Rookies on cryptocurrencies sometimes rely on their intuition instead of actually reading the charts before investing. This might work for sometime but this kind of basis can’t guarantee accuracy in the long run. Though cryptocurrencies are also about probabilities.
Reading candlestick chart is a crucial skill for an aspiring trader.
So , what exactly is a candlestick chart?
If you haven’t seen one, the candlestick chart looks like a candle stick itself. It is a type of financial chart that represents the movement of an asset in a given timeframe. Candlestick can represent any period, from years down to seconds. This was made by Homma, a Japanese rice trader. Which then was refined by Charles Dow who is also known as the father of modern technical analysis.
According to Academy Binance , these are the parts of the candlestick chart.
Open — The first recorded trading price of the asset within that particular timeframe
High — The highest recorded trading price of the asset within that particular timeframe.
Low — The lowest recorded trading price of the asset within that particular timeframe.
Close — The last recorded trading price of the asset within that particular timeframe.
This set of data is also known as OHLC (just get the initials of each word). The space between the open and close is called the body while the distance between the body and high or low is called the wick or the shadow.The distance between the high and low of the candle is called the range of the candlestick.
- The longer the body , the more intense the buying or selling during the measure timeframe . if it’s short , it means that the high or low was near the closing price.
- If the body is green, this means that the asset closed higher than it opened.
- If it’s red , this means that the price went down during the measured timeframe.Opposite of the green , the close was lower than the open.
- Other uses black and white instead of green and red.
- Candlestick chart just provide you general price action not details.
- The candles change quickly , it can be challenging to read and interpret it .