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Intermediate · Lesson 7 of 9

Volume, candlesticks and chart patterns

8 minute read · By Krishna Avadhani, Vestora Academy · Updated 18 October 2026

Volume shows conviction. Breakouts on heavy volume are more trustworthy than those on light volume. On-balance volume (OBV) adds volume on up days and subtracts it on down days.

Japanese candlesticks show open, high, low and close. Common signals include the doji (open and close nearly equal: indecision), hammer (long lower shadow after a fall: buyers stepping in) and engulfing patterns (a candle whose body engulfs the previous one).

Classic chart patterns include head and shoulders, double tops and bottoms, triangles, flags and cup-and-handle. Studies such as Thomas Bulkowski's catalogue give mixed success rates, and many patterns fail. Use them with a predefined exit if wrong.

Key takeaways

  • Volume confirms or questions a move.
  • Candles show the battle within each day.
  • Patterns fail often; always have an exit plan.

Check your understanding

1. A breakout on very low volume is...

  • More reliable
  • Less reliable
  • Guaranteed
  • Irrelevant
Show the answer

Less reliable. Low participation means weaker conviction.

2. A doji candlestick signals...

  • Strong buying
  • Indecision
  • A dividend
  • A stock split
Show the answer

Indecision. Open and close are nearly equal.

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General education only, not financial advice. Examples are illustrations. Rules, tax settings and products change; check official sources.