Candlesticks
Six Candlestick Patterns in Context
7 min · Interactive lesson · Educational only — not advice
Forty patterns is not knowledge. It is a memory test you will fail under pressure.
Search "candlestick patterns" and you get a chart of forty-plus names — Three Black Crows, Abandoned Baby, Concealing Baby Swallow. This lesson focuses on a handful of patterns used to interpret possible shifts in buying and selling pressure. Their usefulness needs testing in context.
Here are six. Learn their shapes, then examine their limits.
1. The Hammer
A small body at the top, a long lower wick at least twice the body, little or no upper wick.
What happened: Sellers drove price down hard. Buyers absorbed everything and pushed it back to near the open.
Where it counts: Only after a decline, at a support zone. A hammer in the middle of a range is decoration.
2. The Shooting Star
The hammer upside down. Small body at the bottom, long upper wick, appearing after an advance.
What happened: Buyers pushed price up and got overwhelmed. Supply appeared at that level.
Where it counts: After a rally, at resistance or a prior high. The longer the upper wick, the more meaningful the rejection.
3. Bullish Engulfing
A green candle whose body completely covers the previous red candle's body.
What happened: One session erased the entire prior session's selling and then some. That is a genuine change of hands, not a drift.
Strength check: Bigger engulfing body and higher volume than the candle it swallowed. Without volume, downgrade it.
4. Bearish Engulfing
The mirror image at the top of a move. A red body swallowing the prior green body.
Where it counts most: After an extended run, especially on a stock that has gone up for several sessions without pausing. This is often the first honest sign that the crowd has finished buying.
5. The Doji
Open and close are effectively the same. A cross, not a candle.
What happened: Complete stalemate.
The nuance most people miss: a doji is not bearish or bullish. It is a pause. Its meaning comes entirely from what precedes it and what follows. A doji after a trend may suggest hesitation; it does not establish that momentum has stopped. Inside a range, its significance also depends on context.
A doji alone is not an entry rule. A later candle adds information, but can also give a false signal.
6. Marubozu
A long body with virtually no wicks. Price opened at one extreme and closed at the other.
What happened: One side controlled the entire session, start to finish. No meaningful counter-attack.
Why it matters: A bullish marubozu breaking out of a range is one of the cleanest continuation signals available. It shows conviction rather than drift.
Indian caveat: verify it is not a circuit-locked candle. A stock frozen at upper circuit prints a wickless body on almost no genuine two-way trade. That is not conviction — it is a queue.
The Rule That Governs All Six
Read the pattern in its location. Neither guarantees the next move.
The same hammer is:
- A high-quality signal at a tested support level after a decline
- Meaningless in the middle of a sideways chop
- A trap in a stock in sustained downtrend with no support anywhere nearby
Before you name the pattern, answer three questions:
- Where is it? At a level that matters, or in no-man's-land?
- What came before it? A pattern only reverses something. If there is no prior move, there is nothing to reverse.
- What is the volume? Compare volume with recent activity. Volume alone cannot reveal conviction or trader intent.
How to Actually Trade Them
Wait for confirmation. A hammer is a hypothesis. The next candle closing above its high is the evidence. Entering on the hammer itself is guessing; waiting for confirmation changes the entry price and may filter some failed setups. Test that trade-off rather than assuming it improves results.
Use the pattern to define your stop. The best thing about these six is not the entry — it is that each gives you a clear invalidation point. Below the hammer's low. Above the shooting star's high. If you cannot place a logical stop, you do not have a trade.
Ignore them on expiry day and in illiquid stocks. Both produce patterns generated by mechanics rather than opinion.
Respect the higher timeframe. A bearish engulfing on the 15-minute chart inside a strong daily uptrend is noise. Trade with the bigger picture or stand aside.
Quick Recap
- The six patterns covered here are: Hammer, Shooting Star, Bullish Engulfing, Bearish Engulfing, Doji, Marubozu.
- Each one describes a transfer of control, not a magic prediction.
- Location + volume + confirmation provide context for a testable setup. They do not establish an edge or guarantee a profitable trade.
Educational content only. This is not investment advice. Markets carry risk — please consult a SEBI-registered advisor before investing.