What is Candlestick?
A candlestick summarises price action for a timeframe: body shows open-to-close range; wicks show extremes. Patterns are context tools, not guarantees.
Formula
Real body: $513.80 − $511.20 = $2.60
Indian market context (NSE)
Reference levels: Nifty 50 at 24,300, Reliance Industries at ₹1,300, Bank Nifty futures at 55,000 (lot size 30). Examples below show how Candlestick shows up on Indian index, equity, and futures books — update to live quotes in your journal.
Nifty 50 perspective
Candlestick on Nifty (24,300): on the 15-minute chart, combine with session VWAP and 9:15–10:00 liquidity — index candlestick signals misfire on expiry Tuesdays without volume confirmation.
Reliance Industries perspective
Candlestick on Reliance at ₹1,300: daily vs hourly settings diverge around results and ex-dividend dates; note corporate events in journal when candlestick readings spike.
Bank Nifty futures perspective
Candlestick on Bank Nifty futures (55,000): first-hour signals differ from post-14:30 behaviour; avoid standalone entries when banking names lead the move.
| Element | Shows | Journal tag |
|---|---|---|
| Long body | Strong directional close | Momentum context |
| Long upper wick | Rejection higher | Failed breakout note |
| Doji | Indecision | Wait-for-confirmation setups |
How to validate
- Forward-test Candlestick on paper or sim for two weeks after rule changes.
- Validate only on trades where Candlestick settings matched the written playbook.
- Split results by trending vs range weeks on Nifty before trusting the signal.
- Require higher-timeframe bias agreement if that is part of your rule.
How to track in TradeLyser
- Add Candlestick reading to trade entry notes (value + timeframe).
- Create tags: “Candlestick aligned” / “Candlestick ignored”.
- Monthly: filter trades by alignment tag and compare win rate and avg R.
- Screenshot chart context for mentor review on disputed trades.
Best practices
- Combine Candlestick with higher-timeframe bias — not as a lone trigger.
- Avoid curve-fitting settings on less than three months of tagged data.
- Refresh playbook screenshots when changing Candlestick parameters.
- Skip trading when Candlestick conflicts with written risk limits.
Common pitfalls
- Treating Candlestick as a guaranteed reversal signal.
- Optimising parameters on one bullish month only.
- Trading against higher-timeframe bias because Candlestick “said so”.
- Failing to log when you overrode Candlestick discretionally.
How to use this in TradeLyser
Screenshot or name the pattern in trade notes. Monthly filter by pattern tag; retire patterns with negative expectancy after 30+ samples.
Related terms
A breakout occurs when price closes beyond a boundary — range high, triangle, or prior day level — that traders were watching.
A moving average is the average price over N bars, recalculated each period. Simple (SMA) weights periods equally; exponential (EMA) weights recent prices more.
Relative Strength Index compares average gains to average losses over a lookback (commonly 14). Readings above 70 and below 30 are traditional extreme zones — not automatic reversal signals.
Support is a price area where demand previously stepped in, slowing or reversing declines. It is a zone — not a single tick — and can fail.
By trader level
Start here — essential concepts
New to trading or journaling? These are the core terms you need to understand before anything else.
FAQ
What does a candlestick show that a line chart doesn't?
A candlestick reveals four data points — open, high, low, and close — for every single period, while a line chart shows only the closing price. This extra data exposes intraday volatility, buyer/seller battles, and rejection of price levels that a line chart hides entirely.
What is the difference between a bullish and bearish candlestick?
A bullish (green or white) candlestick closes above its open, meaning buyers dominated the session. A bearish (red or black) candlestick closes below its open, meaning sellers were in control. The body color is determined solely by the relationship between open and close — not the prior candle.
How long does a wick need to be to be significant?
A wick is generally considered significant when it is at least 2x the length of the real body. A lower wick twice the body length signals strong buying rejection of lower prices; an upper wick twice the body length signals strong selling rejection of higher prices.
Do candlestick patterns work on all timeframes?
Candlestick patterns appear on all timeframes, but reliability decreases on lower timeframes due to noise. A hammer on the daily chart at a key support level is far more meaningful than the same pattern on a 1-minute chart. Most professional swing traders focus on the daily and weekly charts for pattern identification.
What is a doji candlestick?
A doji forms when the open and close prices are virtually identical — within roughly 0.1% of each other. On SPY at $500, that is about a $0.50 difference. The doji signals indecision between buyers and sellers and is most meaningful after a prolonged trend, where it can signal an imminent reversal.
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