Any investor looking to invest in the crypto market should be capable of understanding and reading candlestick charts. For a new investor or trader, this could not be that simple. Many new traders or investors trust their instincts to make decisions related to investment. While this could be beneficial for a short time, in long run this strategy is unlikely to be successful.
For a new investor, it may be very confusing to read all the patterns, as mostly they are very complex. But, a simple knowledge about the charts, how to read and recognize them, would provide investors with great insight in planning their next move.
In candlestick charts, the horizontal axis represents the time, and the vertical axis represents price data. Candles provide more detailed information than any other type of graph could provide. A single glance at the candlestick charts could provide you with the asset’s highest and lowest prices, as well as it’s opening and closing prices.
Defining Candlestick Charts
In the financial world, a candlestick chart can be defined as a graph that depicts asset price fluctuation over a specific period, in a very appealing way. The graph is created with candlesticks, each of which represents a certain period. As a time symbol, candlesticks can be used to represent anything for a few seconds to many years.
Candlesticks provide a clear picture of the price fluctuation in the market and by how much. For investors, they can be of great assistance. In the crypto market, open and closed prices are prices at the end and beginning of the specified interval, as the crypto market operates 24*7*365.
- Body: The body represents the open to close range. To describe it in simple language, it gives the difference between the opening and closing prices.
- Wicks: Also known as “tails” or “shadows”. They indicate the highest and lowest price points of an asset, throughout the candlestick period. When there is no wick to keep track of the opening and closing prices, they are the lowest and highest.
- Opening Price: It is the price at which the first trade for a new candlestick period happened. An increase or decrease in prices is represented through different colors by a candlestick. For increase, the candlestick is green and for the decrease in prices, it is red.
- Closing Price: It is the last price at which the asset was traded during the candle’s formation period. If the prices are higher than the opening price, the candle will be green, and if the prices are lower than the opening price, the candle will be red.
- Highest Price: It is the top of the upper wick, which indicates the top prices at which asset was exchanged throughout the period.
- Lowest Price: It is the bottom of the lower wick, which indicates the lowest price at which an asset was exchanged or traded.
Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.
Photo by – MLbay on Pixabay