What is a candlestick chart?
A candlestick chart is a chart type that shows the price movement of a crypto asset over a given time interval as a single visual block. Each "candle" presents the opening, closing, highest and lowest price information of that interval at the same time. It is the most widely used chart type in technical analysis and lets you read quickly the periods in which the price was strong or weak.
How do you read a candlestick chart?
Each candle holds four basic price points, and these points are spread between the body and the wicks of the candle. The body shows the distance between the opening and the closing, and the wicks show the extreme prices seen in that interval. Reading these four values together lets you understand the balance between buyers and sellers in that period.
- Open: The first price traded at the beginning of the interval
- Close: The last price traded at the end of the interval
- High: The highest price seen throughout the interval
- Low: The lowest price seen throughout the interval
A candle consists of two components:
- Body: The rectangular area between the opening and closing prices
- Wick (shadow): The thin lines seen above and below the body; they show the highest and lowest price in that interval
What do candle colors mean?
Candles are shown in two colors, and the color tells you the direction of the price in that interval. If the closing is above the opening, the candle takes the rising color; if below, the falling color. The default colors are green and red; the colors may change depending on your app settings.
- Rising candle (green by default): The closing is higher than the opening; the price increased in that interval
- Falling candle (red by default): The closing is lower than the opening; the price declined in that interval
Note: When you turn on the Color blindness support option on the Color options screen in the Account section, the rising and falling colors become blue and orange. This preference is reflected in all chart colors including candle bodies, wicks and volume bars.
What do candle types tell you?
The appearance of candles gives clues about the balance of buyers and sellers in the market. The length of the body shows the strength of the move, and the length of the wicks shows the levels that were tested but did not hold.
- Candle with a long green body: Strong buying pressure; a steady period of increase
- Candle with a long red body: Strong selling pressure; a clear period of decline
- Candle with a short body (doji): The opening and closing are very close; indecision in the market
- Long upper wick: The price tried to move up but sellers pulled it back; it may be a resistance signal
- Long lower wick: The price moved down but buyers responded; it may be a support signal
Combinations of these basic types form the candlestick patterns examined by technical analysts (such as hammer, engulfing and morning star).
What do time intervals determine?
The time interval you select in a candlestick chart determines how many minutes, hours or days of movement each candle summarizes. Short intervals give more detail and volatility, and long intervals give a clearer picture of the trend.
| Interval | Use |
|---|---|
| 1m · 5M | Very short-term tracking |
| 15M · 1H | Intraday trading |
| 4H · 8H | Daily trend analysis |
| 1D | Medium and long term |
| 1W · 1M | Long-term perspective |
Warning: Pay attention to the difference between the minute and month intervals — 5M and 15M mean five and fifteen minutes, while 1M means one month, and the one minute interval is written as 1m with a lowercase letter. The 8H interval is available only in the chart on the market detail screen, and the one minute and five minute intervals only in crypto pairs.
How does it differ from a line chart?
A line chart shows only a single line connecting the closing prices. A candlestick chart carries more information because it presents the opening, closing, highest and lowest price of each interval together. The meaning of the time selection also differs: in a candlestick chart the value you select is the duration of a candle, and in a line chart it is the total period shown.
For this reason users who want to examine price behavior in detail mostly prefer the candlestick chart.
Note: On the chart on the market detail screen of an asset, you can switch between line and candle by tapping the chart type icon in the header. The chart on the Buy/Sell screen has three types: candle, line and depth. While candle is selected, you can add the VOL, RSI, EMA, MA, BOLL and MACD indicators to the chart.
Candlestick charts can give misleading signals when they are assessed on their own. Instead of deciding based on a single candle or a short series, assessing several time intervals and additional indicators together gives a healthier analysis.
Frequently asked questions
What is the difference between the body and the wick of a candle?
The body shows the area between the opening and closing price; the wicks are the thin lines extending to the highest and lowest price seen in that interval. The body tells you the result of the move, and the wicks its limits.
How can I see the exact values of a candle?
When you press and hold your finger on the chart, the Open, High, Low and Close values of that candle appear in an info box. You can slide your finger sideways to examine the values of other candles as well.
What does a doji candle mean?
A doji is a candle whose opening and closing price are very close, so its body is almost as thin as a line. It shows that buyers and sellers stayed in balance and that there is indecision in the market.
Which time interval should I select?
If you trade during the day you can use 15M or 1H, if you follow moves over a few days 4H or 1D, and if you assess the long-term trend 1W or 1M. Comparing several intervals rather than sticking to a single one gives a more reliable reading.
Related articles
- How do you read a chart? — Chart types, time intervals and expanding
- What are technical indicators and how do you use them? — Adding indicators to the candlestick chart
- What is trading volume (VOL)? — Reading the volume indicator
- What is RSI (relative strength index)? — Overbought and oversold zones
- How are crypto asset prices formed? — Price formation through order matching
Author:
Paribu