Candlestick patterns are the language of price action. Originating from 18th-century Japanese rice traders, these patterns reveal the battle between buyers and sellers within each trading session. Learn to read 12 essential patterns used daily on NSE and BSE.
Every candlestick tells a story of four data points: the Open, High, Low, and Close (OHLC) of a trading session. The thick part is the "body" and the thin lines above and below are called "wicks" or "shadows."
A green (bullish) candle means the close was higher than the open — buyers won that session. A red (bearish) candle means the close was lower than the open — sellers dominated. The length of the body shows conviction; the length of the wicks shows rejection.
Formed by just one candlestick. They are quick to spot but generally need more confirmation from subsequent candles or volume.
Formed over 2-3 sessions. They carry more weight because they show a shift in momentum across multiple trading days.
A Doji forms when the open and close are virtually identical, creating a cross or plus-sign shape. It signifies perfect equilibrium between buyers and sellers — neither side could gain the upper hand during the session.
The Doji becomes powerful when it appears after a strong trend. After a prolonged uptrend, a Doji signals that buyers are running out of steam. After a sustained downtrend, it suggests sellers are losing conviction. The length of the shadows indicates the range of indecision.
The Hammer has a small body at the top and a long lower shadow at least twice the length of the body. It appears at the bottom of a downtrend and signals that sellers pushed prices significantly lower during the session, but buyers stepped in aggressively to drive the price back near the open.
The colour of the body matters less than the shape, though a green (bullish) Hammer is slightly more reliable. The longer the lower shadow, the stronger the rejection of lower prices. Volume should ideally spike on the Hammer day, showing genuine buying interest.
The Inverted Hammer appears at the bottom of a downtrend and looks like an upside-down Hammer — a small body at the bottom with a long upper shadow. It shows that buyers attempted to push prices higher during the session, but sellers pulled it back down near the open.
Despite the session ending near its low, the Inverted Hammer is bullish because it signals the first attempt by buyers to regain control. The upper wick shows buying interest is emerging. However, this pattern absolutely requires confirmation — the next session must open above the Inverted Hammer's body.
The Bullish Engulfing pattern is a two-candle reversal pattern where a small red candle is completely "engulfed" by the following larger green candle. The green candle's body must open below and close above the previous red candle's body, showing a dramatic shift from selling to buying pressure.
This is one of the most reliable candlestick patterns, especially when it occurs at a key support level or after a prolonged downtrend. The larger the green candle relative to the red one, the more significant the signal. Volume should be noticeably higher on the engulfing day.
The mirror image of the Bullish Engulfing — a small green candle is completely swallowed by a larger red candle. The red candle opens above the previous green candle's close and closes below its open, signalling an abrupt takeover by sellers.
When this pattern appears at resistance levels or after an extended uptrend, it often marks the beginning of a correction. The pattern is especially potent near all-time highs or round-number psychological levels (like ₹500, ₹1,000, ₹2,000) where profit-booking is common.
The Morning Star is a powerful three-candle bullish reversal pattern. It begins with a large red candle (continuing the downtrend), followed by a small-bodied candle that gaps down (the "star" showing indecision), and concludes with a large green candle that closes well into the first candle's body.
This pattern represents a complete narrative: Day 1 shows sellers in control, Day 2 shows exhaustion and indecision, and Day 3 shows buyers taking over decisively. The gap between the first and second candles is ideal but not always present in Indian markets due to overnight moves. A Doji as the middle candle (Morning Doji Star) is even more significant.
The Evening Star is the bearish counterpart of the Morning Star. A large green candle is followed by a small-bodied candle that gaps up (the "star"), and then a large red candle that closes well into the first candle's body. It signals a top is forming.
The Evening Star often appears at the peak of a rally when euphoria is highest. The small middle candle represents the moment when upward momentum stalls, and the final red candle confirms that sellers have regained control. This pattern is particularly common near earnings announcements when expectations are already priced in.
The Shooting Star appears at the top of an uptrend with a small body near the low and a long upper shadow at least twice the body's length. It shows that buyers pushed prices to new highs during the session, but sellers overwhelmed them and drove the price back down near the open.
Think of it as a failed attempt to move higher. The long upper wick represents rejected buying — a "shooting star" that briefly illuminated higher prices before falling back. A red Shooting Star is slightly more bearish than a green one. It is the upside-down version of the Hammer but appears in the opposite market context.
Three White Soldiers is a powerful bullish pattern consisting of three consecutive long green candles, each opening within the previous candle's body and closing progressively higher. Each candle should have small or no upper shadows, showing sustained buying pressure without rejection.
This pattern indicates a strong shift in momentum from bearish to bullish. It is most meaningful when it appears after a downtrend or consolidation phase. However, be cautious if the three candles are extremely long — this could signal exhaustion rather than the beginning of a sustained trend (the "advance block" variation).
Three Black Crows is the bearish mirror of Three White Soldiers — three consecutive long red candles, each opening within the prior candle's body and closing progressively lower. Each candle should have minimal lower shadows, indicating persistent selling with no meaningful buying attempts.
This pattern signals a decisive shift from bullish to bearish sentiment. It is particularly ominous when it appears after a prolonged uptrend or near all-time highs, as it suggests institutional distribution (smart money exiting). The pattern demands respect; fighting it without a clear reversal signal is risky.
The Piercing Line is a two-candle bullish reversal pattern. The first candle is a long red candle continuing the downtrend. The second candle opens below the first candle's low (gap down) but closes above the midpoint of the first candle's body, "piercing" into it. The deeper the penetration, the more bullish the signal.
This pattern works because the gap-down opening initially confirms bearish sentiment, but the strong buying that follows catches shorts off guard. As they scramble to cover, it accelerates the upward move. The key requirement is that the second candle must close above the midpoint of the first — if it does not, the pattern is invalid.
Dark Cloud Cover is the bearish counterpart of the Piercing Line. The first candle is a long green candle showing bullish strength. The second candle opens above the first candle's high (gap up) but sells off aggressively, closing below the midpoint of the first candle's body, casting a "dark cloud" over the bulls.
The psychology behind this pattern is devastating for longs. The gap-up open creates initial euphoria, but when price reverses sharply and closes deep into the prior green candle, it traps all the buyers who entered on the gap up. This trapped-long scenario often leads to accelerated selling over the following sessions.
A Hammer in a strong uptrend is not a reversal signal — it might just be a pullback. Always identify the prevailing trend first using higher timeframes or moving averages. Patterns only become actionable when they appear at the right place in the trend structure.
Entering a trade the instant a candlestick pattern forms without waiting for confirmation leads to false signals. Wait for the next candle to confirm direction. For example, a Doji at resistance means nothing if the next day rallies 2% higher.
Candlestick patterns on low volume are far less reliable than those on high volume. On NSE, check delivery percentage alongside volume — high delivery volume confirms institutional participation, making the pattern more trustworthy.
Candlestick patterns should be combined with support/resistance levels, moving averages, RSI, or MACD for higher probability setups. A Bullish Engulfing at the 200-day EMA with RSI divergence is far more reliable than one in the middle of nowhere.
Candlestick patterns are most reliable on daily and weekly charts. On 1-minute or 5-minute charts, they generate far more noise and false signals. If you trade intraday, use patterns on 15-minute or hourly charts for better accuracy.
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