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What is a Candlestick Chart?

Candlestick charts are charts covering a specific time period and are a technical analysis method that seeks to be informed about the current trend. It is formed by taking into account the opening and closing prices, which are the lowest and highest prices. Since cryptocurrencies do not have opening and closing points, the price range is determined according to the selected time frame.


Candlestick charts are made up of boxes called bodies. A candle-like shape is formed by the combination of the lines on these bodies and the body. Therefore, such charts are called candlestick charts. It can be used for short, medium and long term analysis.


Candlestick charts present a chart that shows the uptrend or downtrend of market movements. The ups and downs are represented by the colors of the candlestick. Accordingly, if the candlestick shows an uptrend, it is green, and if it shows a downtrend, it is red.


How to Use Candlestick Charts in Technical Analysis?


Candlestick charts allow for more information at a glance when compared to other chart variants. In the candlestick charts, which show the prices in a certain time period, the price changes are expressed by colors that are up or down.


In addition to price trends, opening and closing prices are important in candlestick charts. Since the cryptocurrency market is a 24-hour market and does not have opening and closing points, the starting and ending prices in the selected time frame can be treated as opening and closing points.


What Are Commonly Used Candlestick Charts?


There are various patterns on the chart to interpret the meanings of the candles. Hammer and inverted hammer formations are among the frequently used candlestick charts. Basically, candlestick charts are divided into two categories, bullish and bearish patterns.


In bullish patterns, the charts tend to be bullish, and the closing prices are usually higher than the opening prices. In bear formations, the values on the chart tend to decrease. Closing prices are below the opening prices.


Hammer


The concept of hammer is used to express the situation where the bottom wick is at least twice as long as the body in a candlestick chart. Occurs when the price on a chart sees the lowest point and bounces back to rise. As a result of a cryptocurrency rebounding from its lowest point, a hammer-shaped candle forms on its chart.


Inverted Hammer


The shape of the reverse hammer pattern is the opposite of the hammer pattern. The wick line is located above and is represented by a line longer than the length of the candle shape. An inverted hammer refers to the situation when the price of a cryptocurrency asset bounces off the top and then goes down.