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Candlestick Stop Loss

Need to know where to place a stop loss on a candlestick pattern? Find the standard placement level for each pattern below.

Pattern iconPatternStop placementOpen guide
DojiA few ticks below the low
Inverted HammerA few ticks below the candle's low
HammerA few ticks below the Hammer's low
Spinning TopA few ticks below the low
Bullish HaramiA few ticks below the mother candle's low
Bullish EngulfingA few ticks below the engulfing candle's low
Dragonfly DojiA few ticks below the Dragonfly's low
Piercing PatternA few ticks below Candle 2's low
Morning StarA few ticks below the formation's low
Three White SoldiersA few ticks below the first soldier's low
Tweezer BottomA few ticks below the matched low
Long-Legged DojiA few ticks below the low
Three Inside UpA few ticks below the formation's low
Bullish Abandoned BabyA few ticks below the doji's low
Bullish Belt HoldA few ticks below the candle's low
High WaveA few ticks below the low
Three Outside UpA few ticks below the engulfing candle's low
Homing PigeonA few ticks below the mother candle's low
Matching LowA few ticks below the lower of the two lows
Bullish Doji StarA few ticks below the pattern's lowest low
Bullish Tri StarA few ticks below the middle doji's low
Bullish KickingA few ticks below the formation's low
Bullish Tasuki LineA few ticks below the pattern's low
Last Engulfing BottomA few ticks below the red candle's low
Takuri LineA few ticks below the candle's low
Ladder BottomA few ticks below the pattern's lowest low
Bullish Counterattack LinesA few ticks below the pattern's low
Unique Three-River BottomA few ticks below the pattern's lowest low
Bullish BreakawayA few ticks below the pattern's lowest low
Three Stars in the SouthA few ticks below the pattern's lowest low
Concealing Baby SwallowA few ticks below the pattern's lowest low
Four-Price DojiNo conventional stop — not a setup to take a position on

How to place a stop loss on a candlestick pattern

A stop loss sits a small buffer beyond the level the pattern has to hold — below its low if you are long, above its high if you are short, and beyond the gap when the pattern is built on one and still has it. That level is also its invalidation level. Keep it off the exact price, or a normal wick test will stop you out of a trade that is still valid. How much room to give it:

  • Fixed — a few ticks or cents past the level. Best for: low-volatility, liquid stocks where the noise is small and you want a quick rule with no math.
  • Percentage — about 0.1% to 0.5% beyond the level. Best for: automated or scanner-based strategies that apply one rule across many stocks at different prices.
  • Volatility (ATR) — about 0.5x to 1.5x ATR. Best for: high-volatility stocks like small-caps — the buffer automatically widens for big movers and tightens for calm ones.
  • Structure — set the stop beyond the nearest swing low or support when one sits just past the pattern, instead of the candle's low. Best for: trades resting on defined support, giving the position room to develop above real structure.

FAQ

What is the difference between a stop loss and an invalidation level?

They are closely related but not the same. The invalidation level is structural — the exact price that proves the pattern wrong, such as the low of a bullish reversal. It does not depend on you; it is the same for everyone reading the chart. The stop loss is the order you actually place to act on that level, set a small buffer beyond it so ordinary noise does not eject you from a trade that is still valid. Put simply: invalidation is where the pattern fails, and the stop loss is how you protect your capital when it does.

Should a stop loss go above or below the wick?

Beyond the wick, on whichever side the pattern has to hold: below the lowest wick on a long, above the highest wick on a short. The wick marks the true extreme of the session — the price the winning side defended. A stop inside the body instead sits within the pattern's own range, where ordinary price action will hit it. So use the wick, not the close or the body.

How far below the low should a stop loss be?

Far enough to clear normal noise, no further — and the same distance above the high on a short. There is no fixed number: common choices are a few ticks or cents, a small percentage of price (about 0.1% to 0.5%), or a fraction of the Average True Range (about 0.5x to 1.5x ATR) for names that move more. The goal is to sit just outside routine wicks while keeping the loss small enough to protect your reward-to-risk.

Should a candlestick stop loss be tight or wide?

It is a trade-off, not a fixed rule. A tighter stop — closer to the entry — improves your reward-to-risk but is shaken out more easily by normal noise; a wider stop survives the noise but costs more when the trade fails. Which fits depends on the pattern's structure and your risk tolerance. Whichever you choose, the distance from entry to stop is what sets your position size for a fixed risk per trade: a wider stop means a smaller position to keep the dollar risk the same.

When should I move a stop loss to breakeven?

Once the trade has proven itself — commonly after price has moved about one multiple of your initial risk in your favour, or after it clears the next level of structure. Moving the stop to your entry price removes the downside while leaving room for the trade to run. It is a trade-management decision the pattern does not dictate: the candlestick tells you where the idea fails, but how you protect an open profit is up to your plan.