How To Read A Candle Chart Youtube

How to read candlestick charts? Candlestick charts show the development of a value over time. For example, Candlestick charts are frequently used on the stock exchange to display the price development of shares or indices.

The individual candles in the candlestick nautical chart prove the beginning cost, the last price, the highest price, and the lowest cost of a specific period. In a daily nautical chart, for example, each candle shows the high toll, the depression cost, the opening price, and the closing price of a day.

Candlestick charts are essential to the technical analysis of stock market prices.

Sometimes candlestick charts are besides called candlestick charts or candlestick charts.

What are candlestick charts?

Candlestick charts are used to analyze crypto marketplace prices to show the price trend of a cryptocurrency.

In a candlestick chart, each individual candle shows how the cost has adult within a certain period of fourth dimension. For example, in a daily chart, each candle represents the toll development within a specific day. On the other paw, if you see a weekly chart, each candle shows the price movement within a week.

The individual candles show the first toll (opening price), the last price (closing price), the highest price, and the everyman price of the period under consideration.

How to Read Candlestick Charts?

Candles with Explanations

Each candle consists of a box-shaped body in the candle’s centre and ii lines protruding above and beneath the box.

How to Read Candlestick Charts?

The upper and lower boundaries of the trunk bespeak the corresponding opening price and closing price.

  • If the closing price is above the opening price, the box is drawn in dark-green. In this case, the price has risen in the class of trading.
  • On the other hand, if the price has fallen, the closing price is below the opening price, and the box stays ruby.

Occasionally, information technology happens that the price closes at the same point where information technology opened. In this case, a straight line is drawn in identify of the body. This candlestick shape is chosen aDoji.

The two lines above and beneath the body are called shadows. The peak of the upper shadow indicates the highest price of the menstruum under consideration, while the lower shadow marks the lowest betoken. These are the starting tips to read candlestick charts.

What Data can exist Gleaned from the Shape of Each Candle?

The shape of the candles tells a lot near how the price has developed in the period under consideration. From the length of the shadows and the size of the bodies, we tin can conclude how the price behaved during the period under consideration. Yous can find some examples of this in the two charts below.

Shape of Each Candle

i.
A long trunk with small shadows indicates a strong up motility (green body) or downward move (carmine body).


2.
On the other manus, if a candle has only a tiny body and at the same time long lower and upper shadows, this indicates a strongly fluctuating trade without a clear trend.

Shape of Each Candle

3.
A very long shadow in one management indicates a tendency reversal. A long lower shadow indicates that the price fell sharply at a certain point. And so, withal, a strong countermovement started, and the price recovered nearly of its losses by the end of the trading session.

4.
Precisely the opposite case occurs with a long upper shadow. Here, the cost rose sharply but could non concur it’s loftier and had to give up most of its interim gains at the cease.

5.
If the highest price and the lowest cost of a candle are very shut, this indicates uneventful trading.

6.
Gaps are gaps between two candles. These toll gaps occur when the adjacent candle opens significantly above (upward gap) or below (downward gap) the previous candle.

A gap remains visible on the nautical chart only if the price does not move dorsum in the direction of the previous candle, thereby closing the gap.

  • An upward gap indicates that at that place were significantly more buyers than sellers at the market opening.
  • Conversely, a downwards gap indicates significantly more than sell orders than buy orders before trading opened.

Uptrends, downtrends, and sideways movements are relatively easy to identify in a candlestick chart.

  • In an upward movement, the candles close in a higher place the closing price of their pre-candles. There are more than green candles within the up trend than crimson ones.
  • On the other hand, in a downward movement, the ruby-red candles predominate—almost candles within the movement close below the closing price of their pre-candles.

Sideways Movements / Ranging

  • Every bit the name suggests, the price moves sideways in a sideways movement. The candles move upwards and down within a narrowly defined range. In the sideways movement, the candles oftentimes modify color.

Short-Term Compression Zones and Breakouts

Next, we look at how the individual candles in the candlestick chart are related to each other.

A mutual pattern in the candlestick chart is pinch zones, where several consecutive candles oscillate upwardly and down in a tight box
( betoken 1 ).

The bodies of the individual candles all lie more or less on one line.

Short-Term Compression Zones and Breakouts

In many cases, all candle bodies also lie inside the largest candle’s two shadows.

Within this box, the price fluctuates inconclusively back and forth between ii narrow frames without forming a articulate trend.

If the price finally succeeds in breaking out of this box, there is often a violent, steep price movement in the breakout direction( signal 2 ). However, before the breakout from the box, it is impossible to predict the management the breakout volition occur. Therefore, wait until the kickoff candle closes exterior the box before inbound.

Resistances and Support Lines

Significant highs or lows often grade resistance zones for subsequent price movements. So at these points, the price is more likely to bounce off the aforementioned bespeak again and plow back in the opposite management.

Resistances and Support Lines

These resistance zones are fifty-fifty stronger if the toll has already bounced off the same signal several times.

You can meet such a resistance zone in the chart on the right. Here, the price has bounced off the same line twice, at point1 and at signal2.

This high is now interesting for two reasons:

First, at that place is an exceptionally high probability that the toll could plow downward again at this point.

At the aforementioned time, however, a quantum this resistance line would bear as a specially bullish sign. Many traders come across the intermission of such a resistance line as an indicator for further rising prices and therefore enter the value shortly after a quantum. Thus, after a break of this line, increased demand increases, which drives the price further upwards.

Final Thoughts on How to Read Candlestick Charts

Before entering, however, it is advisable to await whether the candle closes at to the lowest degree above the resistance line. This is because sometimes bull traps occur precisely at such resistance lines, where traders enter in anticipation of rising prices, only to face a sudden countermovement before long after that.

One time the price has moved above the resistance line for an extended period of time, the resistance line becomes a support line. A support zone is thus formed along the former resistance line, making it more difficult for the cost to fall below the former resistance line again.

Are y’all sure well-nigh how to read candlestick charts? Exit united states a comment.

Source: https://www.fatpigsignals.com/blog/how-to-read-candlestick-charts-correctly/

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