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In cryptocurrency trading, candlesticks (often just called candles) are a crucial part of technical analysis. Each candlestick represents price movement within a specific time frame, such as one minute, one hour, one day, or even one week. Traders use candles to quickly understand how a crypto asset’s price behaved during that period, including where it opened, closed, and how high or low it went.
A typical candlestick has two main parts: the body and the wicks (also called shadows).
The body shows the difference between the opening and closing prices. If the close is higher than the open, the body is usually green (or white), indicating a price increase. If the close is lower than the open, the body is often red (or black), showing a price drop.
The wicks extend from the top and bottom of the body, showing the highest and lowest prices reached during that period.
Candlestick patterns can give hints about future price movements. Some well-known patterns are doji (where open and close are nearly the same, signaling indecision), hammer (often seen as a bullish reversal signal), and engulfing patterns (which can indicate strong reversals).
Understanding candles helps crypto traders spot trends, reversals, and possible entry or exit points. Since crypto markets are open 24/7 and highly volatile, reading candles accurately is an essential skill for anyone serious about trading cryptocurrencies.