Candles 1 and 2 indicate that the market is on a downtrend. But although candle 1 shows strong downward momentum, we can see a slowing down of this momentum in candle 2 (candle 2 has a smaller real body).
Next, we see candle 3 showing strong upward momentum, as it (more than) covers the body of candle 2. This is an indication of weakness of the sellers in the market, as the buyers completely overwhelm them.
You may realise that Candles 2 and 3 form a candlestick pattern called the ‘engulfing’ pattern… but now that you understand the basics of price action, you won’t have to memorise any patterns at all.
All you have to do is apply the concept of momentum, and you’ll be able read candle patterns right away. Everything you need to know is already in your head!