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Candlestick Patterns: Reading Price Action in Stock Market Charts

Candlestick Patterns: Reading Price Action in Stock Market Charts

Candlestick Patterns: Reading Price Action in Stock Market Charts

After all, some traders just use squiggly lines on a chart while trading. Unbelievably, some people don’t even glance at the charts! Instead, they focus on the “tape”—the bids and offers that are displayed in their Level II trading montage like numbers in The Matrix. There are undoubtedly innumerable ways to profit from the stock market.

When you open demat account on an excellent platform, you shall find several chart patterns. There is no right or wrong way to read a chart. However, unless you’re merely a gambler, you need some kind of information to make wise choices. We think that comprehending candlestick patterns is the most effective approach to do this. 

What Is a Candlestick?

In essence, the candle’s development represents a price time series. Because of this, a one-minute candle represents the price movement over the course of one trading day minute. The real candle is merely a visual representation of that price movement and all trades that were executed in that particular minute. Similar to a daily candle, a weekly candle represents all of the trading executions that took place during that day or that week.

The open informs us of the stock price’s opening position each minute. The closing price for that minute is displayed. The highest and lowest recorded prices from the open and close are shown by the wicks, which are also referred to as shadows or tails.


On a chart, each candlestick represents an event that occurred over a certain time period. By altering the timeline of your chart, you can select the duration of the period. For example, each candlestick on a 1-hour chart corresponds to one hour of activity. It is one day when viewed as a daily chart.The exception to this rule is regarding the most recent candle. It displays what is occurring during the current session.


You only need to glance at the candle’s color to determine if the market increased or decreased during the period it covers.

  • A green candle indicates a rising market
  • The candle collapsed if it was red

Reading Price Action Inside Candlestick Patterns

A strong talent is being able to read price action. Looking at candlestick patterns on a chart and determining “what kind of price action might have generated the candlestick pattern” is one of the principles of price action. In layman’s terms, this means being able to instantly comprehend scenarios that could have produced candlestick patterns when looking at candlestick patterns on one period, most likely lower timeframe scenarios. Think about this instance;

A single candlestick can be seen in the image, with only very slight shadows cast on its top and bottom. If you’re an experienced trader, you can comment on this candlestick in a few ways. The open is lower than the close. The lows were produced by price activity, which also traded higher than the close. It finally pulled back from the peaks. Isn’t that easy? There’s more, hold on. There are numerous ways in which price movement could have produced this candlestick. Identifying lower time frame scenarios that might have generated the candlestick takes time for traders gauging the price action.  

Being stuck in a single time frame without taking the big picture into account can prevent us from seeing the true nature of the market. Lower time frame market structure will occasionally become highly significant, even though the random noises and volatility it exhibits. To avoid low probability candlestick patterns, analyse price movement using lower time frames.

A Valuable Method To Filter Out Low Probabilistic Trades

The ability to comprehend lower time frame events and candlestick patterns is a skill that traders must master. It will improve traders’ ability to understand price activity intuitively. We can use the background of buying and selling pressure to test candlestick patterns. One can weed out low-probability trade entries after understanding the purchasing and selling convictions underlying candlestick patterns.

Consider the left panel of the image above; it shows a swing analysis-traced lower time frame market structure. Compare those to the matching candlestick patterns in the right panel for higher time frames. Without context from occurrences in lower time frames, the candlestick patterns in higher time frames appear robust at first glance. Through the lens of buying and selling pressure, a deeper investigation with a lower time frame gives significant information about the strength of the pattern. After examining huge candlesticks, many traders believe that they are a sign of strength. However, looking at price movement, this is typically a momentary weariness or even a little reversal.


Trading and investing professionals can learn important insights from candlestick charts about market trends, patterns, and probable price movements. You may make wise trading selections by comprehending the fundamental components of candlestick charts, deciphering candlestick patterns, determining support and resistance levels, and examining trend lines.

You may better navigate the financial markets and increase your chances of success by incorporating candlestick analysis into your trading approach. So, open a trading account on a well-designed online stock trading app like BlinkX to access such vital chart patterns. It will help you meet your trading goals.

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Candlestick Patterns: Reading Price Action in Stock Market Charts