Want to master candlestick charts? First, understand the market signals behind these candlestick patterns.

Trading fears most about not understanding the market are alleviated by candlestick charts, which act like a “truth mirror” reflecting market sentiment. Each candlestick tells a story; once you learn how to interpret it, you can anticipate the next market move in advance.

What Are Candlesticks Really Saying?

Candlesticks, also called “Lamps” or “Candle Lines,” condense four price points within a period (Open, Close, High, Low). Simply put, one candlestick is a record of price movement over a certain time frame.

Each candlestick consists of two parts: the real body (the rectangular part) and the shadow (the thin line).

The real body indicates the relationship between the opening and closing prices:

• If the close > open, the body is red (bullish), indicating buyers dominated during this period
• If the close < open, the body is green (bearish), indicating sellers controlled the scene

The thin line above the body is called the upper shadow, representing the highest price during the period; the line below is the lower shadow, representing the lowest price.

Note: Different trading platforms may have different color schemes. In US stocks, green often indicates gains and red indicates declines—be sure to clarify this.

Daily, Weekly, Monthly K—Timeframes Shape the Story You See

Candlesticks can be applied across different timeframes:

Daily K: Reflects price fluctuations within a single day or a few days, suitable for short-term traders to quickly judge market direction. You can see the battle between bulls and bears each day, draw support and resistance lines, and identify short-term trend changes.

Weekly and Monthly K: Suitable for medium- and long-term investors. Weekly candlesticks show weekly ups and downs, while monthly candlesticks condense the entire month’s battle between bulls and bears. In this timeframe, you can incorporate fundamental news into your analysis for more confident decisions.

The same stock can look entirely different across various timeframes. That’s why some say, “Use daily K for short-term trading, use monthly K for long-term investing”—the timeframe determines the market story you perceive.

The True Meaning Behind Candlestick Patterns

Don’t just memorize candlestick patterns! Understanding the logic behind each candlestick is far more important than just knowing their names.

Long bullish candlestick: Indicates strong buying power, with prices rising steadily from open to close, facing little resistance. The trend may continue upward in the next period.

Long bearish candlestick: Conversely, shows sellers in control, with prices dropping sharply, leaving room for further decline.

Candlestick with long lower shadow: Price found support at low levels and rebounded, often signaling a bottom, but always consider the overall trend before entering.

Candlestick with long upper shadow: Price surged high but was pushed back down, indicating resistance at higher levels. Be cautious of a pullback.

Doji: When upper and lower shadows are about the same length, it shows indecision between buyers and sellers, and the market may be about to choose a direction.

Four Practical Tips for Using Candlesticks

Tip 1: Judge who is in control by the closing position

Even with the same upward movement, the closing position matters:

• Close near the high, buyers are strong, and the probability of further rise is high
• Close near the middle or low, sellers are fighting back, be cautious

Tip 2: Compare body lengths to assess buying and selling strength

Don’t just look at one candlestick; compare its body length to previous ones. If the current candlestick’s body is more than twice as large as the previous, it indicates a sudden surge in buying or selling—key for trend reversal signals.

Tip 3: Capture swing lows and highs to identify the true trend

The simplest and most effective way is to observe the direction of swing points:

• Higher lows and higher highs → Uptrend, consider continuing to buy
• Lower lows and lower highs → Downtrend, watch for risks
• Lows and highs at the same level → Sideways consolidation, wait for a breakout

Tip 4: Spot false breakouts to avoid getting trapped

This is the easiest way to get caught. When prices break resistance and you see a big bullish candlestick, you rush in, only for the price to fall back shortly after.

Countermeasure: Wait for the price to retrace and see if the breakout fails. If it does, consider the opposite trade (e.g., failed breakout above resistance, then short).

Three Core Insights to Help You Avoid Detours

1. Gradually Rising Swing Lows = Buyers Slowly Pushing Up Price

Many see prices approaching resistance and rush to short, but if each swing low is higher, it indicates strengthening support at the bottom, and buyers still have energy. This often forms an ascending triangle with room to rise further.

2. Sudden Volume Deterioration = Possible Trend Reversal

When momentum drops sharply and buyers can’t push prices higher, fewer buyers are attracted, creating a “liquidity gap.” The market is prone to reversal as everyone waits and watches.

3. Smaller Bodies + Increased Retracements = Seller Power Diminishing

When trend candlesticks’ bodies shrink and retracement candles’ bodies grow larger, it signals weakening trend strength and the emergence of new forces fighting back. This is a sign of correction or reversal.

Final Words

Candlestick charts are not fortune-telling tools but a reflection of market participants’ wisdom and emotions. Each candlestick records the battle between bulls and bears. By habitually viewing the market from these four perspectives—closing position, body size, trend swings, and strength shifts—you can read the market like a professional trader.

There are no shortcuts—just more observation, practice, and reflection. Over time, candlesticks will transform from symbols into your instinctive reactions.