Read the candle before naming the pattern
A candlestick records open, high, low and close for a chosen period. The body shows the relationship between open and close; the wicks show prices reached outside the body. A named pattern is simply a recurring visual arrangement—not a prediction.
Body, wick and range
- Body: distance between open and close.
- Upper wick: high relative to the body.
- Lower wick: low relative to the body.
- Total range: high minus low.
Why context changes meaning
A long lower wick after a prolonged decline can indicate rejection of lower prices. The same shape inside random sideways noise may mean much less. Trend, location, volume and the next candle matter.
Common patterns
Doji, hammer, shooting star, engulfing patterns and inside bars are common labels. Learn what price action created the shape before memorising the name.
Worked example
If a stock opens at ₹100, falls to ₹92, trades as high as ₹103 and closes at ₹102, the candle has a small body near the top and a long lower wick. That describes what happened; it does not establish what happens next.
How to test a pattern
Define the exact pattern, timeframe, market regime, entry, invalidation and exit before testing. Include costs and avoid changing the rule after seeing historical outcomes.
Common mistakes
- Trading every named pattern.
- Ignoring where the pattern occurs.
- Using tiny timeframes because patterns appear frequently.
- Assuming a visually convincing pattern has a statistical edge.
Checklist
- Timeframe defined
- Trend/location identified
- Volume checked
- Pattern rule precise
- Invalidation defined
- Historical rule tested