Candlestick chart (K-line), which originated from the rice market of Japan in the late 18th century, was found by a Japanese rice trader Munehisa, Honma. It's also known as candlestick, a technical analysis method about the price prediction of financial products like stock, gold, etc. in Asia.
What is the Candlestick chart (K-Line)?
In the transaction page of cryptocurrency exchange, we can often see the candlestick chart of cryptocurrency trends as follows. In the crypto trading market, the candlestick chart is the result of the direct opposition between buyers and sellers. With a candlestick chart, you can know the open price, close price, high and low price of the cryptocurrency in a certain period. And it helps you to learn and study the fluctuation of cryptocurrency prices in a more intuitive way.
Three main shapes of candlestick
A candlestick consists of three parts: body, upper shadow, and lower shadow. The part between the open price and close price, drawn into a rectangle, is the body of a candlestick.
Note: In European and American markets, the body of the Yang line is green, and red for the Yin line, which is different from that in Chinese or Asian markets.
1) Yang Line
In a certain period, if the close price is higher than the open price, and the body is filled with blank or red color, it's Yang line, shown as below. A line drawn between the highest price and the close price is called the upper shadow of a candlestick, and the line between the open price and the lowest price is called the lower shadow of a candlestick.
2) Yin Line
If the close price is lower than the open price, and the body is filled with green color, it is called the Yin line. The line drawn between the highest price and the open price is called the upper shadow of a candlestick. And the part drawn between the lowest price and the close price is the lower shadow of a candlestick.
3) Doji Line
If the close price equals the open price, there will be a horizontal line instead of the rectangle body. And no upper and lower shadow either.
In addition to the shape, candlestick can be also drawn according to the timeline, for example, minute, hour, day, week, month, year, or an indefinite period. For short-term investors, a minute or hour candlestick chart is more useful, while month or year K-line chart for long-term investors.
Basic technical analysis of candlestick chart
The analysis of the candlestick chart is the basic, but also core technique in investment. In this session, we will show you how to analyze some common candlestick patterns.
1) Long Yang Line
Long Yang line refers to the candlestick rises 5% or above, indicating buyers are overwhelming more than the sellers. And the price is much more likely to rise in the post-market.
2) Long Yin Line
Opposite to the long Yang line, if the candlestick chart falls 5% or higher, it will be a long Yin line. The Long Yin line indicates the price correction or price bottom building.
3) Doji Line
As mentioned above, the Doji line means that the close price equals the open price. If the upper shadow is longer, it indicates that there are more sellers. If the lower shadow is longer, it means that buyers are more than sellers. In case the Doji line shows in the high price position or low price position, there will be a price reversal.
T-line refers to the candlestick chart that has the same open price, close price, and highest price, and it just has a lower shadow. If the T line appears after a big price rising, it indicates that the price has reached the peak and it's about to fall. On the contrary, if the T line shows after a big price falling, it is a signal of price bottom which means the price will go up.
Based on candlestick chart analysis, it's easier for you to predict the price trend and get more chances to make profits in cryptocurrency investment. Now start a trade on cryptocurrency according to your candlestick chart analysis.