Traders use candlestick charts to identify and predict long-term market trends. At first glance, they may seem complicated, but in reality they are not. In the material, we tell you what charts are, what Japanese candlesticks are and how to read them.
Types of graphs
There are two types of graphs. Linear is a sequence of price values that are taken over a certain period of time. They are separated by time intervals, for example 1 hour or 1 day.
The chart consists of points of closing prices at the end of the selected time interval. They are connected by a line, so the graph is called linear. It shows minimal information.
Closing price - the price of the last deal at the time of the close of trading in a certain period of time.
A candlestick chart is a type of stock chart that reflects the movements of the open and close prices, highs and lows over a certain period of time. It is also called a Japanese candlestick chart.
Opening price - the price of a coin set at the beginning of trading in a certain period of time.
The candlestick chart is the most informative. It consists of candles, each of which shows the trading results for the selected time period. On the candlestick chart, you can see the minimum fall and rise of the asset. Let's dwell on it in more detail: we will show what it looks like, what the candlestick consists of, and also how to read information on it.
What a candlestick chart consists of
Traders use such a chart to visualize asset prices over a certain period of time and analyze their dynamics. A candlestick chart displays a range of values for price information:
- trading time - for example, 5 minutes, 15 minutes, day, month;
- minimum and maximum prices for a specific trading time;
- the opening and closing prices for the selected time.
To do this, he uses graphic symbols in the form of candles. A Japanese candlestick is an indicator that is positioned horizontally along the timeline and displays the results of trading activity over a certain period of time. We show what it consists of in the image below.
Green candlestick - the opening price is lower than the closing price - the coin has risen in price. Red candle - the opening price is higher than the closing price - the coin has decreased in price. These colors are used by most cryptocurrency exchanges, for example, the Bybit exchange . But there is also a white candle instead of a green one and a black one instead of a red one.
Each candle has a body and shadows, the latter are also called rays. The main rectangle is called the body and displays the range between the open and close prices in a given period of time.
The lines emanating from the upper and lower body are called upper and lower shadows. Each shadow shows the maximum or minimum bid price for the specified time period. They can be more, less, or coincide with the opening and closing prices.
The body of a candlestick is the difference between the open and close prices over a period of time.
The candlestick shadow is the price high and low for a period of time.
Consider the green candle for the day. For example, bitcoin was selling at $ 66K at the beginning of the day - this is the opening price. Then, during the day, it dropped to $ 64 thousand - this is the minimum - and rose to $ 68 thousand - this is the maximum. But at the end of the day, its price became $ 67 thousand - this is the closing price. During the day, the rate increased by $ 1,000, so the candlestick will be green. The next day, the opening price will be the same as the previous day's closing price, that is, $ 67,000.
The candle shows:
- the cost of the cryptocurrency at the beginning and at the end of the time period,
- the maximum and minimum price within a certain period of time.
The candlesticks on the chart can be divided into two categories:
- with a wide range - when the body of the candle is long - they speak of high trading interest on the part of market participants and frequent price changes,
- with a narrow one - when the body of the candlestick is short - they speak of a small trade interest and a price change.
To understand a candlestick chart, you need to identify the major highs and lows of the price movement. If they:
- move up - there is an uptrend in the market, that is, the highs and lows of prices will rise,
- moving down - there is a downtrend in the market, that is, the lows and highs of prices will be less than the previous ones,
- have the same range - there is consolidation or equilibrium in the market, when the demand for a coin is equal to supply and the price does not change.
This is how traders use candlestick charts to identify and predict long-term market trends. The color and shape of the candles also allows you to track daily market sentiment.
Conclusion
A candlestick chart reflects the movement of the open, close, high and low prices of an asset over a certain period of time. It is as informative as possible and consists of Japanese candlesticks:
- green candle - the opening price is lower than the closing price - the coin has increased in price,
- red candle - the opening price is higher than the closing price - the coin has decreased in price.
Each candle has a body and shadows, the latter are also called rays. The main rectangle is called the body, which displays the range between the open and close prices in a given period of time.
The lines emanating from the upper and lower body are called upper and lower shadows. This is the price maximum and minimum for a specific period of time.
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