If you’re serious about improving your trading skills, understanding candlestick patterns is an essential first step. Candlesticks are more than just colorful bars on a chart — they represent price action, market psychology, and trader behavior. In this beginner-friendly guide, you’ll learn how to read candlestick patterns, recognize the most important formations, and apply them to real trades.

What Are Candlestick Patterns?

Candlestick patterns are visual representations of price movement over a specific period. Each candle reflects four key pieces of information: open, high, low, and close. When you learn to interpret these patterns, you can make smarter trading decisions based on momentum, trend strength, and potential reversals.

Why Learn Candlestick Patterns?

• They help you identify market trends and reversals early

• They improve entry and exit timing

• They’re universally used by traders, from beginners to professionals

• They can be combined with indicators for more accurate setups

Bullish vs Bearish Patterns

Candlestick patterns fall into two major categories:

• Bullish Patterns: Suggest the price may rise. Typically found at the bottom of a downtrend.

• Bearish Patterns: Indicate potential price drops. Usually seen at the top of an uptrend.

5 Must-Know Candlestick Patterns

1. Hammer (Bullish Reversal)

• Appears after a downtrend

• Small body, long lower wick

• Indicates buyers are gaining strength

2. Engulfing Pattern

• Bullish: Green candle fully covers the previous red candle

• Bearish: Red candle completely engulfs the previous green candle

• Reliable on higher time frames like 1-hour or daily

3. Doji

• Tiny or no body with long wicks

• Shows indecision in the market

• Use confirmation candle to trade

4. Morning Star (Bullish Reversal)

• Three-candle pattern:

  1. Red candle

  2. Small-bodied candle (Doji or Spinning Top)

  3. Strong green candle

• Seen near support zones

5. Shooting Star (Bearish Reversal)

• Appears after an uptrend

• Small body with long upper wick

• Signals weakness in buying pressure

Tools to Practice Candlestick Reading

• TradingView: Free charting tool with replay feature

• Chartink: Pattern scanner for Indian stocks

• Notion/Excel: For maintaining a candle journal with screenshots

Common Mistakes to Avoid

• Trading every pattern without confirmation

• Ignoring volume or market context

• Forgetting to use stop-losses

• Overtrading based on just one signal

Final Tips

• Always combine candlestick patterns with trend lines, support/resistance, and indicators like RSI or VWAP

• Backtest strategies before using them in live trades

• Practice daily and maintain a trade journal