Guide To Candlestick Patterns For Improved Trading Decisions

Candlestick patterns have been used in the share market technical studies for centuries. These patterns tell traders about market sentiment and price movements, helping them make better decisions. Mastering these patterns can help you navigate the complex financial markets. This post covers the most significant candlestick patterns any trader should know and how to use them to profit.

How to Read Candlestick Patterns?

Candlestick patterns are pictures that show how prices have changed over a certain amount of time. They are usually shown on trade charts used by the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) of India. There is a body and flames (or shadows) that stick out from the body of each candlestick.

The wicks show the high and low prices during the time, while the body shows the price range between the opening and closing prices. For traders on both the BSE and the NSE, knowing these trends can be helpful.

Common Shapes for Candlesticks

  • Doji: A doji is a small-bodied candlestick that forms when the starting and closing prices are almost the same. This pattern shows indecisiveness in the market and a possible turnaround.
  • The Hammer and Hanging Man: Its styles have a small body near the top (Hanging Man) or bottom (Hammer) of the candlestick and a long wick at the bottom. They show possible changes in direction after a trend goes down (Hammer) or up (Hanging Man).
  • Bullish and Negative Engulfing: A Bullish Engulfing pattern happens when a bigger bullish candlestick engulfs a smaller negative candlestick that came before it. This means that the price could turn upwards again. On the other hand, a Bearish Engulfing pattern means that prices may turn down.
  • Morning Star and Evening Star design: Three Morning Star and Evening Star candlesticks exist. Bearish, Doji, and positive candlesticks appear in the Morning Star. That suggests the direction may be up. Evening Star suggests a rise may be ending. To ensure accuracy, you should constantly study evening star patterns before you sell equity shares
  • Three Black Crows and Three White Soldiers: These patterns consist of three straight bullish (Three Black Crows) or bearish (Three White Soldiers) candlesticks with closing prices that get higher (bullish) or lower (bearish). They show that there is a strong movement in the direction of the trend.

How to Use Candlestick Patterns in Trading?

When trading stocks with candlestick patterns, it’s important to look at them in the context of other technical signs and larger market trends. Here are some important plans:

  • Confirmation: Before making a trading choice, wait for confirmation from other technical indicators or more candlestick patterns. This helps eliminate false signs and raises the chances of success.
  • Risk Management: To lower the chance of losing money, use the right risk management methods, like setting stop-loss orders. There’s always some risk in the markets, even when you use the most accurate candlestick patterns.
  • Time Frame Analysis: Think about how your trading plan fits with the timeframe of the candlestick patterns. Patterns may look different at different times, so make changes to your study as needed.


In conclusion, candlestick patterns help traders understand market emotions and price fluctuations. Understanding these patterns and integrating them with technical analysis and risk management can help traders succeed in the complex world of finance. Don’t give up if you don’t notice results right away—mastering these patterns takes time and effort.