Understanding Candlestick Patterns for Smarter Trading
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October 16, 2025
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Introduction
Candlestick patterns are very powerful components of technical analysis, yet they are often underutilized. They explain the reasons for price movement and can be used to predict future market action. Whether beginner or professional these 5 things are essential to know if you want to trade with price action using candlestick patterns.
At NXT Institutions, one of the leading trading institute in Malappuram, traders are taught how to analyse these patterns proficiently and take informed judgements.
What Are Candlestick Patterns?
A candlestick pattern is a visual representation of a price movement in a certain period. Each “candlestick” typically shows four key pieces of information open, close, high and low for traders trying to make sense of a potential reversal or continuation in the market.
They came from the Japanese rice trade in the 1700s and today are used heavily across forex, stocks and crypto markets.
Why Is Candlestick Pattern Important in Trading?
Candlestick charts can inform us what the market sentiment at a particular time is, as well as market dynamics and potential shifts in momentum. Traders use these patterns to:
- Identify market reversals or continuations
- Confirm entry and exit points
- Get inside the mind of traders and see strength of markets
At NXT Institutions, which is the best forex trading institute in Malappuram students are taught to use candlestick analysis together along with technical indicators for accurate trade decisions.
Popular Candlestick Patterns Every Trader Should Know
a) Doji
A Doji occurs when the opening and closing prices are virtually the same, this indicates balance or market indecision. It is often a signal that the trend is about to reverse.
b) Hammer
The Hammer comes after a bearish trend and implies that buyers are stepping in to retake control, possibly reversing the period of falling prices.
c) Shooting Star
A Shooting Star develops following an uptrend and signals that the sellers are beginning to outnumber the buyers although a bearish reversal is not promised.
d) Engulfing Patterns
Bullish and Bearish Engulfing These patterns provide a strong reversal signal if the second candle “engulfs” the previous one.
e) Morning Star & Evening Star
These 3-candle formations are strong signs that price will reverse up / down.
How to Use Candlestick Patterns in Forex Trading
The candlestick patterns are even more effective when used in combinations like these:
Support and resistance levels
- Trend lines
- Volume analysis
- Moving averages
At NXT Institutions, our trading mentors work with students to understand those signals in a complete system of trading for accuracy and profitability.
Avoiding Common Mistakes
The truth is that many traders are relying on just the candlestick patterns and not considering the general broader perspective of trend if any or market conditions. Avoid this by:
- Confirming with any indicator (MACD, RSI, CCI)
- Demo trading before live trading
- Following a structured trading plan
Conclusion
Learning candlestick patterns is crucial if you want to become a confident and profitable trader. These patterns uncover the market psychology and present us with important clues to making good trades.
If you are passionate about learning and updating your trading skills then join NXT Institutions, the best trading institute in Malappuram as well as forex training in Malappuram. What you will Learn How to do like a professional and trade smarter for consistent results.
