Definition
Candlestick Pattern
Candlestick patterns are formations of one or more candles that suggest likely shifts in market sentiment.
Each candle shows the open, high, low, and close for a period; combinations form recognised patterns like doji, hammer, engulfing, morning star, and evening star, each hinting at continuation or reversal. They are a visual shorthand for the battle between buyers and sellers.
Indian traders apply candlestick patterns across timeframes on Nifty, Bank Nifty, and stocks, treating them as signals rather than guarantees. They carry far more weight when they appear at key levels — support, resistance, trendlines, or moving averages — and are confirmed by volume and the following candle.
Related terms
- DojiA doji is a candlestick with a tiny or absent body, signalling indecision between buyers and sellers.
- HammerA hammer is a bullish reversal candlestick with a small body at the top and a long lower wick, found after a decline.
- Engulfing PatternAn engulfing pattern is a two-candle reversal where the second candle's body completely swallows the first.
- Support and ResistanceSupport is a price level where buying tends to halt a fall; resistance is a level where selling tends to cap a rise.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.