What is a Candlesticks Chart and How Does it Work?

The Candlesticks chart patterns are a way to identify the price movement or trends of a Stock/Cryptocurrency Market.

Just like every other asset price in financial markets opens up, then either it pulls higher or gets lower, given the market conditions and eventually price closes.

Chart pattern shows all these price movements through candlesticks chart patterns.

However, there are many price charts such as candlestick charts, line charts, bar charts, point and figure charts.

Among All these chart patterns, most individual traders or investors prefer the candlesticks chart. 

How does this candlestick Chart pattern work?

From a broader perspective, there are only four price spots in candlesticks. They are open, close, high and low.

However, the spotlights in a candlestick chart are the opening and closing price. The combination of open and close represents bullish and bearish candlesticks.

Bullish candles are green that show prices going up while bearish candles are red representing prices decline.

For example, take the price movement of bitcoin on any given day. If the price of Bitcoin opens with $20K at the start of the day and goes down at $19K in addition to the high of $21K and finally BTC closes at price $20.5K.

The price closes above the opening price and it adds some value to its previous price. As a result, it shows a bullish candle on the chart, which is a clear sign of profit. See the Green body at the bottom of the image.

A red candle (bearish candle) is formed when an asset price starts trading and closes below its opening price.

This way an asset goes into loss, therefore, it is called a red candle or a bearish candle at the bottom of the chart.

Compared to the open and close, the high and low points placed at the same spot are either bullish or bearish in candlesticks.

Meanwhile the open and close forms a body of the candle while both the candlesticks form the candlesticks price graph.

Properties of Candlesticks Chart Patterns

  • Easy to use.
  • Easy to find chart patterns.
  • Indicates the extant time of occasion. 

Instead of line graphs, buyers can easily understand candlestick graphs while predicting further price movement.

They are easy to read, and it becomes convenient to find support and resistance in the given graph. The candlestick chart illustrates the key positions of volatility.

Multiple time-frames are available in graphs like hourly, daily, weekly and monthly etc. These time frames help individual traders/investors to gauge the potential of any directional trend.

While it also depends on how long someone wants the initial buy/sell order to last.

For example:

If your outlook is bearish on Bitcoin on the hourly time frame, this could indicate a positive sign on the daily or weekly time frame window.

So, make a proper plan before doing business.

Easy to find chart patterns.

Traders use candlesticks graphs because one can determine chart patterns such as triangles, parallel channels, trendlines, hedge zones, etc. when you rely only on price action.

Indicates the exact time of the occasion.

The crypto market is extremely volatile, but still many noob speculators jump into the trade at the wrong time and get liquidated.

So, a candlesticks chart helps to get the exact timing of the opportunity which we can identify by opening and closing price.

So, from the side of a simple trading strategy, candlesticks are an easy way to trade accurately through chart patterns.

It is easy to understand, and one can be friendly with it. But don't cross the limit while trading.

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This information is for educational purposes only and does not constitute investment advice. No person should rely on it to make any investment. Investing carries risks, including the loss of capital. All opinions expressed are subject to change without notice. Past performance is not indicative of future results. Always seek the advice of a licensed investment professional before making any investment.