3 Candle Rule: What It Is and How Traders Use It in India

When traders look at price charts, they’re not just seeing lines—they’re reading stories told by 3 candle rule, a pattern-based trading signal that uses three consecutive candlesticks to predict market direction changes. Also known as three-candle pattern, it’s one of the most straightforward tools in candlestick trading, a method of analyzing price movements using visual candle-shaped bars that show open, high, low, and close prices. Unlike complex indicators, this rule doesn’t need formulas or plugins. You just need to see how three candles line up—and what they say about buyer and seller pressure.

The 3 candle rule isn’t magic. It’s observation. For example, if you see two strong green candles pushing prices up, then a small red candle that doesn’t close higher, that’s a warning. It means buyers are losing steam. The opposite happens with two red candles followed by a green one—sellers are tired, and buyers might be stepping in. These patterns show up on 5-minute charts for day traders and daily charts for investors. In India, where markets like Nifty and Bank Nifty move fast, this rule helps traders decide when to enter or exit without waiting for news or rumors. It’s not foolproof, but when used with volume and support levels, it cuts through noise. Many Indian traders combine it with technical analysis, the practice of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume to confirm signals. You won’t find this in textbooks from 20 years ago, but you’ll see it in every trading room in Mumbai, Delhi, or Bangalore today.

What you’ll find in the posts below are real examples of how the 3 candle rule plays out in Indian markets—along with related patterns like the black candle, how it compares to other candlestick signals, and why some traders swear by it while others ignore it. You’ll also see how these patterns connect to broader market behavior, what mistakes beginners make when reading them, and how to avoid false signals. No theory without practice. No jargon without clarity. Just what works—and what doesn’t—on the trading floor and on your screen.