Candlestick charts are the most popular chart type in technical analysis, displaying price action through candle-shaped bars. Each candlestick shows four prices—open, high, low, and close—for a specific time period. The visual format reveals market psychology, momentum, and potential reversals at a glance.
- Shows open, high, low, close in visual format
- Body = open-to-close range; Wicks = high and low
- Green/white = bullish; Red/black = bearish
How Candlesticks Work
Each candlestick tells a story of the trading period:
Candlestick Anatomy:
| ← Upper Wick (High)
[ ]
[ ] ← Body (Open to Close)
[ ]
| ← Lower Wick (Low)
Bullish Candle (Green):
Open: ₹100
Close: ₹110
High: ₹112
Low: ₹98
Body: ₹100 to ₹110 (green)
Bearish Candle (Red):
Open: ₹110
Close: ₹100
High: ₹112
Low: ₹98
Body: ₹110 to ₹100 (red)
Quick Reference: Candlestick Elements
| Element | What It Shows | Interpretation |
|---|---|---|
| Large body | Strong momentum | Conviction in direction |
| Small body | Weak momentum | Indecision |
| Long upper wick | Selling pressure | Bulls pushed back |
| Long lower wick | Buying pressure | Bears pushed back |
| No wick | Extreme momentum | One-sided action |
Example: Reading Price Action
Daily Candlestick Sequence:
| Day | Candle Type | Psychology |
|---|---|---|
| 1 | Large green | Strong buying |
| 2 | Small green | Momentum slowing |
| 3 | Doji | Indecision |
| 4 | Long upper wick | Sellers appearing |
| 5 | Large red | Reversal confirmed |
This sequence shows a bullish move exhausting and reversing.
Candlestick charts show open, high, low, and close in visual format. The body shows open-to-close range; wicks show extremes. Green candles are bullish; red are bearish. Patterns reveal market psychology and potential reversals.
Key Candlestick Patterns
Single Candle Patterns
- Doji: Open equals close—indecision
- Hammer: Small body, long lower wick—bullish reversal
- Shooting Star: Small body, long upper wick—bearish reversal
- Marubozu: No wicks—extreme momentum
Two-Candle Patterns
- Engulfing: Second candle engulfs first—reversal
- Harami: Second candle inside first—potential reversal
- Piercing/Dark Cloud: Partial engulfing patterns
Three-Candle Patterns
- Morning Star: Bearish, doji, bullish—bottom reversal
- Evening Star: Bullish, doji, bearish—top reversal
- Three White Soldiers: Three bullish—strong uptrend
Using Candlesticks Effectively
At Key Levels
Patterns at support/resistance are more significant than patterns in empty space.
With Confirmation
One candle isn’t enough. Wait for follow-through to confirm the signal.
With Context
A hammer in an uptrend is different from a hammer at a major low after extended downtrend.
Multiple Timeframes
Check higher timeframe candles for context before trading lower timeframe patterns.
Common Mistakes
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Trading patterns in isolation – Context matters. Where is the pattern occurring?
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Not waiting for confirmation – One candle doesn’t make a reversal.
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Memorizing too many patterns – Master a few reliable ones instead.
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Ignoring timeframe – Higher timeframe patterns are more significant.
How JournalPlus Tracks Patterns
JournalPlus lets you tag the candlestick patterns at entry, helping you analyze which patterns lead to profitable trades in your specific style.
