Beginner’s Guide to Candlesticks – Cryptocurrency Charting

Have you ever wondered how someone who looks like they just graduated high school is rolling around in a brand new Ferrari?  More than likely this person made some money by buying and selling some cryptocurrency. This means that he is either the luckiest person alive, or that he analyzed some investor emotion and price action by using what is known as a candlestick (aka crypto candle).

By candlestick, we’re not talking about the thing you use to light your house during a power outage.  This candlestick is completely different. This candlestick is used to predict the price of an asset over a specific timeframe.  

Modernized by a journalist named Charles Dow back in the late 1800s, it is these same principles that candlestick charting uses today.  With candlestick charting, it is the price action that is the most important thing to look at, more so than earnings, any breaking news, or even other principles.

Essentially, the candlestick says that everything you need to know is reflected in the price.  So the candlestick gives you all the information that you need to know.

Candlestick Anatomy

Each and every candlestick has two features that will display all four of its main components.

  • The body

    This is the wide midsection part of the candlestick, and represents the close and open during a certain time period.  Normally, you are able to choose how long you would like that time period to be.

  • The Close

    If your candlestick is green, the close is represented on the top side of the body.  If your candlestick is red, the close will be represented at the bottom of the body.

  • The Open

    This is the opposite of the close.  So the open on the green candlestick will be on the bottom, and on the top of the red candlestick.

  • The High and Low

    The high and low are going to be in what is called the ‘wick.’  The wick is displayed on the chart by the thin lines that extend out of the body on the top and the bottom of the candlestick.

For those who trade cryptocurrency, they thrive on taking advantage of all the market volatility by using the candlestick charts on intra-day time frames.  With the intra-day charts, each candlestick will usually represent 12, 4, 2, or 1-hour time frames. Those looking for longer term trades will more than likely prefer to use a candlestick chart that represents a larger amount of time, such as a day, a week, or even a month.

A candlestick will become green, or bullish, when the closing price of the asset has risen above the opening price.  On the other hand, a candlestick will become red, or bearish, when the assets closing price has fallen below its opening price.

While using candlestick charting can be very lucrative, just be sure to remember that with any type of investing, no matter what it is, there is always going to be a risk of losing money.  With that being said, be sure that you never invest anything that you are not willing to lose.


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