How to read candlestick charts

Anatomy of a candle

The body is the battleground between buyers and sellers that was actually resolved. A long body means one side dominated the whole period; a tiny body means the period ended roughly where it started.

Wicks record rejected prices. A long upper wick says buyers pushed higher and were forced back; a long lower wick says sellers tried and failed.

Patterns worth knowing

Doji: open and close nearly equal, signalling indecision. Meaningful only after an extended move.

Hammer and shooting star: small body with a long wick on one side, showing a failed push. A hammer after a downtrend and a shooting star after an uptrend are the classic reversal hints.

Engulfing: a candle whose body completely covers the previous one, indicating the balance of control flipped within a single period.

Context and volume

A pattern in the middle of a range is noise. The same pattern at a prior support level, a moving average, or after a long trend is worth attention.

Confirm with volume. A reversal candle on below-average volume is a suggestion; the same candle on twice-average volume is a statement.

Timeframes

Daily candles suit swing trading and investing. Five- and fifteen-minute candles suit intraday work and carry far more false signals.

Whatever the timeframe, check the daily and weekly chart first so you are not trading against the larger trend.

Frequently asked questions

What do green and red candles mean?

Green (or hollow) means the close was above the open for that period; red (or filled) means it closed below.

Which candlestick pattern is most reliable?

No pattern is reliable in isolation. Engulfing candles and hammers at established support or resistance, confirmed by high volume, have the best track record.

Do candlestick charts work for Indian stocks?

Yes. Candlesticks describe order flow and apply to NSE, BSE, NYSE, Nasdaq and LSE alike.