Education
Beginner's guide to candlestick charts
t of Co
Introduction
As a novice in trading and investing, reading trading charts can be a difficult task. Some people only rely on their intuition and subjective ideas to invest. Although this approach may work temporarily in a bullish market environment , it is likely to suffer significant losses in the long run.
In essence, trading and investment are games of probability and risk management . Therefore, being able to read the K-line chart is essential for all investment methods. This article will explain what K-line diagrams are and how we can read them.
What is a candlestick chart?
A candlestick chart is a financial chart that graphically represents changes in asset prices in a given time frame. As the name implies, it consists of cylinders , each cylinder representing the same time. Cylinders can represent any time range, from seconds to years.
The history of the K-line diagram can be traced back to the 17th century. As a drawing tool, the invention of the K-line chart is due to a Japanese rice trader named Homma. His ideas laid the foundation for the K-line diagram we use in modern times. Later, many people, including Charles Dow , one of the fathers of modern technical analysis , perfected Homma's invention.
Although candlestick charts can be used to analyze any other type of data, they are often used to simplify financial market analysis. If used properly, they can be used as tools to help traders assess the probability of price fluctuations. They allow traders and investors to form their own opinions based on the analysis of the market, and are therefore very useful.
How does the K chart work?
The creation of each column requires the following price points:
- Opening price —The first transaction price record for an asset in a specific time frame .
- Highest price -The highest transaction price record of an asset in a specific time frame .
- Lowest price -The lowest transaction price record of an asset in a specific time frame .
- Closing price -The last transaction price record of an asset within a specific time frame .
The distance between the opening and closing prices is called an entity, and the distance between the entity and the highest / lowest price is called a candle wick or shadow. The distance between the height of the candle is called the range of the column.
1.Abandoned Baby
An uncommon inversion design described by a hole followed by a Doji, which is then trailed by another hole the other way. The shadows on the Doji should totally hole beneath or over the shadows of the first and third day.
2.Dark Cloud Cover
A bearish inversion design that proceeds the upturn with a long white body. The following day opens at another high, at that point closes underneath the midpoint of the body of the principal day.
3.Doji
Doji structure when the open and close of a security are basically equivalent. The length of the upper and lower shadows can fluctuate, and the subsequent candle seems as though either a cross, reversed cross or in addition to sign. Doji pass on a feeling of hesitation or back-and-forth among purchasers and venders. Costs move above and beneath the initial level during the meeting, however close at or close to the initial level.
4.Downside Tasuki Gap
A continuation design with a long, dark body followed by another dark body that has gapped underneath the first. The third day is white and opens inside the body of the subsequent day, at that point shut in the hole between the initial two days, yet doesn't close the hole.
5.Dragonfly Doji
A Doji where the open and close cost are at the high of the day. Like other Doji days, this one ordinarily shows up at showcase defining moments.
6.Engulfing Pattern
An inversion design that can be bearish or bullish, contingent on whether it shows up toward the finish of an upturn (bearish overwhelming example) or a downtrend (bullish immersing design). The principal day is described by a little body, trailed by a day whose body totally inundates the earlier day's body and shut the other way of the pattern. This example is like the outside inversion outline design, yet doesn't require the whole range (high and low) to be overwhelmed, only the open and close.
7.Evening Doji Star
A three-day bearish inversion design like the Evening Star. The upturn proceeds with a huge white body. The following day opens higher, exchanges a little range, at that point closes at its open (Doji). The following day closes underneath the midpoint of the body of the main day.
8.Evening Star
A bearish inversion design that proceeds with an upswing with a long white body day followed by a gapped up little body day, at that point a down close with the nearby underneath the midpoint of the principal day.
9.Falling Three Methods
A bearish continuation design. A long dark body is trailed by three little body days, each completely contained inside the scope of the high and low of the principal day. The fifth day closes at an amazing failure.
10.Gravestone Doji
A doji line that creates when the Doji is at, or close, the low of the day.
11.Hammer
Mallet candles structure when a security moves fundamentally lower after the open, yet rallies to close well over the intraday low. The subsequent candle resembles a square candy with a long stick. On the off chance that this candle structures during a decrease, at that point it is known as a Hammer.
12.Hanging Man
Hanging Man candles structure when a security moves fundamentally lower after the open, however rallies to close well over the intraday low. The subsequent candle resembles a square candy with a long stick. On the off chance that this candle structures during a development, at that point it is known as a Hanging Man.
13.Harami
A two-day design that has a little body day totally contained inside the scope of the past body, and is the contrary shading.
14.Harami Cross
A two-day design like the Harami. The thing that matters is that the most recent day is a Doji.
15.Inverted Hammer
A one-day bullish inversion design. In a downtrend, the open is lower, at that point it exchanges higher, yet closes close to its open, in this way resembling a reversed candy.
16.Long Body / Long Day
A huge value move from open to close, where the length of the light body is long.
17.Long-Legged Doji
This candle has long upper and lower shadows with the Doji in the day's exchanging range, unmistakably mirroring the uncertainty of dealers.
18.Long Shadows
Candles with a long upper shadow and short lower shadow show that purchasers overwhelmed during the initial segment of the meeting, offering costs higher. On the other hand, candles with long lower shadows and short upper shadows demonstrate that merchants commanded during the initial segment of the meeting, driving costs lower.
19.Marubozu
A candle with no shadow reaching out from the body at either the open, the nearby or at both. The name implies neatly trimmed or close-cut in Japanese, however different translations allude to it as Bald or Shaven Head.
20.Morning Doji Star
A three-day bullish inversion design that is fundamentally the same as the Morning Star. The principal day is in a downtrend with a long dark body. The following day opens lower with a Doji that has a little exchanging range. The most recent day closes over the midpoint of the main day.
21.Morning Star
A three-day bullish inversion design comprising of three candles - a since quite a while ago bodied dark light expanding the current downtrend, a short center flame that gapped down on the open, and a since quite a while ago bodied white light that gapped up on the open and shut over the midpoint of the body of the primary day.
22.Piercing Line
A bullish two-day inversion design. The main day, in a downtrend, is a long dark day. The following day opens at an amazing failure, at that point closes over the midpoint of the body of the primary day.
23.Rising Three Methods
A bullish continuation design in which a long white body is trailed by three little body days, each completely contained inside the scope of the high and low of the main day. The fifth day closes at another high.
24.Shooting Star
A solitary day design that can show up in an upswing. It opens higher, exchanges a lot higher, at that point closes close to its open. It looks simply like the Inverted Hammer aside from that it is bearish.
25.Short Body / Short Day
A brief day speaks to a little value move from open to close, where the length of the light body is short.
26.Spinning Top
Candle lines that have little bodies with upper and lower shadows that surpass the length of the body. Turning tops sign uncertainty.
27.Stars
A candle that holes from the past candle is supposed to be in star position. Contingent upon the past candle, the star position candle holes up or down and seems secluded from past value activity.
28.Stick Sandwich
A bullish inversion design with two dark bodies encompassing a white body. The end costs of the two dark bodies must be equivalent. A help cost is evident and the open door at costs to switch is very acceptable.
29.Three Black Crows
A bearish inversion design comprising of three continuous long dark bodies where every day closes at or close to its low and opens inside the body of the earlier day.
30.Three White Soldiers
A bullish inversion design comprising of three successive long white bodies. Each should open inside the past body and the nearby ought to be close to the high of the day.
31.Upside Gap Two Crows
A three-day bearish example that just occurs in an upswing. The main day is a long white body followed by a gapped open with the little dark body remaining gapped over the primary day. The third day is likewise a dark day whose body is bigger than the subsequent day and overwhelms it. The end of the most recent day is still over the primary long white day.
32.Upside Tasuki Gap
A continuation design with a long white body followed by another white body that has gapped over the first. The third day is dark and opens inside the body of the subsequent day, at that point shut in the hole between the initial two days, yet doesn't close the hole.
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