Learn · Chapter 02 of 09
Candlestick patterns
Individual candles tell you who won the period; small clusters tell you when momentum is shifting. This chapter covers the half-dozen patterns that actually recur on Nifty 500 stocks — and the context filters that separate signal from noise.
Start here · 5 lessons · 15 min read
Key takeaways
- Location beats shape: the same hammer at support vs mid-range is a different trade.
- Wait for the confirming close — anticipating the candle is gambling.
- Daily and weekly candles carry more weight than 5-minute noise.
Lesson 1
Single-candle indecision: Doji and spinning tops
- Doji = open ≈ close after a run; means fuel exhaustion, not automatic reversal.
- Needs confirmation: next candle close + location at support/resistance.
- Ignore Dojis in sideways chop — they only matter after a 3–5 candle impulse.
Lesson 2
Rejection candles: hammer, shooting star
- Hammer: small body on top, long lower wick, at support after a fall.
- Shooting star is the mirror at resistance — long upper wick, weak close.
- Wick should be 2x+ the body; volume above average strengthens the read.
Lesson 3
Engulfing patterns
- Bullish engulfing: red candle fully covered by a larger green close — buyers seized control.
- Bearish engulfing mirrors at tops; both fail often without trend-location context.
- Best on daily charts at prior swing levels, not mid-range.
Lesson 4
Harami and inside bars
- Inside bar = consolidation; the mother's high/low becomes your trigger lines.
- Harami cross (Doji inside a large candle) often precedes Nifty reversals on daily charts.
- Trade the break, not the pattern — place entries beyond the range, not inside it.
Lesson 5
Three-candle confirmations
- Morning/evening star: exhaustion + indecision + confirmation across three periods.
- Rare but higher conviction on weekly charts for positional entries.
- Always check the next support/resistance — a star into a bigger barrier still fails.
Mistakes that cost money
- Trading every Doji and hammer without checking trend and level.
- Using 5-minute engulfing patterns as positional signals.
- Forgetting that gap-ups on NSE often invalidate overnight candle signals.
Chapter FAQ
Do candlestick patterns actually work?
As standalone predictors, weakly. As entry triggers at pre-marked support/resistance with volume confirmation, they improve timing — the level does the heavy lifting, the candle times the entry.
Hammer vs Doji — what's the difference?
A hammer shows intraday rejection (long wick, close near highs). A Doji shows indecision (open ≈ close). Hammers are directional; Dojis need the next candle to pick a side.
Which patterns suit intraday NSE trading?
Opening-range break + engulfing on 15-minute charts, traded only in the direction of the daily trend and the first-hour VWAP bias.
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