Candlestick charts are the language of the market. Once you understand what each candle is telling you, you will never look at price the same way again.
What is a Candlestick?
A candlestick represents price movement over a specific time period. Every candle has four data points: the Open, High, Low, and Close — commonly abbreviated as OHLC.
The thick body of the candle shows you the range between the open and close price. The thin lines above and below (called wicks or shadows) show the high and low of that period.
Green vs Red Candles
A green (bullish) candle forms when the closing price is higher than the opening price. Buyers were in control. A red (bearish) candle forms when the closing price is lower than the opening price — sellers dominated that period.
The Most Important Candlestick Patterns
1. Doji
A Doji has almost no body — the open and close are nearly the same. It signals indecision. When you see a Doji after a strong trend, it often means the trend is losing strength.
2. Hammer
A Hammer has a small body at the top and a long lower wick. It appears at the bottom of a downtrend and signals a potential reversal. Buyers stepped in and pushed price back up from the lows.
3. Shooting Star
The opposite of a Hammer. Small body at the bottom, long upper wick. Appears at the top of an uptrend — sellers rejected higher prices aggressively.
4. Engulfing Pattern
A Bullish Engulfing pattern occurs when a large green candle completely engulfs the previous red candle. It is one of the strongest reversal signals in technical analysis.
How to Use Candlesticks in Real Trading
Never trade a candlestick pattern in isolation. Always confirm with:
- Key support or resistance levels
- Volume — high volume confirmation makes the signal stronger
- Higher timeframe context — is the overall trend in your favour?
A Hammer at a key support level on high volume is far more reliable than a Hammer appearing randomly in the middle of a trend.
Practice Makes Perfect
Spend 15 minutes every evening reviewing the day's candlestick charts on NSE stocks. Over time, you will develop an instinct for reading price action that no indicator can replicate.