Part 35 - Candlestick Foundations Basics Anatomy, Emotion, and Elevation
Part 35 - Candlestick Foundations Basics Anatomy, Emotion, and Elevation
Beginning the Journey: Real Candlesticks, Real Price Action
Welcome to the first step in decoding the emotional language of the markets.
In this series, we begin learning the real candlestick structures, the price action behind them, and the emotional tug-of-war they represent. No fluff, no generic patterns—just clarity-driven insights that compress confusion into conviction.
Candlesticks aren’t just shapes on a chart. They’re emotional slope tags—each one capturing a moment of fear, greed, hesitation, or momentum. By understanding their anatomy and context, you’ll learn to read the market like a story, not just a spreadsheet.
Whether you're a beginner or a seasoned trader seeking clarity, this journey will elevate your understanding of:
• Candlestick components (body, shadows, open/close)
• Price action logic (support, resistance, trend shifts)
• Emotional slope (who’s in control—bulls or bears?)
Let’s begin with the foundation—and build a vault of clarity, one candle at a time.
Candlestick charts trace their origins back to 18th-century Japan, where rice merchants first used them to track market prices and momentum.
Their modern revival came in the 1980s, when Steve Nison introduced them to Western technical analysis through his influential book Japanese Candlestick Charting Techniques—widely regarded as a foundational text for understanding candlestick behavior.
Today, candlesticks are a cornerstone of stock trading. Whether you're a fast-paced day trader or a long-term investor, these visual patterns help decode price action, signal potential reversals, and assess market sentiment with clarity and precision.
Is Trading Based on Candlestick Patterns a Good Idea?
Yes—if used with context, discipline, and emotional slope tagging.
Candlestick patterns are powerful tools because they visually compress market emotion—fear, greed, hesitation, momentum—into teachable setups. But they’re not magic signals. Their true value comes when paired with:
• Context: What came before the pattern? What’s the trend? Where’s support/resistance?
• Confirmation: Is volume supporting the move? Is the pattern part of a larger structure?
• Discipline: Are you following a tested setup or reacting emotionally?
Why Candlestick Patterns Work
• They reflect real price action—open, high, low, close
• They reveal who’s in control—bulls or bears
• They help traders spot reversals, continuations, and traps
• They’re universally recognized and work across timeframes and assets
Why They Fail (If Misused)
• Used without context (e.g., spotting a hammer in a sideways market)
• Ignoring volume, trend, or broader structure
• Blindly trading every pattern without confirmation or discipline
• Overloading with 100+ patterns instead of mastering the core 10–20
Candlestick charts offer a visually intuitive method for analyzing price movements in financial markets, surpassing traditional bar charts and line graphs in their ability to highlight critical market dynamics.
Their distinct structure—encoding open, high, low, and close prices into single "candles"—enables traders to rapidly assess trends, volatility, and sentiment shifts.
This clarity underscores why mastering candlestick patterns is essential for informed decision-making in technical analysis.
Candlestick charts get their name from their visual similarity to real candles—each one features a thick "body" representing the range between opening and closing prices, and thin "wicks" or "shadows" extending above and below to show the day's high and low. It’s like a candle standing upright, glowing with market sentiment at both ends.
Typically, a single candlestick captures one day’s price movement for a stock or security, though traders can adjust the timeframe to suit their strategy.
As these candles accumulate, they form recognizable patterns that help traders anticipate potential price shifts and make informed decisions.
At a glance, candlesticks offer a compact snapshot of market behavior—revealing not just price levels, but the emotional tug-of-war between buyers and sellers.
It’s a powerful lens into the psychology driving the stock market.
Here's a simplified breakdown of candlestick chart basics:
Candlestick Charts Decoded -
These visual tools display four essential pieces of information for any chosen timeframe (1 minute, 1 day, etc.):
Opening Price
The initial trade value when the period begins - your starting reference point.
The price at which the candle opens.
Closing Price
The final transaction value before the timeframe concludes, showing where prices settled.
The price at which the candle closes.
High Price
The peak value reached during this window - the session's maximum trading level.
The highest price during the candle's time frame.
Low Price
The trough value - the lowest point traders were willing to pay during this period.
The lowest price during the candle's time frame.
Body: The area between the open and close prices.
Wicks (Shadows): Lines above and below the body showing the high and low prices.
Visual Clue:
Bullish Candlestick: Closes higher than it opens (often green/white).
Bearish Candlestick: Closes lower than it opens (often red/black).
The candle's body (thick middle section) shows the open-close range, while wicks (thin lines) mark the high-low extremes.
Green/white candles indicate closing higher than opening (bullish), red/black shows the opposite (bearish).
Understanding OHLC: The DNA of Price Action
OHLC stands for Open, High, Low, and Close—the four essential price points that define a market’s movement within a specific time frame.
• Open: The price at which the asset begins trading for the period
• High: The highest price reached during that interval
• Low: The lowest price touched within the same period
• Close: The final price when the period ends
These four values form the backbone of candlestick charts and bar charts, offering traders a compact visual summary of price behavior, volatility, and emotional slope.
By analyzing OHLC data, traders can:
• Spot trend shifts and momentum surges
• Identify support and resistance zones
•Decode market psychology—who’s in control: bulls or bears
Candlestick Components: Anatomy of Market Emotion
Candlesticks are more than just chart visuals—they’re emotional slope tags that compress price action into three core components:
1. Upper Shadow (Wick)
• This thin line above the candlestick body represents the highest price reached during the selected time frame.
• A long upper shadow signals that buyers pushed prices significantly higher—but couldn’t hold the gains.
• A short upper shadow suggests price action stayed close to the closing level, with minimal upward volatility.
• Emotionally, it reflects buyer ambition vs. resistance.
2. Real Body
• The thick rectangular section between the open and close prices.
• If the body is green, it means the closing price was higher than the opening—bulls dominated.
• If the body is red, the closing price was lower than the opening—bears took control.
• The size of the body reflects conviction: a large body = strong momentum; a small body = indecision or balance.
• This is the battle zone—where bulls and bears fought for control.
3. Lower Shadow (Wick)
•The thin line below the candlestick body shows the lowest price reached during the time frame.
•A long lower shadow indicates sellers pushed prices down—but buyers recovered.
• A short lower shadow suggests price action stayed near the open or close, with strong support holding firm.
• Emotionally, it reflects seller aggression vs. buyer defense.
Candlestick Charts: Emotional Stories in Price Form
Candlestick charts aren’t just technical tools—they’re visual narratives of the market’s emotional tug-of-war. Each candle captures a moment in the ongoing battle between:
• Bulls vs Bears
• Buyers vs Sellers
• Fear vs Greed
Every wick, body, and shadow reflects tension, conviction, hesitation, or reversal. But here’s the doctrine: no candle speaks in isolation.
Context Is King
It’s tempting for beginners to spot a hammer, hanging man, or doji and jump to conclusions. But a single candlestick is like a sentence pulled from a novel—it may be dramatic, but without the surrounding plot, its meaning is incomplete.
To truly understand candlestick behavior, you must:
• Examine preceding price action (Was there a rally? A sell-off?)
• Watch what follows (Does the pattern confirm or fade?)
• Anchor it within support/resistance zones, volume spikes, and broader trend
Candlestick as Literature Doctrine
“Each candlestick is a line in the market’s story.
The full plot unfolds only when you read the candles in sequence—past, present, and potential future.”
Types of Candlestick Patterns: Single, Double, Triple -
Candlestick patterns are visual signals that compress market emotion into teachable setups.
They’re categorized by how many candles form the pattern—each type reveals a different layer of conviction, reversal, or continuation.
Single-Candle Patterns -
These are standalone candles that signal potential turning points or indecision.
They’re fast to spot and ideal for beginners learning emotional slope.
Examples -
Hammer
Hanging Man
Doji
Spinning Top
Double Candle patterns -
These involve two candles interactign often signaling
a shift in control or momentum
Examples -
1-Bullish Engulfing - green candle fully engulfs red candle - Bulls overpower bears.
2-Bearish Engulfing - Red Candle fully engulfs green candle
bears reclaim control
3-piercing line
4-dark cloud cover
Triple Candle Patterns -
1- Morning star
2-evening star
3- Three white soldiers
4-Three black crows
Candlestick Patterns: Comprehensive Classification
There are important 42-55 recognized candlestick patterns in technical analysis, though traders typically focus on 15-20 core formations.
What Comes Next: Elevating Each Pattern with Precision
This article laid the foundation for understanding candlestick components and emotional slope. But this is just the beginning.
In the coming articles, I will dive deep into each important candlestick pattern—single, double, and triple setups—and explain them with clarity, context, and conviction.
Each pattern will be decoded not just visually, but emotionally: what it signals, when it matters, and how it fits into the larger market narrative.
Whether you're a beginner seeking clarity or a seasoned trader refining discipline, these upcoming modules will compress confusion into actionable insight—one candlestick at a time.
Suggested Reading -
Disclaimer:
This content is for educational and informational purposes only.
It does not constitute financial, investment, or professional advice.
Readers should consult a SEBI-registered financial advisor before making investment decisions.
The author is not liable for any losses or decisions based on this information.
