Understanding candlestick charts is a fundamental skill that must be mastered to enter the financial markets (including cryptocurrency, stock markets, and futures). Below, I will help you quickly get started with simple and easy-to-understand language, learning to read candlestick charts from scratch.
What is a candlestick?
A candlestick chart, also known as a "candlestick chart," represents the price fluctuations of a certain period. It consists of **the body (red or green bars) and the shadows (thin lines above and below).
What information does a candlestick contain?
Each candlestick contains 4 prices:
Opening price: the price at the beginning of this period
Closing price: the price at the end of this period
Highest price: the highest point of the price during the period
Lowest price: the lowest point of the price during the period
Red candlestick (bullish):
Closing price > Opening price: price rises
The red bar rises from the opening price to the closing price.
Green candlestick (bearish):
Closing price < Opening price: price falls
The green bar drops from the opening price to the closing price.
What do the shadows mean?
Upper shadow: the price once reached a higher point but did not close there.
Lower shadow: the price once fell to a lower point but then rebounded.
Looking at the shadows can help judge the market's bullish and bearish strength: long upper shadow: upward movement was rejected, bears are strong.
Long lower shadow: downward movement was pulled back, bulls are strong.
How to read common candlestick timeframes?
1-minute candlestick: each candlestick represents 1 minute of price fluctuations, suitable for ultra-short-term trading.
15-minute candlestick: suitable for intraday swings.
1-hour candlestick: suitable for observing short-term trends.
4-hour candlestick: commonly used for mid-term analysis of mainstream coins.
1-day candlestick: suitable for medium to long-term trend judgment.
Candlestick combination patterns (a bit advanced)
Here are some common signals (not guaranteed to occur):
Hammer (long lower shadow): a potential rebound.
Inverted hammer: a potential drop.
Engulfing pattern: a large bullish candlestick engulfs the previous bearish candlestick (bullish signal).
Doji: a stalemate between bulls and bears, a signal for a potential trend reversal.
In summary:
Candlesticks are not fortune-telling; they are the "emotional diary" that records market sentiment. Understanding candlesticks is not about memorizing patterns but about seeing "who is stronger in the market."
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