What traders mean by a “rejection candle”
A rejection candle is a single candlestick on a chart that shows price tried to move in one direction but was pushed back before the candle closed. Visually it usually has a long wick (shadow) in the rejected direction and a relatively small body. That long wick is the important bit: it records a failed attempt to keep pushing price higher or lower and signals that the opposing side—buyers or sellers—stepped in and reclaimed control during that time period.
In plain terms, a rejection candle is the market putting up a sign that “this level is getting defended.” When rejection candles appear at obvious places such as swing highs, swing lows, trendlines or round numbers they attract attention because they reflect a short, sharp change in buyer-seller balance.
Anatomy and common shapes
A rejection candle has three visible parts: the open/close (the body), the high/low (the wicks), and the relationship between them. The key features traders look for are a long wick and a small body. Several familiar candlestick names fall into the rejection family because they show a clear rejection of one side:
A hammer or bullish pin bar typically has a long lower wick showing rejection of lower prices. When this appears after a down move at a support area it suggests buyers stepped in and pushed price back up before the candle closed.
A shooting star or bearish pin bar has a long upper wick and a small body near the low of the candle. It shows that sellers rejected higher prices after a rally, so it can signal a top when it appears at resistance.
Doji and Dragonfly/Gravestone doji are rejection-like when the body is tiny and one shadow dominates, indicating strong rejection on one side but overall indecision.
An outside or engulfing candle can be a rejection if price extended into a zone, got pushed back, and the second candle closes significantly away from that extreme.
Those different shapes are simply variations of the same idea: price tried to go somewhere and failed.
Why rejection candles matter (market psychology)
At the simplest level a wick is evidence of conflict. When the market spikes up but then falls back into the candle body it means buyers drove price up briefly but sellers overwhelmed them. Conversely, a long lower wick means sellers pushed price down but buyers returned it higher. That tug-of-war is a raw read on supply and demand.
Rejection candles matter most when they happen at places where participants expect action—support/resistance, moving averages, prior breakout points, or round numbers. Institutional flow, stop orders and clustered limit orders tend to live around those levels; a rejection there often shows large participants defending a price area or liquidity being consumed. For retail traders that makes the candle a useful signal for timing entries and stops.
Context is everything: where rejection candles are reliable
A rejection candle in isolation is just a candle. Its value increases with context. A long lower wick in the middle of a noisy range carries less weight than the same candle printed at a well-defined daily support accompanied by evidence of buying. Higher-timeframe rejection candles (daily or 4‑hour) typically carry more significance than one-minute or five‑minute wicks, because they reflect more participants and volume.
Think top-down: if the weekly or daily chart shows a major resistance and the 4‑hour prints a shooting star there, your odds of a meaningful pullback improve. Conversely, a wick that forms into a major news release or low-volume market session can be unreliable; it may simply be a short-lived spike.
How traders use rejection candles — step by step
First, identify a meaningful level on a higher timeframe. That might be a swing high/low, a trendline, a moving average, a Fibonacci level, or a round number. Knowing where the market tends to react narrows the search.
Next, look for a rejection candle at that level on your trading timeframe. A clear long wick with a small body that touches or pokes the level is the textbook set-up. A stronger set-up includes additional confirmation: higher volume on the rejection, alignment with the higher‑timeframe bias, or other price‑action clues such as an engulfing follow‑through.
For entries, many traders prefer to wait for confirmation: a close of the next candle in the direction suggested by the rejection (for example, a bullish close above a hammer’s high). An aggressive entry is to go on close of the rejection candle itself, accepting a tighter initial stop. Another approach is to enter on a retest of the rejected wick or the level that held.
Stops are commonly placed beyond the far end of the wick. If a lower wick shows rejection of lows, a protective stop goes a few pips below that wick. Targets are set to the next logical area of support/resistance or by using a risk-reward ratio (for example 1:2 or 1:3). In an example: if EUR/USD prints a long lower wick at a daily support and the next candle closes higher, you could enter long when that confirmation candle closes, place a stop below the wick, and target the prior swing high or a 2:1 reward relative to your stop distance.
Confluence — stacking reasons to trade
Rejection candles are most useful when combined with other evidence. Useful confluence factors include higher-timeframe trend alignment, volume confirming the rejection, a nearby moving average, a Fibonacci level, or multiple touches of the same support/resistance. When two or more of these line up with a clear rejection candle, the probability profile improves.
- Higher-timeframe trend or bias
- Volume spike on the rejection
- A nearby moving average, Fibonacci level, or round number
- Price structure (swing points) supporting the level
(That short list shows common confluence items traders look for alongside a rejection candle.)
Examples (described)
Imagine the daily chart of a currency pair trending higher for several weeks and approaching a prior swing high near 1.2000. On the 4‑hour chart, price spikes above 1.2000 but prints a candle with a long upper wick that closes well below the spike. The next 4‑hour candle closes lower, confirming selling pressure. A trader who respects the higher‑timeframe resistance might take this as a bearish rejection—entering short after confirmation, placing a stop a few pips above the long wick, and targeting the recent support zone.
In another scenario, a pair in a downtrend pulls back to its 21‑period moving average on the 1‑hour chart. A hammer-like candle with a long lower wick forms at the moving average and the next candle closes higher. That could be treated as a bullish rejection in line with a short-term counter-trend trade or a fade of the pullback, depending on the trader’s plan.
Common mistakes and practical cautions
Counting every long wick as a reliable rejection is the fastest way to lose money. False rejections happen: markets can “wick out” stops, test liquidity and then continue. Wicks created during or immediately after major news events are particularly risky because they reflect transient, high-volatility moves rather than a stable change in supply-demand balance.
Another mistake is ignoring timeframe. A rejection on a 1‑minute chart is mostly noise compared with the same pattern on the daily chart. Overtrading small-timeframe wicks or taking setups with poor confluence increases the chance of getting stopped out.
Volume helps but is not a cure-all: high volume on a rejection can confirm it, but large institutions can also intentionally move price through liquidity before reversing.
Risk management and money rules
Treat rejection-candle setups like any other trade signal: size your position so that a stop at the wick does not risk more than you can afford on a single trade. Many experienced traders limit risk per trade to a small percentage of account equity. Use clear stop placement, plan your take-profit, and avoid increasing size into a trade after the signal (averaging up or down without a plan is dangerous). Finally, keep a trading journal to record which rejection-candle contexts work for you — markets and timeframes differ, and personal edges matter.
Risks and caveats
Trading always involves risk and rejection candles are not exceptions. A single candlestick cannot guarantee a reversal or continuation; it is only a piece of market information. Rejection wicks can be produced by one-off liquidity grabs, by news surprises, and by algorithmic order flows that do not reflect sustainable sentiment. Higher timeframe signals are generally more reliable, but larger reversals can also fail. Practice patterns on a demo account, use sensible position sizing, and remember that no setup wins every time. This article is educational and not personalized trading advice; always consider your own situation before risking capital.
Key takeaways
- A rejection candle is a candlestick with a long wick and small body that shows price was pushed away from an extreme; it signals a short-term failure of one side (buyers or sellers).
- Rejection candles are more useful when they occur at meaningful levels (support/resistance, moving averages, swing points) and when higher-timeframe bias and volume support the signal.
- Trade plans should include confirmation (next-candle close), stops beyond the wick, and targets based on nearby structure or a defined risk-reward.
- Trading carries risk; use proper position sizing, confirm setups with context, and do not treat a single wick as a sure signal.
References
- https://www.theforexguy.com/price-action-signals/rejection-candle/page/3/
- https://tradeciety.com/7-rejection-price-patterns-you-need-to-know-to-make-more-money
- https://www.youtube.com/watch?v=pTquOm8uIBc
- https://www.instagram.com/reel/DTBOuU9jbI6/
- https://www.youtube.com/watch?v=iCsOKQqLtaI
- https://www.wrightresearch.in/blog/how-to-identify-and-trade-the-rejection-candle-pattern/
- https://forexbee.co/price-rejection/
- https://dl.kohanfx.com/pdf/the-candlestick-trading-bible-(KohanFx.com).pdf
- https://www.ig.com/en/trading-strategies/16-candlestick-patterns-every-trader-should-know-180615