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INDEX
Sl.
Details Page No.
No.

1 Disclaimer 2

2 Author Note 2

3 Definition Of Candlesticks 3

4 Hammer Pattern (With Setup) 4–5

5 Shooting Star (With Setup) 6–7

6 Morning Star (With Setup) 8–9

7 Evening Star Pattern (With Setup) 10 – 11

8 Piercing pattern (With Setup) 12 – 13

9 Dark cloud cover (With Setup) 14 – 15

10 Bullish Engulfing (With Setup) 16 – 17

11 Bearish Engulfing (With Setup) 18 – 19

12 Bullish Harami (With Setup) 20 – 21

13 Bearish Harami (With Setup) 22 – 23

14 Money Management 24

15 Psychology 25

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➢ Disclaimer:
We are not SEBI registered. The information presented in this book is for
educational purposes only and is not intended as investment advice. Trading in the
stock market involves a high degree of risk and may not be suitable for all investors.
The author and publisher of this book are not responsible for any losses incurred
as a result of the information provided in this book.
The information presented in this book is based on historical data and past
performance is not indicative of future results. The author does not guarantee the
accuracy, completeness, or reliability of the information provided in this book.
Readers are advised to conduct their own research and analysis before making any
investment decisions. The author and publisher of this book do not endorse or
recommend any particular investment, product, or service. The information
provided in this book is intended to be a starting point for readers to explore
candlestick patterns and make informed decisions based on their own research and
analysis.

➢ Author Note:
We are delighted to present this book on Candlestick Patterns of the stock market.
As a seasoned trader and market analyst, we have spent years studying the
intricacies of the stock market, and we are thrilled to share our knowledge and
experience with readers who are interested in exploring the world of candlestick
patterns.
This book is designed to be a comprehensive guide to understanding and using
candlestick patterns as a tool for trading in the stock market. The information
presented in this book is based on our own research and analysis, as well as insights
gained from years of practical experience in the field.
However, it is important to note that the stock market is a complex and ever-
changing landscape, and the information provided in this book should not be taken
as a guarantee of success. Trading in the stock market carries inherent risks, and
readers are advised to conduct their own research and analysis before making any
investment decisions.
I hope that this book will serve as a valuable resource for readers who are interested
in learning more about candlestick patterns and how to use them effectively in their
trading strategies. Thank you for choosing to explore this exciting and dynamic field
with us.

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➢ Definition Of Candlesticks:
Candlestick charts are a type of financial chart used to represent price movements
of an asset, such as a stock or commodity. They were first used in Japan during the
18th century to analyse the price of rice contracts, but have since become widely
used throughout the world to analyse financial markets.
The charts are composed of individual candlesticks, which each represent a specific
time period of trading, such as a day, week, or month. Each candlestick displays
four pieces of information: the opening price, the closing price, the highest price,
and the lowest price for the given time period. The body of the candlestick represents
the difference between the opening and closing prices, while the wicks, or shadows,
represent the highest and lowest prices reached during the time period.
Candlestick charts are a popular tool used by traders and investors to analyse
market trends, identify potential trading opportunities, and make informed
decisions about buying and selling assets. The use of candlestick charts is based
on the belief that price movements are influenced by human psychology and
emotions, and that patterns in these movements can be used to predict future price
movements. Different candle stick patterns are discussed in the following chapters
–

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➢ Hammer Pattern (With Setup):
❖ Description:
1. A hammer candle forms after
Downtrend.
2. It is a Trend reversal Pattern.
3. Lower shadow at least 2 times of body.
4. Body of the hammer candle either
green or red.

❖ Psychology:
The psychology behind the hammer candle is that it represents a battle
between bulls and bears in the market. The long lower wick or shadow of the
hammer candle shows that the price fell to a low level during the period, but
the buyers stepped in to support the security and push the price back up,
creating the small body at the top. This indicates that the bulls have gained
strength and are starting to take control of the market.
Traders interpret the hammer candle as a bullish signal, which means that
they believe the buyers will continue to push the price up, leading to a
potential trend reversal. The bullish sentiment often attracts more buyers to
the market, leading to a further increase in demand and prices. However, it's
important to confirm the hammer candle signal with other technical
indicators and market conditions before making any trading decisions.

❖ Setup – Hammer:
1. Hammer is trend reversal pattern it converts from down to up trend.
2. There should be 21 candles before hammer but these 21 candles will be
coming from up to down.
3. Hammer low should be unbreakable in 21 candles.

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4. The hammer pattern consists of a small body located at the top of the
candle with a long lower shadow that makes up 70% to 80% of the
candle's total range.
5. Hammer can be bullish or either bearish.
6. The next candle from the hammer should be bullish.
7. The bullish candle should not be larger than the hammer candle. This Is
the Confirmation Candle.
8. Once the high of the confirmation candle is broken, you can take the
trade.
9. We have to take the stop loss of, low of the hammer with added some
buffer point varying stocks to stocks.
10. We have to take the target of 1:2.

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➢ Shooting Star (With Setup):
❖ Description:
1. A Shooting star candle forms after
uptrend.
2. It is a Trend reversal Pattern.
3. Upper shadow at least 2 times of body.
4. Body of the Shooting Star Candle either
green or red.

❖ Psychology:
The shooting star candlestick pattern represents a shift in market sentiment.
The strong buying pressure at the beginning of the day causes the stock price
to rise significantly, indicating a bullish sentiment. However, as the day
progresses, the selling pressure increases, and the price falls back to its
opening level or below, indicating a shift to bearish sentiment.
The shooting star pattern is often interpreted as a warning sign that the
bullish trend may be ending and a bearish trend may be starting.
However, it's important to confirm the shooting Star candle signal with other
technical indicators and market conditions before making any trading
decisions.

❖ Setup – Shooting Star:

1. Shooting Star is trend reversal pattern it converts from Up to Downtrend.
2. There should be 21 candles before shooting Star but these 21 candles will
be coming from Down To up.
3. Shooting Star High should be unbreakable in 21 candles.
4. The Shooting Star consists of a small body located at the Bottom of the
candle with a long higher shadow that makes up 70% to 80% of the
candle's total range.

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5. Shooting Star can be bullish or either bearish.
6. The next candle from the shooting Star should be bearish.
7. The Bearish candle should not be larger than the Shooting Star candle.
This Is the Confirmation Candle.
8. Once the Low of the confirmation candle is broken, you can take the trade
Short /sell side.
9. We have to take the stop loss of, High of the hammer with added some
buffer point varying stocks to stocks.
10. We have to take the target of 1:1 or 1:2 according to risk apatite.

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➢ Morning Star (With Setup):
❖ Description:
1. Bullish Trend Reversal.
2. It is a Three Candle Pattern.
3. First candle is red and second candle is
doji or spinning top, third candle is
bullish.

❖ Psychology:
The morning star candlestick pattern is a bullish reversal pattern that
typically occurs after a downtrend. It consists of three candles: a long bearish
candle, followed by a small-bodied candle that gaps down, and then a long
bullish candle.
From a psychological perspective, the morning star pattern represents a shift
in sentiment from bearishness to bullishness. The long bearish candle
represents a period of selling pressure and pessimism, while the small-bodied
candle represents indecision and uncertainty. Finally, the long bullish candle
represents a period of buying pressure and optimism, as buyers have taken
control of the market.
However, it is important to note that no trading pattern is 100% reliable, and
traders should always use additional technical and fundamental analysis to
confirm their trading decisions.

❖ Setup – Morning Star:

1. Morning Star is trend reversal pattern it converts from down to Uptrend.
2. There should be 21 candles before Morning Star but these 21 candles will
be coming from Up to Down.
3. Morning Star Low should be unbreakable in 21 candles.
4. The next candle from the Morning Star should be bullish. This is the
Confirmation Candle.

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5. Once the High of the confirmation candle is broken, you can take the
trade Buy Side.
6. we have to take the stop loss of, Low of the Morning Star with added some
buffer point varying stocks to stocks.

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➢ Evening Star Pattern (With Setup):
❖ Description:
1. Bearish Trend Reversal.
2. It is a Three Candle Pattern.
3. First candle is red and second candle is
doji or spinning top, third candle is
bullish.

❖ Psychology:
The evening star candlestick pattern is a bearish reversal pattern that
typically occurs after an uptrend. It consists of three candles: a long bullish
candle, followed by a small-bodied candle that gaps up, and then a long
bearish candle.
From a psychological perspective, the evening star pattern represents a shift
in sentiment from bullishness to bearishness. The long bullish candle
represents a period of buying pressure and optimism, while the small-bodied
candle represents indecision and uncertainty. Finally, the long bearish
candle represents a period of selling pressure and pessimism, as sellers have
taken control of the market.
However, it is important to note that no trading pattern is 100% reliable, and
traders should always use additional technical and fundamental analysis to
confirm their trading decisions.

❖ Setup – Evening Star:

1. Evening Star is trend reversal pattern it converts from Up to Downtrend.
2. There should be 21 candles before Evening Star but these 21 candles will
be coming from Down To up.
3. Evening Star High should be unbreakable in 21 candles.
4. The next candle from the Evening Star should be bearish. This is the
Confirmation Candle.

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5. Once the Low of the confirmation candle is broken, you can take the trade
Sell Side.
6. We have to take the stop loss high of the Evening Star with added some
buffer point varying stocks to stocks.
7. We have to take the target of 1:1 or 1:2 or 1:3 according to risk apatite.

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➢ Piercing pattern (With Setup):
❖ Description:
1. Trend Reversal Pattern.
2. It is a Two Candle Pattern.
3. First candle is red and second candle is
bullish.

❖ Psychology:
The piercing pattern indicates a shift in market sentiment, from bearish to
bullish. This can trigger a psychological response among traders, as they try
to interpret the meaning of the pattern and its potential implications for the
market.
Bullish traders may see the piercing pattern as a signal that the market is
bottoming out and that it may be a good time to enter the market. This can
create a sense of optimism and confidence among traders, which can lead to
more buying activity and a further increase in the price.
However, it's important to note that not all traders may interpret the piercing
pattern in the same way. Some traders may be more cautious and may want
to wait for further confirmation before entering the market. This can create a
sense of uncertainty and volatility, as traders try to make sense of the shifting
market sentiment.
Therefore, it's important for traders to use good risk management strategies
and to stay disciplined in executing trades, especially when dealing with
volatile market conditions.

❖ Setup – Piercing Pattern:

1. Piercing pattern is trend reversal pattern it converts from downtrend to
up trend.
2. There should be 21 candles before Piercing pattern but these 21 candles
will be coming from up to down.

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3. First candle should be bearish second candle should be bullish. bullish
candle low is lower than first bearish candle.
4. Bullish candle body will cover bearish candle body 50% to 65% shadow.
5. The next candle from the piercing pattern should be bullish either it is
doji or spinning bottom candle. Candle size doesn’t matter but candle
should be bullish.
6. The third bullish candle should not be larger than the second bullish
candle.
7. After the high break of the third confirmation candle, one can buy
immediately. (Either it breaks on 4th, 5th, 6th…etc on any candle) we have
to buy it when it crosses the third candle.
Stop Loss : Low of the Bullish Candle
Target : Minimum 1:2

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➢ Dark Cloud Cover (With Setup):
❖ Description:
1. Trend Reversal Pattern.
2. It is a Two Candle Pattern.
3. First candle is bullish and second
candle is bearish.

❖ Psychology:
The dark cloud cover candlestick pattern is a bearish reversal pattern that
suggests a shift in market sentiment from bullish to bearish. The first candle
in the pattern represents strong buying pressure, creating a sense of
optimism among bullish traders. However, the second candle, a long bearish
candle, represents strong selling pressure, causing uncertainty and fear
among traders. This can trigger a psychological response as traders interpret
the pattern's meaning and its potential implications for the market.
Bearish traders may see the pattern as a signal to enter the market and sell
their positions, while bullish traders may become cautious and consider
taking profits or exiting their positions. Psychological factors such as fear of
missing out (FOMO) or greed can also influence traders' decisions. Therefore,
it's important for traders to stay disciplined, use sound risk management
strategies, and have a well-thought-out trading plan when trading the dark
cloud cover pattern or any other trading pattern. This can help traders
capitalize on opportunities while minimizing risks.

❖ Setup – Dark Cloud Cover:

1. Dark cloud cover is trend reversal pattern it converts from up to down
trend.
2. There should be 21 candles before Dark cloud cover but these 21 candles
will be coming from down to up.
3. First candle should be bullish second candle should be bearish. Bearish
Candle high is higher than first bullish candle.

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4. Bearish candle body will cover bullish candle body 50% to 65% shadow
down going will not matter.
5. The next candle from the dark cloud cover should be bearish either it is
doji or spinning doji candle. Candle size doesn’t matter but candle should
be bearish.
6. The third bearish candle should not be larger than the second bearish
candle.
7. After the low break of the third confirmation candle, one can sell
immediately. (Either it breaks on 4th, 5th, 6th…etc on any candle) we have
to sell it when it crosses the third candle.
8. We have to take the stop loss of, high of the second bearish candle
because second candle high is unbreakable.
9. We have to take the minimum 1:2.

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➢ Bullish Engulfing (With Setup):
❖ Description:
1. It is a Trend Reversal Pattern.
2. It is a Two Candle Pattern.
3. First candle is red and second candle is
bullish. Opening price of second candle
will be lower than the closing price of
first candle and closing price of second
candle will be higher than the opening
price of first candle.

❖ Psychology:
The bullish engulfing candlestick pattern is a bullish reversal pattern that
suggests a shift in market sentiment from bearish to bullish. The first candle
in the pattern represents strong selling pressure, creating a sense of fear and
pessimism among traders. However, the second candle, a long bullish candle,
represents strong buying pressure, causing optimism and confidence among
traders. This can trigger a psychological response as traders interpret the
pattern's meaning and its potential implications for the market.
Bullish traders may see the pattern as a signal to enter the market and buy
positions, while bearish traders may become more cautious and consider
taking profits or exiting their positions. Psychological factors such as fear of
missing out (FOMO) or greed can also influence traders' decisions. Therefore,
it's important for traders to stay disciplined, use sound risk management
strategies, and have a well-thought-out trading plan when trading the bullish
engulfing pattern or any other trading pattern. This can help traders
capitalize on opportunities while minimizing risks.

❖ Setup – Bullish Engulfing:

1. Bullish engulfing is trend reversal pattern it converts from down to up
trend.

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2. There should be 21 candles before bullish engulfing but these 21 candles
will be coming from up to down.
3. First candle should be bearish second candle should be bullish. bullish
candle low is lower than first bearish candle.
4. Bullish candle body will cover bearish candle body 100% and more than
100% shadow upgoing will not matter.
5. The next candle from the bullish engulfing should be bullish either it is
doji or spinning bottom candle. Candle size doesn’t matter but candle
should be bullish.
6. The third bullish candle should not be larger than the second bullish
candle.
7. After the high break of the third confirmation candle, one can buy
immediately. (Either it breaks on 4th, 5th, 6th …etc on any candle) we have
to buy it when it crosses the third candle.
8. We have to take the stop loss of, low of the second bullish candle because
second candle low is unbreakable.
9. We have to take the target of 1:2

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➢ Bearish Engulfing (With Setup):
❖ Description:
1. It is a Trend Reversal Pattern.
2. It is a Two Candle Pattern.
3. First candle is green and second candle
is red. Opening price of second candle
will be higher than the closing price of
first candle and closing price of second
candle will be lower than the opening
price of first candle.

❖ Psychology:
The bearish engulfing candlestick pattern is a bearish reversal pattern that
occurs after an uptrend. The pattern is formed when a long bullish candle is
followed by a long bearish candle that completely engulfs the body of the
previous candle. This pattern can create a shift in market sentiment from
bullish to bearish.
The psychology behind the bearish engulfing pattern is that it can trigger a
sense of unease among traders, as they may interpret the pattern as a signal
that the bulls may be losing control and that a bearish reversal may be
imminent. This can lead to a selling pressure, especially from those traders
who have bought into the market during the uptrend.
Furthermore, the bearish engulfing pattern can create a psychological
response among traders, as they try to interpret the meaning of the pattern
and its potential implications for the market. Some traders may become more
cautious and consider taking profits or exiting their positions, while others
may see the pattern as a signal to enter the market and sell positions.
Overall, it's important for traders to stay disciplined, manage their emotions,
and use sound risk management strategies when trading the bearish
engulfing pattern or any other trading pattern.

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❖ Setup – Bearish Engulfing:
1. Bearish Engulfing is trend reversal pattern it converts from up to down
trend.
2. There should be 21 candles before Bearish Engulfing but these 21 candles
will be coming from down to up.
3. First candle should be bullish second candle should be bearish. Bearish
candle high is higher than first bullish candle.
4. Bearish candle body will cover bullish candle body 100% or more than
100% shadow down going will not matter.
5. The next candle from the Bearish Engulfing should be bearish either it is
doji or spinning doji candle. Candle size doesn’t matter but candle should
be bearish.
6. The third bearish candle should not be larger than the second bearish
candle.
7. After the low break of the third confirmation candle, one can sell
immediately. (Either it breaks on 4th, 5th, 6th …etc on any candle) we have
to sell it when it crosses the third candle.
8. We have to take the stop loss of, high of the second bearish candle
because second candle high is unbreakable.
9. We have to take the target of 1:2

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➢ Bullish Harami (With Setup):
❖ Description:
1. Bullish Trend Reversal.
2. It is a Two Candle Pattern.
3. The first candle being a long bearish
candle and the second candle being a
small bullish candle that is completely
engulfed by the body of the previous
candle.

❖ Psychology:
The psychology behind the bullish harami pattern is that it can create a shift
in market sentiment, from bearish to bullish. The first candle in the pattern
represents strong selling pressure, which can create a sense of fear and
pessimism among traders. However, the small bullish candle in the pattern
represents a weak buying pressure, which can create a sense of optimism
and confidence among traders.
The bullish candle in the bullish harami pattern suggests that the bulls may
be taking control of the market, and that the bearish momentum may be
waning. This can create a sense of excitement among traders, as they may
feel that the price may continue to rise, and that they may profit from the
bullish trend reversal.
Overall, the bullish harami pattern can trigger a psychological response
among traders, as they try to interpret the meaning of the pattern and its
potential implications for the market. It's important for traders to stay
informed, manage their emotions, and use a well-thought-out trading plan
when trading the bullish harami pattern or any other trading pattern.

❖ Setup – Bullish Harami:

1. Bullish harami is trend reversal pattern it converts from down to up trend.

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2. There should be 21 candles before Bullish Harami but these 21 candles
will be coming from up to down.
3. First candle should be bearish second candle should be bullish. Bullish
candle would be small and bullish candle body will not cover more than
50% then previous bearish candle shadow upgoing will not matter.
4. First bearish candle low is unbreakable in 21 candles.
5. The next candle from the bullish harami should be bullish either it is doji
or spinning bottom candle. Candle size doesn’t matter but candle should
be bullish.
6. The third bullish candle should not be larger than the first bearish candle.
7. After the high break of the third confirmation candle, one can buy
immediately. (Either it breaks on 4th, 5th, 6th …etc on any candle) we have
to buy it when it crosses the third candle.
8. We have to take the stop loss of, low of the First bearish candle because
first candle low is unbreakable.
9. We have to take the target of 1:2

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➢ Bearish Harami (With Setup):
❖ Description:
1. Bearish Trend Reversal.
2. It is a Two Candle Pattern.
3. First candle being a long bullish candle
and the second candle being a small
bearish candle that is completely
engulfed by the body of the previous
candle.

❖ Psychology:
The psychology behind the bearish harami pattern is that it can create a shift
in market sentiment, from bullish to bearish. The first candle in the pattern
represents strong buying pressure, which can create a sense of optimism and
confidence among traders. However, the small bearish candle in the pattern
represents a weak selling pressure, which can create a sense of fear and
pessimism among traders.
The bearish candle in the bearish harami pattern suggests that the bears
may be taking control of the market, and that the bullish momentum may be
waning. This can create a sense of caution among traders, as they may feel
that the price may continue to drop, and that they may suffer losses from the
bearish trend reversal.
Overall, the bearish harami pattern can trigger a psychological response
among traders, as they try to interpret the meaning of the pattern and its
potential implications for the market. It's important for traders to stay
informed, manage their emotions, and use a well-thought-out trading plan
when trading the bearish harami pattern or any other trading pattern. This
can help traders capitalize on opportunities while minimizing risks.

❖ Setup – Bearish Harami:

1. Bearish Harami is trend reversal pattern it converts from up trend to
down.

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 2. There should be 21 candles before bearish harami but these 21 candles
will be coming from down to up.
3. First candle should be bullish second candle should be bearish. second
bearish candle would be small and bearish candle body will not cover
more than 50% then previous bullish candle shadow down going will not
matter.
4. First bullish candle high is unbreakable in 20 candles.
5. The next candle from the bullish harami should be bearish either it is doji
or spinning bottom candle. Candle size doesn’t matter but candle should
be bearish.
6. The third bearish candle should not be larger than the first bullish candle.
7. After the low break of the third confirmation candle, one can sell
immediately. (Either it breaks on 4th, 5th, 6th …etc on any candle) we have
to sell it when it crosses the third candle.
8. We have to take the stop loss of, high of the First bullish candle because
first candle high is unbreakable.
9. We have to take the target of 1:2

Precautions: There is no strategy that can guarantee overnight riches, and it's crucial to
trade with discipline and proper money management. Before jumping into any strategy, it's
essential to thoroughly back test it and paper trade it at least 50 times. Once you feel
comfortable with the results, you can start forward testing it with just one lot for at least 20
trades. If you continue to see a profit after 20 trades, you can gradually increase your
position size. However, it's important to be cautious and not jump into a direct 10 lots.
Remember, patience and consistency are key to successful trading, and it's essential to
manage risk appropriately to protect your capital.

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➢ Money Management:
Money management is a crucial aspect of trading, and it's especially important when
using candlestick patterns. Candlestick patterns can provide useful insights into
market trends and potential price movements, but they don't guarantee success or
eliminate the risk of losses. To effectively manage money when trading using
candlestick patterns, traders should consider the following strategies:
1. Use stop-loss orders: Stop-loss orders can help traders minimize losses by
automatically closing positions when the price reaches a predetermined level.
2. Determine position size: Traders should determine how much capital they are
willing to risk on each trade and adjust their position sizes accordingly. This can
help limit losses and manage risk.
3. Use proper risk-reward ratios: Traders should aim to have a risk-reward ratio of
at least 1:2, meaning that the potential reward is at least twice the potential risk.
4. Monitor market volatility: Traders should be aware of market volatility and
adjust their position sizes accordingly. High volatility can increase the risk of
losses, while low volatility can limit potential gains.
5. Stick to a trading plan: Traders should have a well-defined trading plan and stick
to it. This can help eliminate emotional decision-making and ensure that trades
are based on sound analysis.
By implementing these money management strategies, traders can effectively
manage risk and maximize their chances of success when trading using candlestick
patterns.

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➢ Psychology:
Trading in financial markets can be a challenging and emotionally demanding
endeavour. Successful trading requires not only a sound knowledge of trading
strategies and risk management techniques but also an understanding of the
psychological factors that can impact trading performance.
Making money on the stock market using candlestick patterns requires a good
understanding of the psychology of the market and the behaviour of other traders.
Candlestick patterns can be used as a tool to analyse market sentiment and identify
potential trends, but success also depends on the trader's ability to manage their
emotions and make rational decisions. Here are some key psychological factors that
can influence a trader's ability to make money using candlestick patterns:
1. Greed: Greed can lead traders to take excessive risks, chase high returns, and
ignore warning signs. It's important to manage greed by setting realistic goals
and avoiding impulsive decisions.
2. Fear: Fear can lead traders to miss out on potential opportunities, close positions
too early, or hesitate to enter the market. It's important to manage fear by staying
informed, having a trading plan, and using stop-loss orders.
3. Overconfidence: Overconfidence can lead traders to take unnecessary risks and
make poor decisions. It's important to remain humble, acknowledge mistakes,
and learn from them.
4. Confirmation bias: Confirmation bias can lead traders to interpret information
in a way that supports their preconceived ideas and ignore conflicting
information. It's important to stay objective and consider all available
information when making trading decisions.
5. Patience: Patience is key to successful trading using candlestick patterns.
Traders need to wait for patterns to fully develop and avoid entering trades too
early or too late.
By understanding these psychological factors and how they can affect trading
decisions, traders can use candlestick patterns as a tool to make informed and
rational decisions, manage risk, and increase their chances of making money on the
stock market.

*****

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