How to read candlestick chart?

 2018-11-30 17:22:47
How to read candlestick chart?

Abstract

Candlestick chart (K-line), originated from the rice market of Japan in the late 18th century, was found by a Japanese rice trader Munehisa, Honma. It's also known as candlestick, a technical analysis method about the price prediction of financial products like stock, gold, etc. in Asia.


What is Candlestick chart (K-Line)?

In the transaction page of cryptocurrency exchange, we can often see the candlestick chart of cryptocurrency trend as follows. In the crypto trading market, candlestick chart is the result of the direct opposition between buyers and sellers. With candlestick chart, you can know the open price, close price, high and low price of the cryptocurrency in a certain period. And it helps you to learn and study the fluctuation of cryptocurrency prices in a more intuitive way.


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Three Main Shapes of candlestick 

A candlestick consists of three parts: body, upper shadow and lower shadow. The part between open price and close price, drawn into a rectangle, is the body of a candlestick.  


Note: In European and American markets, the body of Yang line is green, and red for Yin line, which are different from that in Chinese or Asian markets.


1) Yang Line

In a certain period, if the close price is higher than the open price, and the body is filled with blank or red color, it's Yang line, shown as below. A line drawn between the highest price and the close price is called upper shadow of candlestick, and the line between the open price and the lowest price is called lower shadow of candlestick.


Yang Line


2) Yin Line

If the close price is lower than the open price, and the body is filled with green color, it is called Yin line. The line drawn between the highest price and the open price is called upper shadow of candlestick. And the part drawn between the lowest price and the close price is lower shadow of candlestick.


Yin Line

3) Doji Line

If the close price equals to the open price, there will be a horizontal line instead of the rectangle body. And no upper and lower shadow either.


Doji Line


In addition to the shape, candlestick can be also drawn according to the timeline, for example, minute, hour, day ,week, month, year or indefinite period. For short-term investors, minute or hour candlestick chart is more useful, while month or year K-line chart for long-term investors.


Basic Technical Analysis of candlestick chart

The analysis of candlestick chart is the basic, but also core technique in investment. In this session, we will show you how to analyze some common candlestick pattern.


1) Long Yang Line

Long Yang line refers to the candlestick rises 5% or above, indicating buyers are overwhelming more than the sellers. And the price is much more likely to rise in the post-market.


2) Long Yin Line

Opposite to the long Yang line, if the candlestick chart falls 5% or higher, it will be a long Yin line. Long Yin line indicates the price correction or price bottom building.


3) Doji Line

As mentioned above, Doji line means that the close price equals to the open price. If the upper shadow is longer, it indicates that there are more sellers. If the lower shadow is longer, it means that buyers are more than sellers. In case the Doji line shows in the high price position or low price position, there will be a price reversal.


4) T-Line

T-line refers to the candlestick chart that has the same open price, close price and highest price, and it just has lower shadow. If T line appears after a big price rising, it indicates that the price has reached the peak and it's about to fall. On the contrary, if T line shows after a big price falling, it is a signal of price bottom which means the price will go up.


Based on candlestick chart analysis, it's easier for you to predict the price trend and get more chances to make profits in cryptocurrency investment. Now start a trade on cryptocurrency according to your candlestick chart analysis.


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