Understanding Market Psychology through Candlestick Patterns: A Qualitative Analysis of Investor Behavior in Stock Trading

Indra Saputra; Evan Stiawan

doi:10.63922/ijebir.v5i06.7242

Indra Saputra Sharia Economics Study Program, State Islamic University Fatmawati Sukarno Bengkulu, Indonesia
Evan Stiawan Sharia Economics Study Program, State Islamic University Fatmawati Sukarno Bengkulu, Indonesia

DOI: https://doi.org/10.63922/ijebir.v5i06.7242

Keywords: Keywords: candlestick, market psychology, investor behavior, behavioral finance, technical analysis.

Abstract

Stock trading is influenced not only by companies’ fundamentals and market price movements, but also by investors’ perceptions, expectations, and psychological behavior. One technical-analysis tool commonly used to read price movements is the candlestick chart. Candlestick patterns are often interpreted as representations of the contest between buying and selling pressure and may help investors understand market sentiment. However, the same pattern does not always lead to the same decision because investors differ in experience, knowledge, risk tolerance, and emotional state. This study aims to understand how investors interpret candlestick patterns when reading market psychology, how emotions affect trading decisions, and which factors shape investors’ interpretations. The study is designed as descriptive qualitative research, using in-depth interviews, price-chart documentation, and observation of investors’ analytical processes. Data are analyzed through data condensation, data display, and conclusion drawing and verification. The analytical framework draws on Kahneman and Tversky’s Prospect Theory and behavioral-finance literature, while considering empirical studies of candlestick-strategy effectiveness. The study is expected to explain candlesticks as an aid to market interpretation and to explore the role of perception and emotion in decision-making. Empirical conclusions will be established on the basis of the field data collected.

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