In order to navigate the change in the cryptocurrency rate and respond to market signals in time, you need to pay attention to the "course charts". On many information resources there are special schemes that record changes in the value of the asset. Such schemes are called graphs.
In addition to the diagrams and linear displays of volatility that are familiar to the reader, market information providers often use the interval technical chart – Japanese Candlesticks (JC). Let's talk about it.
Japanese Candlesticks – display of quotations on stock exchanges
JC is an interval technical chart indicator that displays price changes on stock exchanges. By its nature, the JC is a hybrid of linear and interval plots. The curve of the chart consists of individual elements (candlesticks), which reflect the price change during one trading session.
For an example, look at the Japanese Candlestick chart here.
Due to the high information content of the JC graphics and many adjustable instruments (which we will discuss in the next articles of the rubric), it is often used for technical analysis of the course and forecasting.
It is interesting! According to legend, the graphics system of Japanese Candlesticks was invented in the XVIII century by the Japanese rice trader Munehisa Homma. Homma, having inherited from the father rice plantation with the workers, began to study the principles of trade and price. As a result, he invented the schedule, which is still in demand today.
To understand how the chart works, consider its individual parts – candlesticks.
Japanese candlesticks: "anatomy" of candlesticks
Candlesticks are the red or green rectangles that make up the graph curve. Each such rectangle means the following parameters: opening and closing of a trading session; maximum and minimum asset price in a separate session.
The body of the candlestick indicates the opening and closing prices of the auction and is represented by a colored rectangle. Possible price deviations of transactions (above and below) are called a shadow or wick of a candle. Wick JC demonstrates the maximum and minimum cost per session.
The area between the opening and closing prices is represented by a rectangle, it is called the body of the candlestick. Price deviations above and below it is shadows. They show the maximum and minimum value for the period.
According to the color differences, candlesticks are divided into bullish (green) and bearish (red).
Additionally! Bulls are called traders who play on the appreciation. Bears, on the contrary, bidders who are trying to reduce the price.
Separately, we consider bullish and bearish candlestick.
Bullish (green) candlesticks
Green JCs indicate price increases, the closing price of a trading session is higher than the opening price. Depending on the size of the candle body, its importance is considered – the large body of the green candle indicates a strong pressure from the bulls and the strength of the uptrend.
Above and below the body of the bullish candlestick are shadows (wicks). The top wick indicates the maximum price that was at the time of the auction. The bottom wick - on the contrary, displays a price minimum. Body size is pressure force. The data of the upper edge of the candlestick indicate the closing price of the session, the lower boundary of the body – the opening price. In green candlesticks: the closing price is always higher than the opening price, they symbolize the growth of the cryptocurrency rate.
Bearish (red) candlesticks
Red candlesticks also have a body and two wicks (upper and lower). As in the previous case, the upper wick means the maximum price, and the lower minimum.
It is important to note that the wicks (in cases with both types of candles) may be short or long. If the wick is short, the range of price change per session is concentrated around the closing-opening figures. On the contrary, if the wick is long, it means that the course has moved away from the borders of the closing-opening several times, the longer the shadow, the wider the range.
The size of a red candlestick means the strength with which the rate and pressure of a downtrend fall. So, for example, if there are three long red candlesticks with large wicks on a JC cryptocurrency chart in a row, the asset will most likely fall in value due to the strong pressure of the players to fall.
The upper limit of the bearish candlestick indicates the opening price, and the lower one at the closing price of the trading session. In the case of red candlesticks, the closing price will always be lower than the opening price, as they indicate a depreciation.
For those who are interested to find out why the cryptocurrency rate is changing, we recommend reading the previous articles about cryptocurrency market efficiency and rate manipulation, and on Marx's labor theory and its impact on the crypto course.
Editor: Godfrid Brower