doesn’t have to significantly impact your finances. By being a vigilant shopper and adjusting your budget, you can continue to enjoy your favorite products. You can also make your money work harder by choosing a banking partner with favorable terms.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Why is shrinkflation allowed?

Shrinkflation is allowed because it isn’t inherently illegal. There isn’t a law saying companies must disclose packaging changes, nor are manufacturers or marketers claiming they are selling the same size as before. Therefore, as long as a package of “14 oz” truly contains “14 oz,” the practice is legal, even if the consumer is getting less for their money.

What is a real life example of shrinkflation?

One real example of shrinkflation in recent years is paper towels. On average, this product went from offering 165 sheets per package to offering 147 sheets, while maintaining a price of $3.99. As a result, the cost of each sheet increased from 24 cents to 27 cents.

How do you beat shrinkflation?

You can fight shrinkflation by becoming a more vigilant shopper: focus on unit prices and net weights on labels, compare prices between different brands (especially store brands), and shop smart by buying in bulk or stocking up during sales. Other strategies include cooking from scratch and using online resources like coupon apps.

Photo credit: iStock/AlexSecret

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SOBNK-Q425-024

Candlestick charts are one of many popular tools used for technical stock analysis. They are also called Japanese candlestick charts or patterns, because they were first invented in Japan in the 1700s to track the prices of rice. Today, candlestick patterns are used to reveal potential patterns in stock price movements.

Candlestick charts are one of multiple types of technical tools that traders use to analyze stock prices. There are some general patterns that are helpful to know and understand if you’re using candlestick charts while trading.

What Is a Candlestick Pattern?

A candlestick pattern is a sequence of price changes that are represented as a series of candle-like formations on a chart. Each candlestick represents stock price increases or decreases within a specified time frame.

Watching out for particular candlestick patterns in charts is a popular day trading strategy, one that may help traders assess whether a stock may go up or down in value, and to make trades based on those predictions.

Again, this is a form of technical analysis, as opposed to fundamental stock analysis, which is different.

Candlestick patterns can be useful for helping some traders assess entry and exit timing for trades, when investing online or through a brokerage. Based on how stock price movements have repeatedly occurred in the past, traders may decide whether to put faith in them potentially moving in a similar way again. The reason these patterns form is that human perceptions, actions, and reactions to stock price movements also tend to be repeated.

Past events are not predictions of the future, however, and there are always risks when trading stocks. But candlestick patterns can be useful guidelines and one more piece of information for those looking to make informed trading decisions.

History and Origins of Candlestick Charts

Candlestick charts originated in 18th-century Japan, where a rice trader named Munehisa Homma developed a system to track rice prices and market sentiment. Homma’s techniques combined price patterns with observations about trader psychology, laying the groundwork for modern candlestick analysis.

While the system evolved over time, it was introduced to Western markets in the late 20th century. Today, candlestick charts are widely used across financial markets by day traders and other investors to assess short-term price movements and spot potential reversals or continuation patterns.

Recommended: Stock Trading Basics

Reading Single Candlesticks

Even a single candlestick on a candlestick chart can provide insight into where stock prices may head. Each candlestick is composed of four parts:

•   Body. The body, or real body, is the rectangular candle-like shape that represents the opening and closing prices. A short body tends to indicate lack of a strong trading direction; a longer body suggests strong selling or buying pressure.

•   Wicks. The top “wick” or shadow of a candlestick marks the highest price the stock traded within the specified time period. The bottom wick marks the lowest price the stock traded.

If a candlestick wick is long, this means the highest or lowest trading price is significantly different from the opening or closing price. A shorter wick can indicate that the high or low trade was close to the opening or closing price. The difference between the high and low price of the candlestick wicks is called the range.

•   Candlestick color. The color provides a quick take on the price direction. A green or white candlestick body is bullish, with the closing price at the top, indicating it’s higher than the opening price. A red or black body is bearish, and reflects a lower closing price (at the bottom) vs. the opening, signaling potential downward pressure.

Candlesticks can represent different time frames. One popular time frame when stock trading is a single day, so each candlestick on a chart will show the price change for one day. A one-month chart would have approximately 30 candlesticks.

Trending Candles vs Non-Trending Candles

If a candle continues an ongoing price trend, this is called a trending candle. Candles that go against the trend are non-trending candles.

Candles that don’t have an upper or lower wick may also show that there is a strong trend, or support or resistance in either direction. This means the opening or closing price was close to the high or low trade. And vice versa — a long wick can be an indicator that the stock’s intraday high or low prices may not hold.

Doji Candles

When a candle’s opening and closing price are almost the same, this forms a doji candle, which looks like a cross or plus sign. The wicks of doji candles can vary in length.

A doji can either be a sign of a reversal or a continuation. It shows roughly equal forces from buyers and sellers, with little net price movement in either direction.

Long Shadow Candles

Candles with a long wick or shadow may indicate a rejection of higher or lower prices. A candle with a long upper shadow can signal seller rejection of higher prices, while a long lower shadow can signal buyer rejection of lower prices.

Marubozu Candles

A Marubozu candle is a single candlestick pattern that has no upper or lower wicks, showing only the real body. It may indicate that buying or selling pressure was especially strong during the selected time period.

A green Marubozu may suggest steady upward pressure, while a red Marubozu might point to consistent downward pressure. Traders sometimes view Marubozu candles as potential signals that prevailing trends could continue.

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Types of Candlestick Patterns

Candlestick patterns are used to help analyze stock price action. There are dozens of candlestick patterns that traders use to help recognize trading opportunities and better time their entries and exits, but there are four distinct ways to define potential outcomes of candlestick patterns:

1.    Bullish candlestick patterns show that a stock’s price is dominated by buyers and the price is likely to increase.

2.    Bearish patterns may indicate selling pressure and a potential decrease in the stock’s price.

3.    Reversal candlestick patterns may demonstrate that the price trend of a stock could reverse.

4.    Continuation patterns may indicate that the stock’s price will continue heading in the direction it’s currently going.

It’s important to remember that some patterns may be interpreted as a signal not to trade. Knowing when not to buy or sell is just as important as knowing when to take action.

Bullish Candlestick Patterns

A bullish candlestick pattern can either be an indication of a continued bullish trend, or it could be a reversal from a bearish trend. There are a number of popular bullish candlestick patterns, each of which can tell a trader something different.

Morning Star: The Morning Star is a three-candlestick pattern that may indicate a reversal from a bearish trend towards a bullish trend. The first candle is long-bodied and red. The second candle opens lower and has a short body, often with a gap and a small body. Its color may vary. The third candle is green and closes at or above the center of the first candle body.

Morning Star Doji: This three-candlestick pattern is sometimes interpreted as a possible reversal from a bearish trend. The first candle has a long body showing a downtrend. The second candle opens at a lower price and trades within a narrow price range, then the third candle reverses in a bullish direction, closing at or above the center of the first candle body.

Bullish Engulfing: In this two-candle pattern, the first candle is bearish and the second is bullish. The body of the first candle fits completely within the body of the second larger candle, which engulfs it. Although both candles are important, the higher the high of the second candle’s body, the more some traders may view it as a potential reversal signal.

Hammer: This single-candle pattern typically appears at the end of a decline. The hammer candle looks like a hammer, with a short real body with little or no upper shadow. This shows that the low for the period is significantly lower than the close for that period, which is generally viewed as a potential bullish reversal after a downtrend. However, many traders look for confirmation, such as a higher close on the next candle, before acting on the pattern.

Inverted Hammer: The inverse of the hammer pattern, this is a single-candle pattern which may suggest weakening downward momentum and can indicate the end of a downtrend and reversal towards a bullish movement.

This candle has a short real body near the low, little or no lower shadow, and a long upper shadow. Unlike a hammer, the inverted hammer may show buyers testing higher prices but failing to hold them. This makes confirmation on the next candle especially important.

Bullish Harami: This reversal pattern happens during a downtrend and may suggest a switch toward upward price movement. It looks like a short green candlestick that follows several red candlesticks. The green candlestick body fits within the body of the previous red candlestick.

Dragonfly Doji: This is a pattern some traders view as a possible reversal signal. In this pattern, a doji candle opens and closes at or near the highest price of the day. The lower shadow tends to be long, but it can vary in length.

Piercing Line: In this two-candle pattern, the first candle is long and red, followed by a long green candle that opens below the prior close and closes above the midpoint of the first candle’s real body. This pattern is often interpreted as a potential bullish reversal after a bearish trend.

Stick Sandwich: This is a three-candle pattern with an opposite-colored middle candle that consists of a long candle sandwiched between two long candles of the other color. The closing prices of the two outer candles are similar, creating a potential level of support that some traders interpret as a possible bullish signal.

Three White Soldiers: A three-candle pattern that looks like a staircase toward higher prices, sometimes viewed as a potential bullish continuation signal. It consists of three green candles, each of which opens within or above the prior candle’s body and closes progressively higher.

Bearish Candlestick Patterns

Bearish candlestick patterns may indicate an ongoing bearish trend, or they may indicate a reversal from a bullish trend. These are some common bearish candlestick patterns.

Evening Star: This three-candle pattern is the opposite of the Morning Star, sometimes interpreted as a possible shift from bullish to bearish momentum. The first candle is long and green. The second candle gaps up and has a short body. The body can be either red or green but doesn’t overlap with the body of the previous candle. This shows that buying interest is coming to an end. The third candle is red and closes at or below the center of the first candle body.

Evening Star Doji: This three-candle pattern is the opposite of the Morning Star Doji. It is sometimes seen as a possible reversal towards a bearish trend. The first candle is a long green candle. The second candle is a doji, or is very narrow and gaps up to a higher price. The third candle is red and closes at or below the center point of the first candle body.

Shooting Star: This is a single-candle pattern defined by shape with a small real body near the low, very little or no lower shadow, and a long upper shadow. The shooting star may be interpreted as a potential sign of weakening upward momentum.

Hanging Man: This is a single candlestick pattern that appears after an uptrend and may indicate a potential bearish reversal. The candle has a long lower wick and a short candle body. Despite resembling a hammer, it typically signals selling pressure after a rally and is not bullish.

Dark Cloud Cover: A two-candlestick pattern that occurs when a red candle has an opening price that’s higher than the closing price of the previous day’s candle, and a closing price below the middle of the previous one. The first candle is green. The second candle, which is red, completes the pattern by closing below the midpoint of the prior green candle.

Bearish Harami Cross: A trend-reversal pattern consisting of a series of green candlesticks followed by a doji, this pattern is sometimes interpreted as a sign that the uptrend may be losing momentum and preparing for a reversal.

Two Black Gapping: This pattern appears near a top and happens when price gaps down and then prints two red candles that gap down again. This is sometimes viewed as a potential bearish sign of an emerging bearish trend.

Gravestone Doji: This is an inverted dragonfly pattern, in which the opening and closing price are at or near the low of the day. The upper candle shadow tends to be long, but can vary in length. It is generally viewed as a potential bearish reversal, especially after an uptrend, but often requires confirmation.

Three Black Crows: This bearish reversal pattern appears after an uptrend and consists of three long red candlesticks. Each opens with the real body of the prior candle and closes lower, showing sustained selling pressure.

Reversal Patterns

Harami Cross: The Harami Cross can indicate a reversal in either a bullish or a bearish trend. It’s a two-candlestick pattern in which the first candle is a long real body in the prevailing trend, and the second candle is a doji within its body.

Abandoned Baby: This reversal pattern is made up of three candles. The middle candle is a doji that is isolated by gaps on both sides, with no overlap to adjacent candles (i.e., “standing alone”). The third candle moves strongly in the opposite direction after the gap. The first and third candles have relatively long bodies. It’s so named because the gaps have space between the doji candle’s wick and both wicks of the first and third candles.

Continuation Patterns

Falling Three Methods: This is a five-candlestick bearish continuation pattern which may reflect a brief pause within a continuing downtrend. The first is a long red candle, followed by three small green candles, which all stay within the range of the first candle. The last candle is another long red one. This pattern may suggest buyers have not yet shifted the downtrend’s momentum.

Three Line Strike: A four-candlestick pattern that consists of three same-direction candles followed by a long, counter-trending candle, and is sometimes interpreted as a potential trend continuation or, depending on the context, a reversal signal. The fourth candle typically engulfs the prior three candlesticks’ real bodies.

Other Patterns

These two patterns don’t fit into the bullish, bearish, reversal, or continuation categories.

Spinning Top: A short-bodied candlestick with similar top and bottom wicks that looks like a spinning top. This is an indication of indecision in the market. After the spinning top, the market may move quickly one way or another, so prior price movement and patterns may help assess whether the stock will move up or down.

Supernova: If there’s a high-volume, low-float stock that experiences a price explosion, followed by a sharp price drop, this is a supernova. There can be trading opportunities on the way up, and then opportunities to short sell on the way down as well.

The Takeaway

Candlestick charts are a stock analysis tool, and traders who can identify patterns within them may assess whether a stock’s price may rise or fall. It can help them make a decision of when or if to buy, sell, or stand pat. There are numerous types of candlestick patterns, though it’s important to remember that patterns do not always lead to the predicted outcome.

Reading stock charts is only one small part of the investing world, and a rather complicated part, too. There are simpler, less-intensive ways to participate in the markets. For traders who understand their limits, candlestick patterns can still offer a practical read on near-term supply and demand.

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FAQ

What is the most reliable candlestick pattern?

No candlestick pattern can guarantee accuracy, but many traders view the engulfing pattern as a strong signal, especially in combination with volume. Some confirmation from the next candle is often used before acting.

Can candlestick patterns be used for all asset classes?

Yes — candlestick patterns can apply to stocks, ETFs, and even futures. However, their reliability may vary depending on the asset’s liquidity and volatility.

How do you confirm a candlestick pattern?

Traders often look for confirmation through the next candle’s direction, volume changes, or supporting indicators, such as the Relative Strength Index (RSI). The RSI is a momentum indicator that measures how quickly prices are rising or falling, which may help traders identify potential overbought or oversold conditions.

Are candlestick patterns useful for day trading?

Candlestick patterns are widely used in day trading and options trading strategies in general to identify short-term price setups. That said, success often depends on combining them with other technical signals.

What are common mistakes when reading candlestick charts?

Relying on patterns without context, skipping confirmation, and ignoring volume are common errors. It’s also a mistake to treat any pattern as a guaranteed prediction.