INDEX :-

How to read candlestick

charts? Hammer Pattern

Bullish Engulfing

The Morning Star

Piercing Pattern

White Marubozu

Falling Window

Rising Window

Downside Tasuki Gap

Upside Tasuki Gap

Rising Three Methods

Falling Three Methods

Doji

Bearish Counterattack

Tweezer Top

Shooting Star

Bearish Harami

Three Inside Down

Black Marubozu
Three Black

Crows The

Evening Star

Bearish Engulfing

Dark cloud cover

Three Side Up

Bullish Harami Pattern

Tweezer Bottom

Inverted Hammer

Three Inside Up

On-Neck Pattern

Hanging man
How to read candlestick charts?

Candlestick charts originated in Japan over 100 years ago when the West
developed bar charts and point-and-figure charts. In the 1700s, a Japanese man
known as Homma discovered that since there was a relationship between price
and the supply and demand of rice, markets were also strongly influenced by
traders' sentiments.

A daily candlestick chart shows the open, high, low and close price of a security
for the day. The wide or rectangular part of the candlestick is called the "real
body" which represents the link between opening and closing prices.

This real body shows the price range between the open and close of that day's
trade.

When the real body is filled, black or red, it means the close is lower than the
open and is referred to as a bearish candle. This indicates that the price opened,
the bears pushed the price down and closed below the opening price.

If the real body is empty, white or green it means the close was higher than the
open which is called a bullish candle. It shows that the price opened, the bulls
pushed the price up and closed above the opening price.

The thin vertical lines above and below the real body are known as wicks or
shadows which represent the high and low prices of the trading session

Upper shadow denotes higher prices and lower shadow denotes lower prices
during the trading session.
Before we get into the different candlestick charts, there are a few assumptions
that need to be kept in mind which are specific to candlestick charts.

Strength is represented by a bullish or green candle and weakness by a bearish

or red candle. One should make sure that whenever they are buying it is a green
candle day and whenever they are selling make sure it is a red candle day.

The textbook definition of a pattern lays out some criteria, but one should point
out that there may be slight variations in the pattern depending on certain
market conditions.
One should look for a prior trend. If you are looking for a Bullish reversal
pattern, the earlier trend should be bearish and if you are looking for a Bearish
reversal pattern then the earlier one should be Bullish.

Candlestick patterns can be divided into:

1. Continuity Pattern

2. Bullish Reversal Pattern

3. Bearish Reversal Pattern

Hammer Pattern :

Hammer is a single candlestick pattern that forms at the end of a

downtrend and signals a bullish reversal.

The actual body of this candle is small and located at the top with a lower
shadow that should be more than twice the size of the actual body. This
candlestick chart pattern has no or only a small upper shadow.

The psychology behind this candlestick formation is that the prices opened
and the sellers pushed the prices down.

Suddenly, the buyers came into the market and pushed the prices up and
ended the trading session above the opening price.

This led to the formation of a bullish pattern and means that buyers are
returning to the market and the downtrend may have ended.

Traders can take a long position if a bullish candle forms the next day and
place a stop loss at the low of the hammer.
Piercing Pattern :

A piercing pattern is a multiple candlestick chart pattern that forms after a

downtrend that signals a bullish reversal.

Two candles make it up, the first candle is a bearish candle which indicates the
continuation of the downtrend.

The second candle is a bullish candle that opens the gap but closes more than
50% of the actual body of the previous candle, indicating that the bulls are back
in the market and a bullish reversal is about to take place.

If a bullish candle is formed the next day, traders can enter a long position and
place a stop-loss at the bottom of the second candle.
Bullish Engulfing :

Bullish engulfing is a multiple candlestick chart pattern that forms after a

downtrend that signals a bullish reversal.

It is formed by two candlesticks, the second candlestick surrounds the first

candlestick. The first candle is a bearish candle which indicates the continuation
of the downtrend.

The second candle is a long bullish candle that completely engulfs the first
candle and indicates that the bulls are back in the market.

If a bullish candle is formed the next day, traders can enter a long position and
place a stop-loss at the bottom of the second candle.
The Morning Star :

Morning Star is a multiple candlestick chart pattern formed after a downtrend

indicating a bullish reversal.

It is made up of 3 candles, the first is a bearish candle, the second is the Doji
and the third is a bullish candle.

The first candle indicates the continuation of the downtrend. The Doji of the
second candle indicates indecision in the market. The third bullish candle
indicates that the bulls have returned and a reversal will take place.

The second candle should be completely outside the actual body of the first and
third candles.

If a bullish candle is formed the next day, traders can enter a long position and
place a stop-loss at the bottom of the second candle.
Three White Soldiers :

The Three White Soldiers is a multiple candlestick pattern formed after a

downtrend that signals a bullish reversal.

These candlestick charts are made up of three long bullish bodies that do not
have long shadows and are open within the original body of the previous candle
in the pattern.
Three inSide Up:

The Three Inside Up is a multiple candlestick pattern formed after a downtrend

indicating a bullish reversal.

It consists of three candlesticks, the first one is a long bearish candle, the second
one is a short bullish candle that should be in the range of the first candlestick.

The third candlestick should be a long bullish candlestick that confirms a bullish
reversal.

The first and second candlesticks should belong to the Bullish Harami
candlestick pattern.

Traders can take long positions after the completion of this candlestick pattern
Bullish Harami Pattern:

A Bullish Harami is a multiple candlestick chart pattern formed after a

downtrend indicating a Bullish Reversal.

It consists of two candlestick charts, the first candlestick is a long bearish candle
and the second is a short bullish candle that should be in the range of the first
candlestick.

The first bearish candle shows the continuation of the bearish trend and the
second candle shows that the bulls are back in the market. Traders can take long
positions after the completion of this candlestick pattern.
Tweezer Bottom :

Tweezer Bottom Candlestick Pattern is a Bullish Reversal candlestick pattern

that forms at the end of a downtrend.

It consists of two candlesticks, one is Bearish and the other is Bullish

candlestick.

Both candlesticks make almost or the same low. When the Tweezer Bottom
candlestick pattern is formed the prior trend is a downtrend.

A bearish tweezer candlestick is formed that looks like a continuation of an

ongoing downtrend. The next day, the low of the second day's bullish candle
shows the support level.

Bottom candles with almost identical lows indicate the strength of support and
also indicate that the downtrend may reverse to form an uptrend. Due to this the
bulls come into action and drive the price upwards.

This bullish reversal is confirmed the day after the bullish candle is formed.
Inverted Hammer:

An inverted hammer is formed at the end of the downtrend and signals a bullish
reversal.

In this candle, the real body is located at the end and there is a long upper
shadow. This is the inverse of the Hammer candlestick pattern.

This pattern is formed when the opening and closing prices are close to each
other and the upper shadow should be more than twice the actual body.
Three Inside Up :

The Three Outside Up is a multiple candlestick pattern formed after a

downtrend indicating a bullish reversal.

It consists of three candlesticks, the first one is a short bearish candle, the
second one is a large bullish candle that should cover the first candlestick.

The third candlestick should be a long bullish candlestick that confirms a bullish
reversal.

The first and second candlestick charts should be related to the Bullish
Engulfing candlestick pattern.

Traders can take long positions after the completion of this candlestick pattern.
On-Neck Pattern :

The on neck pattern is followed by a downtrend when a long real bodied bearish
candle is followed by a short real bodied bullish candle that gaps at the open but
then closes near the close of the previous candle.

The pattern is called a neckline because two closing prices are the same or
nearly identical in two candles, forming a horizontal neckline.
Hanging man :

A hanging man is a single candlestick pattern that forms at the end of an

uptrend and signals a bearish reversal.

The actual body of this candle is smaller and is positioned on the top with the
lower shadow that should be more than twice that of the actual body. There is
no upper shadow or lower in this candlestick pattern.

The psychology behind the formation of this candle is that the prices opened up
and the sellers pushed the prices down.

Suddenly buyers came into the market and pushed the prices up but failed to do
so as the prices closed below the opening price.

This resulted in the formation of a bearish pattern and indicates that the sellers
have returned to the market and the uptrend may be over.

If a bearish candle is formed the next day traders can enter a short position and
place a stop-loss at the height of the hanging man.
Dark cloud cover:

Dark Cloud Cover is a multiple candlestick pattern formed after an uptrend

indicating a bearish reversal.

It is formed by two candles, the first candle is a bullish candle which indicates
the continuation of the uptrend.

The second candle is a bearish candle that opens the gap but closes more than
50% of the actual body of the previous candle indicating that the bears are back
in the market and a bearish reversal is about to take place.

If a bearish candle is formed the next day traders can enter a short position and
place a stop-loss at the high of the second candle.
Bearish Engulfing:

Bearish Engulfing is a multiple candlestick pattern formed after an uptrend that

signals a bearish reversal.

It is formed by two candlesticks, the second candlestick surrounds the first

candlestick. The first candle being a bullish candle indicates the continuation of
the uptrend.

The second candlestick chart is a long bearish candle that completely engulfs
the first candle and shows that the bears are back in the market.

If a bearish candle is formed the next day traders can enter a short position and
place a stop-loss at the high of the second candle.
The Evening Star :

An evening star is a multiple candlestick pattern formed after an uptrend

indicating a bearish reversal.

It is made up of 3 candlesticks, the first one is a Bullish candle, second one is

Doji and third one is a Bearish candle.

The first candle indicates the continuation of the uptrend, the second candle
being a Doji indicates indecision in the market, and the third bearish candle
indicating that the bears are back in the market and a reversal is about to occur.

The second candle should be completely outside the actual bodies of the first
and third candles.

If a bearish candle is formed the next day, traders can enter a long position and
place a stop-loss at the high of the second candle.
Three Black Crows :

The Three Black Crow is a multiple candlestick pattern that forms after an
uptrend that signals a bearish reversal.

These candlesticks are made up of three bearish bodies that do not have long
shadows and open within the actual body of the previous candle in the pattern.
Black Marubozu:

The Black Marubozu is a single candlestick pattern formed after an uptrend that
signals a bearish reversal.

This candlestick chart has a long bearish body with no upper or lower shadows,
which indicates that the bears are building selling pressure and a bearish trend is
likely in the market.

In this candle formation, buyers should be careful and close their buy position.
Three Inside Down :

The Three Inside Down is a multiple candlestick pattern formed after an uptrend
indicating a bearish reversal.

It consists of three candlesticks, the first is a long bullish candle, the second is a
short bearish candlestick that should be in the range of the first candlestick.

The third candlestick chart should be a long bearish candlestick that confirms a
bearish reversal.

The first and second candlesticks should belong to the Bearish Harami
candlestick pattern.

Traders can take short positions after the completion of this candlestick pattern.
Bearish Harami :

There is a Bearish Harami multiple candlestick pattern formed after an uptrend

indicating a bearish reversal.

It consists of two candlesticks, the first candlestick is a long bullish candle and
the second is a short bearish candle which should be in the range of the first
candlestick chart.

The first bullish candle indicates a continuation of the bullish trend and the
second candle indicates that the bears are back in the market.

Traders can take short positions after the completion of this candlestick pattern.
Shooting Star :

A shooting star is formed at the end of an uptrend and signals a bearish reversal.

In this candlestick chart the real body is located at the end and there is a long
upper shadow. This is the inverse of the Hanging Man candlestick pattern.

This pattern is formed when the opening and closing prices are close to each
other and the upper shadow should be more than twice that of the actual body.
Tweezer Top:

The Tweezer Top Pattern is a bearish reversal candlestick pattern that forms at
the end of an uptrend.

It consists of two candlesticks, one is Bullish and the other is Bearish. Both
tweezer candlesticks make almost or the same high.

When the Tweezer Top candlestick pattern is formed, the prior trend is an
uptrend. A bullish candlestick is formed which looks like a continuation of an
ongoing uptrend.

The next day, the second day's bearish candle highs indicate a resistance level.
The bulls seem to be pushing the prices upwards, but now they are not ready to
buy higher prices.

Top candles with almost the same height indicate the strength of resistance and
also indicate that an uptrend may reverse to form a downtrend. This bearish
reversal is confirmed the next day when a bearish candle is formed.
Bearish Counterattack :

Bearish Reversal Candlestick Pattern A bearish reversal pattern that appears

during an uptrend in the market. It predicts that the market will make an
existing uptrend and a new downtrend will take over the market.
Doji :

The Doji pattern is a candlestick pattern of indecision that is formed when the
opening and closing prices are almost equal.

It is formed when both the bulls and the bears are fighting to control the prices
but no one is successful in gaining complete control over the prices.

The candlestick pattern looks like a cross with a very small real body and a long
shadow.
Falling Three Methods :

The "Three Ways to Fall" is a bearish, five candle continuation pattern that
signals a halt, but not a reversal of the ongoing downtrend.

The candlestick pattern is made up of two long candlestick charts in the

direction of the trend, i.e. downtrend at the beginning and end, with three short
counter-trend candlesticks in the middle.

The candlestick pattern is important as it shows traders that the bulls still do not
have enough strength to reverse the trend.
Rising Three Methods :

The "Rising Three Methods" is a bullish, five candle continuation pattern that
signals a halt, but not a reversal of the ongoing uptrend.

The candlestick pattern is made up of two long candlesticks in the direction of

the trend i.e. uptrend in this case. At the beginning and end, with three small
counter-trend candlesticks in the middle.

The candlestick pattern is important because it shows traders that the bears still
do not have enough power to reverse the trend.
Upside Tasuki Gap :

This is a Bullish continuation candlestick pattern forming in an ongoing

uptrend.

This candlestick pattern consists of three candles, the first candlestick is a long
bodied bullish candlestick, and the second candlestick is also a bullish
candlestick chart formed after the gap up.

The third candlestick is a bearish candle that closes in the gap formed between
these first two bullish candles.
Downside Tasuki Gap :

This is a bearish continuation candlestick pattern formed in an ongoing

downtrend.

This candlestick pattern consists of three candles, the first candlestick is a long
bodied bearish candlestick, and the second candlestick is also a bearish
candlestick formed after a gap down.

The third candlestick is a bullish candle that closes in the gap between the first
two bearish candles.
Rising Window:

A rising window is a candlestick pattern in which there is a gap between two

bullish candlesticks. Gap is the space between the high and low of two
candlesticks which results in high trading volatility. This is a trend continuation
candlestick pattern which indicates strong buyer strength in the market.
Falling Window

A falling window is a candlestick pattern consisting of two bearish candlesticks

with a gap between them. The gap is the space between the high and low of two
candlesticks. This is due to the high trading volatility. This is a trend
continuation candlestick pattern and it is a sign of strong seller strength in the
market.
White Marubozu :

The White Marubozu is a single candlestick pattern formed after a downtrend

that signals a bullish reversal.

This candlestick consists of a long bullish body with no upper or lower

shadows, which indicates that the bulls are building up buying pressure and the
market is likely to move higher.

In this candle formation, sellers should be careful and close their shorting
positions.

Candlestick patterns are important tools in technical trading. Understanding

them allows traders to interpret potential market trends and make decisions
from those projections. There are different types of candlestick patterns that can
indicate bullish or bearish movements.

1. Risk in the stock market is when you do not know what you are doing in the
stock market.

2. It is very important for the investor to have confidence in himself while

investing.

3. If you lose in the share market, that is the real meaning of victory and the
new way to win.
4. If there is no possibility of defeat than victory has no meaning. 5.

You should have the utmost confidence in yourself while investing.

Investing in the stock market comes with its share of ups and downs. It is
important to understand that investing in stocks can be profitable and can also
cause harm. The market movement is not always upwards. That's why it takes
time, patience and the right mindset to make a good investment.
KEY TAKEAWAYS

● Candlestick patterns are technical trading tools that have been used for
centuries to predict price direction.

● There are dozens of different candlestick patterns with intuitive,

descriptive names; most also have a corollary pattern between the upside
and downside. For instance, an “abandoned baby top” has its corollary in an
“abandoned baby bottom;” “tweezer bottoms” have their upside corollary in
“tweezer tops.”

● Traders supplement candlestick patterns with additional technical

indicators to refine their trading strategy (e.g., entry, exit).

● Candlesticks are based on current and past price movements and are
not future indicators.
 [Book Title: Candlesticks] by [ DigitalGigz ]

Published by [Self Published]

Copyright © [ 2023 ] [ DigitalGigz ]

All rights reserved. No portion of this book may be reproduced in

any form without permission from the publisher, except as
permitted by U.S. copyright law. For permissions contact:
[[email protected] and

Phone Number +91 6377409606 ]

Cover by [Digital economy].

E-Book Launch Date :- 1 / 1 / 2023

Paperback Launch Date :- 1 / 1 / 2023

Revised Edition 18 / 03 / 2023

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