Candle Patterns in Technical Analysis

How Candlesticks Work

Every candlestick has four major components:

Open: Price at the beginning of the period

Close: Price at the end of the period

High: Highest price reached

Low: Lowest price reached

If the closing price is higher than the opening price, the candle is bullish. If the closing price is lower, the candle is bearish.

The body and shadows (wicks) of the candle provide vital information:

A long body shows strong momentum.

A small body shows indecision.

Long wicks show rejection from higher or lower levels.

No wicks signal strong directional control by either bulls or bears.

Based on these characteristics, candle patterns are broadly divided into reversal patterns, continuation patterns, and indecision patterns.