Technical Analysis
What Japanese Candlesticks Tell You About Market Sentiment
Candlestick patterns are the market's shortest-term sentiment signals — developed in 18th-century Japan and used by every serious trader on NSE and BSE today.
40+
patterns covered
400yr
proven history
1–3
candle formations
What are Candlestick Patterns?
Candlestick patterns are short-term price formations made of one to three candlesticks that signal potential reversals or continuations in price direction. Each candlestick encodes four data points — open, high, low, and close — in a single visual unit. The body (rectangle between open and close) shows where price settled; the wicks (lines above and below the body) show the range of rejection. A long upper wick, for example, shows that buyers pushed price higher but sellers drove it back down before close — a sign of selling pressure at that level.
Developed by Japanese rice trader Munehisa Homma in the 1700s and introduced to Western markets by Steve Nison, candlestick patterns now appear in every charting platform used on NSE and BSE. Unlike multi-week chart patterns, candlestick patterns resolve in 1–3 sessions — making them useful for precise entry and exit timing within a broader chart pattern or market intelligence framework. A bullish engulfing candle at a chart pattern's support level, in a strong-breadth market, is a significantly more actionable signal than any of these factors alone.
6 Lessons
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The Doji Family
Indecision candles — standard doji, dragonfly, gravestone, and long-legged doji.
Coming soonBullish and Bearish Engulfing
Two-candle reversals where one body completely engulfs the previous — the most common reversal signal.
Coming soonHammer and Inverted Hammer
Single-candle bottoming signals with long lower wicks that show buyer rejection of lower prices.
Coming soonShooting Star and Hanging Man
Long upper wick candles signalling seller rejection at highs — after uptrends.
Coming soonMorning Star and Evening Star
Three-candle reversal patterns — the most powerful candlestick reversal formations.
Coming soonMarubozu — The Full-Body Candle
No wicks, full conviction — what a marubozu signals about institutional commitment.
Coming soonCore Concepts
Candlestick Body
The rectangle between the open and close price. A green (or white) body means close was above open — buyers won the session. A red (or black) body means close was below open — sellers won. A large body signals strong conviction; a small body signals indecision.
Upper and Lower Wicks
The thin lines extending above and below the body, representing the intraday high and low. Long upper wicks show seller rejection of higher prices. Long lower wicks show buyer rejection of lower prices. Wick length is often more informative than body size.
Bullish Engulfing
A two-candle reversal pattern where a green candle's body completely engulfs the prior red candle's body. Signals that buyers have overwhelmed sellers decisively. Most reliable after a multi-session downtrend and at a key support level.
Doji
A candle where the open and close are at the same (or nearly the same) price, resulting in a cross shape. Signals that buyers and sellers are in perfect equilibrium — a potential inflection point. Context matters: a doji after a long uptrend is more bearish than a random doji.
Frequently Asked Questions
Are candlestick patterns reliable enough to trade on their own?▾
Candlestick patterns are entry and exit timing tools, not standalone trading systems. A bullish engulfing at random is not reliable. The same pattern at a key support level, in a strong-breadth market, after a chart pattern's confirmation, is significantly more reliable. Always use candlestick patterns as confirmation within a broader framework.
What is a doji and what does it mean?▾
A doji forms when a candle's open and close are at the same price, leaving only wicks. It signals market indecision — buyers and sellers are equally matched. After a strong trend, a doji often precedes a reversal. The dragonfly doji (long lower wick, no upper wick) is bullish; the gravestone doji (long upper wick, no lower wick) is bearish.
How many candlesticks does a pattern need?▾
Most candlestick patterns use 1–3 candles. Single-candle patterns include doji, hammer, shooting star, and marubozu. Two-candle patterns include engulfing, harami, and piercing line. Three-candle patterns include morning star, evening star, and three white soldiers. Three-candle patterns are generally more reliable.
Which timeframe works best for candlestick patterns?▾
Daily charts provide the most reliable candlestick signals for swing trading. Intraday candlestick patterns (15min, hourly) produce more false signals due to noise. For positional trades in Indian equity markets, daily candlestick patterns confirmed by NSE volume data are the standard.
What is the difference between a hammer and a hanging man?▾
Both have the same shape — small body at the top, long lower wick, little or no upper wick. The difference is context: a hammer appears after a downtrend and is bullish (buyers rejected lower prices). A hanging man appears after an uptrend and is bearish (the market may be exhausted). Same candle, opposite meaning depending on trend position.