How to Read Candlestick Charts and Understand Market Trends
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oneprobl4ckMild
August 19, 2024
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Candlestick charts are one of the most widely used tools in technical analysis. They date back to the eighteenth century in Japan, where they were used to analyze rice prices. Today, they are widely applied to all types of financial assets, including cryptocurrencies.
Each candlestick represents a specific time period : it can be 1 minute, 5 minutes, 1 hour, 1 day, and so on, depending on the timeframe you select.
Structure of a sail:
- Body: represents the difference between the opening and closing price.
- Wicks: indicates the maximum and minimum prices reached in that period.
Candle colors
Candles can have two main colors, usually green and red, but they can also be black and white:
✅ Green (bullish) candlestick: The price has closed above the opening price → indicates an upward movement.
❌ Red candle (bearish): The price closed below the opening price → indicates a fall.
Supports and resistances
These are key levels where the price has shown repetitive behavior. They are crucial for predicting future movements.
- Support: A level where the price tends to stop its fall and bounce upwards. This happens because at that level there are more buyers than sellers. The more times it bounces back to that level, the stronger the support.
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- Resistance: A level where the price tends to stop its rise and retreat downwards. This happens because at that level there are more sellers than buyers. If the price manages to break above it, it can become a new support.
📌 Tip: Draw horizontal lines at recurring bounce points to make these levels easier to see.
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