What are candlesticks in trading and how to use them?🕯

24 окт. 2021 г.

✅The price dynamics of an asset are displayed on the chart in different formats, including bars, lines, or candles. The latter format is most popular among traders and is often used in technical market analysis. What are candles and how to work with them?

🟢Candlesticks (Japanese candlesticks) are a graphical way of displaying price dynamics, in which vertical rectangles and lines are used. This method was invented on the rice exchanges of Japan in the 17th century, from where it got its name.

A price candle consists of two main elements:

1️⃣the body is a vertical rectangle that shows the opening and closing levels of trades;

2️⃣wicks (shadows, tails) - vertical lines from above and below the body of the candle, reflecting fluctuations in value in the interval between opening and closing.

❗️The main advantage of a candle over bars and a linear chart is that it allows you to get 4 important indicators for technical analysis at once:

High - the highest price for the period;
Low - the lowest price for the period;
Open - the opening price of the period;
Close - the closing price of the period.

🔴When using a linear graph to get the same information, 4 indicators would have to be displayed on the screen at once, which is inconvenient and complicates the perception of information.

At the same time, candles display the process of cost formation in a specific time interval, so the position and appearance of candles on the hourly and daily periods will differ significantly

Types of candles

⚠️Two main types of candlesticks correspond to market trends:

Bullish candle - formed when the closing price of the period was higher than the opening price. On the chart, such a candle is displayed in green (on b / w - white) and indicates the victory of buyers in this time.

A bearish candle - is formed if the period is closed at a price lower than it was opened. On the chart, bearish candlesticks have a red color (on b / w - black) and they show that sellers are dominating at the moment.

❤️Please, support our work with like & comment!❤️