Just entered the circle and feel overwhelmed by the contract candlestick charts? Don't worry, this article uses the simplest language to help you understand: What is a candlestick, how to read trends, when to buy, and when to sell.
One, what exactly is a candlestick chart?
In simple terms: A candlestick chart is the market's 'thermometer', showing price fluctuations and market sentiment.
Each candlestick = price movement over a certain period, divided into several common timeframes:
1-minute, 5-minute, 1-hour charts 👉 Suitable for short-term trading.
4-hour, daily, weekly charts 👉 More reliable for viewing medium to long-term trends.
Two, what does a candlestick look like? How to interpret it?
Each candlestick is like a 'candle', divided into two parts:
Body: The difference between the opening price and closing price.
Closing price higher than opening price: Rise (green, bullish candle)
Closing price lower than opening price: Fall (red, bearish candle)
Shadows (upper and lower wicks): Highest and lowest prices.
Upper shadow: Indicates that the price was pushed down after reaching a high.
Lower shadow: Indicates that the price was pulled back after a dip.
By looking at a single candlestick, you can know: who dominates the market during that time, the buyers or the sellers.
Three, learn these candlestick combinations for more precise trading!
Engulfing pattern
Bullish engulfing: A small bearish candle is engulfed by a larger bullish candle, likely indicating a rise!
Bearish engulfing: A small bullish candle is engulfed by a larger bearish candle, be cautious of a drop!
Hammer/Inverted hammer
Hammer: Long lower shadow indicates strong support below, potentially reversing upward.
Inverted hammer: Long upper shadow indicates strong pressure above, potentially reversing downward.
Doji
Opening and closing prices are almost the same, indicating market indecision, which could be a reversal signal.
Four, how to use candlestick charts for trading?
1. Look at support and resistance levels
Support level: Prices tend to bounce back when they drop near this area as there are always buyers.
Resistance level: Prices tend to drop when they rise near this area as there are always sellers.
2. Judging the trend is crucial.
Highs getting higher and lows getting higher = Upward trend.
Highs getting lower and lows getting lower = Downward trend.
Repeated up and down fluctuations = Sideways consolidation.
Five, pairing with technical indicators for more reliability!
Candlestick + indicators, signals are more accurate!
MACD: Determines the strength of trends and turning points.
RSI: Determines overbought and oversold conditions.
Moving average: Shows the price's position relative to the average cost.
Six, some practical tips that beginners can use!
Trend line + channel line: Helps you see the price's trajectory.
Pattern recognition: Triangle, flag, head and shoulders; once these patterns break, it's the prelude to a big trend!
Knowing how to read candlestick charts = Knowing how to listen to the market!
Once you master the basic structure of candlestick charts + common patterns + trading skills, you can spot turning points in the market early, catch big fluctuations, lose less, and make more money!
Look at a few candlestick charts every day, and slowly you will find – the language of the market is actually very simple!
