Short answer: Candlestick patterns are shapes formed by one or more candles on a price chart. Traders use them, based on historical price data, to try to anticipate future price movements, and patterns are said to signal possible trend reversals or continuations. The sources checked for this article do not show that they reliably do so.
Last reviewed: 3 November 2026
At a glance
| Term | What it means |
|---|---|
| Open, close, high, low | The four prices one candle summarises for one time period |
| Green or white body | The period closed above its open |
| Red or black body | The period closed below its open |
| Wick or shadow | The thin line showing the highest and lowest prices reached in the period |
| Hammer | A single candle with a small body and a long lower wick, seen after a downtrend |
| Bullish engulfing | Two candles where a larger bullish body covers the smaller bearish body before it |
| Morning star | Three candles: a long bearish candle, a small-bodied candle, then a long bullish candle |
What does one candlestick show?
A candlestick is a picture of price action over one period, such as one day. It shows four prices: the opening price (the first trade of the period), the closing price (the last), the highest price and the lowest price. Charts on Indian exchanges such as the NSE and BSE are often drawn this way, so the same shapes appear whether you are looking at a share or an index.
The rectangular part is called the body, and it runs between the open and the close. The thin lines above and below it are called wicks or shadows, and they reach the high and low of the period.
What do the colours mean?
The body’s colour tells you the direction of the period. A green or white body means the period closed above its open. A red or black body means it closed below its open. Some charting tools let you choose the colours, so check the legend before reading a chart.
Here is a hypothetical example, with invented numbers. Suppose a share opens at ₹100, closes at ₹104, reaches a high of ₹106 and a low of ₹99. The body runs from ₹100 to ₹104, so it is 4 rupees tall and coloured green. The upper wick runs from ₹104 to ₹106, which is 2 rupees, and the lower wick runs from ₹99 to ₹100, which is 1 rupee.
What are the common patterns?
Patterns are shapes made from one candle or a short run of candles. A hammer is a single candle with a small body and a long lower wick. It appears after a downtrend and is read as a sign that buyers are becoming more active.
A bullish engulfing pattern uses two candles. A larger bullish candle’s body completely covers the body of the smaller bearish candle before it. A morning star uses three candles: a long bearish candle, then a small-bodied candle, then a long bullish candle. It is read as a reversal from downtrend to uptrend.
What does the evidence say?
This is the part most charts skip. Candlestick patterns are described by their users as signals, but a signal is only useful if it predicts outcomes more often than chance would. Testing that requires a fixed rule for what counts as a pattern, a comparison against random price moves, and results from data the rule was not built on.
This article does not quote a success rate. None of the facts checked for it gives a verifiable figure, and any number given without a source would be guesswork. If you come across a claim that a pattern “works” most of the time, ask what the test was, what it was compared against, and whether trading costs were counted.
Where are the risks?
The main risk is that a pattern is easy to see after the fact. Once a chart has moved, a hammer or morning star can be found in almost any history. Spotting the shape in the past does not show that it would have helped you decide in advance.
Patterns are also described as indicating reversals or continuations, which means they can point either way. A candle that suggests a reversal today may simply be a pause in an existing trend. Without a clear rule for what happens next, the pattern gives a reading, not a confirmed outcome.
Finally, patterns are built from past prices alone. They do not show company earnings, news, or the wider economy, so a chart can look clear while the reason for a move lies outside it.
Frequently asked questions
Do candlestick patterns predict prices?
They are used to try to anticipate future price movements, and they are said to indicate potential reversals or continuations. The facts checked for this article do not show that they predict prices reliably.
What is the difference between a green and a red candle?
A green or white body means the period closed above its open. A red or black body means it closed below its open.
Is a hammer a sign that prices will rise?
A hammer is a single candle with a small body and a long lower wick, read as a sign that buyers are becoming more active after a downtrend. It is a reading of recent activity, not a guarantee of what comes next.
Why do the wicks matter?
The wicks show the highest and lowest prices reached during the period, even if the price closed somewhere else. They reveal how far price moved within the period.
Sources and last check
Facts in this article were checked against the sources below on 3 November 2026. Rules and figures can change; check the primary source before acting.
- icicidirect.com (broker education)
- dhan.co (broker education)
- upstox.com (broker education)
- groww.in (broker education)
This article is general information, not investment advice. MyFinanceBandhu is not a SEBI-registered investment adviser.
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