Using Put Call Ratio Alongside Candlestick Patterns for Smarter Trades

What Is the Put-Call Ratio?

The put-call ratio is a simple but powerful indicator that shows how many put options and call options are being traded in the market.

• A put is a bet that prices will go down.

• A call is a bet that prices will go up.

The formula is:

👉 Put Call Ratio (PCR) = Total Puts / Total Calls

By studying this number, traders understand whether the market is bullish or bearish.

• If PCR is above 1, more puts are being traded → market may be bearish.

• If PCR is below 1, more calls are being traded → market may be bullish.

What Are Candlestick Patterns?

Candlestick patterns are visual signals on price charts that show the battle between buyers and sellers. They help traders spot reversals, breakouts, or continuations of trends.

Some common examples include:

• Doji: Market is undecided, possible reversal ahead.

• Hammer: Price may bounce upward after a fall.

• Shooting Star: Warning of a possible price drop.

• Engulfing Patterns: Indicate strong buying or selling momentum.

These patterns show what is happening in price, while the put-call ratio shows why it might be happening — making them a powerful combination.

Why Combine Put-Call Ratio and Candlestick Patterns?

When you use Candlestick patterns alone, you may see false signals during volatile times. Adding the put-call ratio gives context — it shows what traders in the options market expect to happen next.

Here’s what happens when you combine both:

1. Stronger confirmation of bullish or bearish trends.

2. Reduced false breakouts during uncertain market phases.

3. Better timing for buying or selling decisions.

The put-call ratio tells you the crowd’s emotion, while Candlestick patterns reveal the price action behind it.

How to Use the Put Call Ratio with Candlestick Patterns

Let’s understand step-by-step how you can use this combination for better results.

1. Check the PCR Value

Start by looking at the current put-call ratio:

• If PCR is above 1, the market is showing fear or bearishness.

• If PCR is below 1, the market is showing optimism or bullishness.

2. Find Matching Candlestick Signals

Now open your chart and look for Candlestick patterns that confirm what PCR is saying.

• If PCR > 1 and you spot a bullish hammer or bullish engulfing, it could signal a reversal upward — traders were too bearish.

• If PCR < 1 and you see a bearish engulfing or shooting star, it could mean the market is overbought and due for a correction.

3. Wait for Confirmation

Never trade instantly. Wait for the next candle to confirm direction.
If the price breaks above resistance or below support, your setup becomes stronger.

4. Manage Risk

Always use a stop loss below the pattern’s low (for buys) or above its high (for sells). Combine this with your PCR-based sentiment to plan your trade targets safely.

Example: PCR and Candlestick Working Together

Let’s say the Nifty PCR rises to 1.5, showing heavy put buying — a sign of bearish sentiment.
At the same time, you see a bullish engulfing Candlestick on the chart. This tells you that despite the fear, buyers are stepping in. This combination can indicate a potential market bounce.

Now, imagine PCR drops to 0.7, showing optimism, and a shooting star candle forms. This can signal profit booking or a trend reversal — a good time to stay cautious.

By combining both tools, traders get a clearer picture of what’s happening and why it’s happening.

Tips for Better Results

• Use the put-call ratio on major indices (like Nifty or Bank Nifty) for reliable sentiment signals.

• Combine with Candlestick patterns on the same timeframe — daily or hourly.

• Don’t depend only on PCR — confirm with volume and support/resistance zones.

• Keep a trading journal to learn how this combination works best for your style.

Using the put-call ratio alongside Candlestick patterns is like seeing the market from two different angles — sentiment and price. Together, they help traders make more confident and accurate decisions.

The put-call ratio shows how investors feel, and Candlestick patterns show how prices react. When both line up, the signal is powerful. Whether you trade indices, stocks, or derivatives, this combo can help you catch the next big move with better timing and confidence.