The Basics of Candlestick Charts #candlestick_patterns
Candles, the foundation of most crypto charts, tell the story of a coin’s price movement over a specific period, usually called the timeframe.
Each candlestick has a body and wicks (also called shadows) on either side. The body shows the asset’s opening and closing prices within that period. If the closing price is higher than the opening price, then the candle is colored green, indicating a price increase (bullish). Conversely, if the asset’s price closed lower than it opened at, then the candle is colored red, signifying a price decrease (bearish). The wicks represent the highest and lowest prices reached during that timeframe.
A note on timeframes:
Analysis can vary dramatically with different timeframes. Higher timeframes (like one day, one week, one month, etc.) can give us a broad overview of the asset’s price movement and are better for long-term investment strategies. Shorter timeframes (a few minutes to an hour, for example) offer a more granular view of price action and are typically used for day trading. Each timeframe can tell a different story.
Technical Analysis #technical_analysis
Technical analysis is a method for predicting the future prices of stocks, currencies, and other financial assets by studying their past market data, such as price movements and volume. Think of it as trying to forecast the weather by looking at past weather patterns but for financial markets.
When we’re studying crypto charts, we’re essentially doing technical analysis. Of the three main types of charts, candlestick charts are the most popular because they convey the most information. Line and bar charts don’t really give us anything useful when we’re trading.
