How To Read a Candlestick Chart

How To Read a Candlestick Chart

In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein. But other investors might compare prices now against the price just one day ago, one hour ago or even five minutes ago. Candlesticks reflect market sentiment and can often be used to predict what is going to happen next. “Open” is the initial price at which the asset was being traded at the beginning of that specific timeframe.

The second pair, Shooting Star and Inverted Hammer, also contains identical candlesticks, but with small bodies and long upper shadows. Only preceding price action and further confirmation determine the bullish or bearish nature of these candlesticks. The Hammer and Inverted Hammer form after a decline and are bullish reversal patterns, while the Shooting Star and Hanging Man form after an advance and are bearish reversal patterns. In order to create a candlestick chart, you must have a data set that contains open, high, low and close values for each time period you want to display. The hollow or filled portion of the candlestick is called “the body” (also referred to as “the real body”). The long thin lines above and below the body represent the high/low range and are called “shadows” (also referred to as “wicks” and “tails”). The high is marked by the top of the upper shadow and the low by the bottom of the lower shadow.

Long Shadow Reversals

Doji candlesticks that have both long upper and lower shadows indicate that there is a lot of indecision in the market. Note that the market price is going up if the candlestick is green or blue. The color of the candlestick is usually green or blue if the market is trending upwards. Candlestick charts can also contain a lot of market noise, especially when charting lower timeframes. The candles can change very quickly, which can make them challenging to interpret. Candlestick charts are an efficient way to view an asset’s price changes. Candlesticks quickly show how far and in which direction the price of an asset moved during a specific time period.

Candlestick charts are comprised of a collection of multiple candles, and each of them represents a predetermined period of time. Here are two common examples of bearish three-day trend reversal patterns. These are a couple of the most common bearish three-day trend reversal patterns. Here are a couple common bullish three-day trend reversal patterns. The candle illustrates the opening price and the closing price for the relevant period, while the wick shows the high price and the low price. Green candles mean the crypto has gained value during the period, while red candles mean the crypto lost value. The candlestick is one of the most widely used charting methods for displaying the price history of stocks and other commodities – including cryptocurrencies.

Reading the Parts of a Candlestick

The open represents the initial deal of the period, while the close represents the last trade of the period. While candlesticks are useful in giving you a general idea of price action, they may not provide all you need for a comprehensive analysis. For instance, candlesticks don’t show in detail what happened in the interval between the open and close, only the distance between the two points . The real bodies how to read candlestick charts are typically one solid color, though they may also be hollow, with only their edges displaying a color. Their coloring depends in part on the color scheme used by your charting platform, but white/black and green/red are commonly utilized. The distance between the top of the upper shadow and the bottom of the lower shadow is the range the price moved through during the time frame of the candlestick.