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    Candlestick Charts — The Complete Guide

    Rohit Singh

    Mr. Chartist · SEBI RA

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    Japanese candlestick charts are the most powerful and widely used charting method in the world. Developed by Munehisa Homma, a legendary Japanese rice trader in the 1700s, candlestick patterns capture the battle between buyers and sellers in a visual, intuitive format. Each candlestick tells a story of the open, high, low, and close (OHLC) within a specific time period.

    Key points

    Bullish (Green/White) Candle: Close > Open. Buyers dominated the session. The body shows the range from open (bottom) to close (top)
    Bearish (Red/Black) Candle: Close < Open. Sellers dominated. The body shows the range from open (top) to close (bottom)
    Upper Shadow/Wick: The thin line above the body. Shows the highest price reached but rejected. Long upper wick = selling pressure at highs
    Lower Shadow/Wick: The thin line below the body. Shows the lowest price reached but recovered. Long lower wick = buying at lows (support)
    Doji: Open ≈ Close (tiny or no body). Represents indecision — neither buyers nor sellers won. Important at trend extremes
    Marubozu: Full body with no shadows. Bullish Marubozu = extreme buying (opens at low, closes at high). Most powerful single candle signal
    Hammer: Small body at top with long lower shadow (2x+ body length). Appears at bottoms — signals potential reversal upward
    Shooting Star: Small body at bottom with long upper shadow. Appears at tops — signals potential reversal downward. Opposite of hammer
    Engulfing: Two-candle pattern where the second candle completely 'engulfs' the first. Bullish Engulfing at bottoms = strong buy signal
    Morning Star: Three-candle reversal at bottoms: Big red → Small body (star) → Big green. Highly reliable bullish reversal
    Evening Star: Three-candle reversal at tops: Big green → Small body → Big red. Highly reliable bearish reversal
    Three White Soldiers: Three consecutive long green candles with higher closes. Strong bullish continuation signal. Volume should increase

    Example — A Bullish Engulfing pattern on NIFTY at the 24,000 support level with 20% above-average volume: This is a textbook high-probability buy signal because (1) the pattern itself is bullish, (2) it forms at a known support level, (3) volume confirms institutional buying.

    Pro tip — Candlestick patterns work best at key support/resistance levels. A Hammer at random price level means very little. A Hammer exactly at a strong support zone = high probability reversal. Context is everything. Mr. Chartist's book covers 35+ patterns with real NSE/BSE examples.

    Related — Candlestick Patterns Book
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