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What are Stock Market Candlestick Patterns?

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March 28, 2023


What’s Inside

Candlestick analysis has been around for decades and operates as other types of technical analysis do: traders follow it. Stock market candlesticks patterns can be coupled with other kinds of technical analysis, such as momentum indicators, but candles ultimately constitute a stand-alone form of charting analysis.

Since they record a whole day of market information and price activity, daily stock candle patterns are the most effective method to see a candlestick chart.

Stock Market Candlestick Chart Patterns Explained

Candlestick charts are technical charts that condense data from many time frames into a single price bar. These are traditionally employed daily, with the concept being that each candle reflects a day's worth of data, news and market activity. As a result, candles can prove more valuable to swing or long-term traders.

Each candle conveys a distinct message. While glancing at a candle, it's best to imagine a contest between sellers and buyers. A bright candle signifies that the buyers prevailed, whereas a dark candle suggests that the sellers prevailed. What occurs between the close and the open and the contest between sellers and buyers makes candlestick charts so enticing as a charting tool.

How To Read Candle Patterns In The Share Market?

A daily candlestick displays a market's opening, high, low, and closing values. The rectangular real body is coloured with a dark colour to indicate a price decrease and a light colour to indicate a price rise. The lines above and below the body are known as wicks or tails, reflecting the maximum high and low of the day.

When the sections of a candlestick are combined, they can frequently signify changes in a market's direction or show significant prospective movements that the following day's candle must frequently validate.

  • Doji and Spinning Top: A doji is a candlestick shape that i identical to the open and closure. A spinning top resembles a Doji but has a much smaller body and virtually identical open and closure patterns. These patterns indicate market hesitation, as buyers and sellers have essentially come to a halt. Nonetheless, these patterns suggest that the indecision will soon fade, and a new price trend will emerge.
  • Hammer: It indicates that a downward trend is coming to an end. The extended lower tail suggests that sellers attempted to sell lower again but were repelled, and the price reversed most or all of the day's losses. The key takeaway is that this is the first time buyers have emerged in force during the current downtrend, indicating a shift in directional momentum.
  • Hanging Man: It indicates a significant possible reversal downward. The candle represents that selling interest has entered the market for the first time in many days, resulting in a prolonged tail to the downside.


Candlestick signals can be single candles or multi-candle patterns. They are excellent forward-looking indicators, but confirmation by consecutive candles is sometimes required before defining a particular pattern and trading on it.

These patterns apply whether you want to invest in domestic or international markets. Speaking of international markets, the Fi Money app can assist you in diversifying your investments throughout US markets. You can purchase the top US stocks with no brokerage and the best FX rates in the industry.

Frequently Asked Questions

1. What is a candlestick pattern?

A candlestick is a tool for displaying information regarding the price movement of a security. Candlestick patterns are a significant aspect of technical analysis because they allow traders to evaluate price information swiftly and from just a few price bars.

2. Which candlestick pattern is most reliable?

Several patterns are favoured equally and regarded as the most reliable by different traders.

3. Are candlestick patterns helpful?

Candlesticks are helpful in trading because they display four price points (open, close, high, and low) across the period specified by the trader.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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