A Beginner’s Guide to Candlestick Charts
Candlestick charts use individual candlesticks to summarize price changes across different time periods, helping learners observe the opening, closing, highest, and lowest prices at the same time. They are useful for assisting with the identification of trends and patterns, but should not be used alone as the basis for definitive judgments.
What Candlestick Charts Show
A candlestick chart is a graphical representation of price action. Each candlestick corresponds to a specific time interval and summarizes the opening, highest, lowest, and closing prices for that period. Compared with charts that show only a single price change, it enables learners to observe the full price range and volatility within a period.
Understanding Bodies and Wicks
The thicker rectangle in a candlestick is called the body, representing the range between the opening and closing prices. The thin lines extending above and below the body are called wicks; the upper end corresponds to the period’s highest price, and the lower end corresponds to its lowest price. The relative lengths of the body and wicks provide an intuitive view of the period’s basic price movement and volatility.
Identifying Upward and Downward Moves
When the closing price is higher than the opening price, the candlestick is typically shown in green or as a hollow candlestick, indicating that the price rose during the period. When the closing price is lower than the opening price, it is typically shown in red or as a filled candlestick, indicating a price decline. However, color conventions may differ across charting platforms, so confirm the meaning of the colors before interpreting the chart.
Patterns Require Confirmation
Traders use candlesticks to observe structures such as doji, hammer, and engulfing patterns in search of clues that a trend may reverse or continue. However, an individual pattern is not a definitive signal. Interpretation should also consider other technical indicators, the market context, and risk management; avoid drawing conclusions based solely on one candlestick or a group of candlesticks.
Original Tutorial
https://www.binance.com/zh-CN/academy/glossary/candlestick
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