Beginner's Quick Guide to Candlestick Charts: Pure Essentials

Candlestick charts are the most basic way to display price in technical analysis. They can turn the dull open, close, high, and low prices into intuitive charts, allowing you to see market price fluctuations at a glance.

Each candlestick contains four core data points: the opening price is the starting price of the corresponding period, the closing price is the end price of the period, the highest price is the highest transaction price within the period, and the lowest price is the lowest transaction price within the period.

To understand candlesticks, first understand the cycle. The cycle refers to the time length each candlestick represents, which can be switched between 1 second, 1 minute, 45 minutes, 1 hour, 1 day, 1 month, and other different levels. Different cycles correspond to different market analysis dimensions. When analyzing the chart, first identify the cycle to accurately interpret signals.

The structure of candlesticks is easy to distinguish: the rectangle in the middle is the body, the thin line above the body is the upper shadow, representing the highest price within the period; the thin line below the body is the lower shadow, representing the lowest price within the period. The market uses green for upward movement and red for downward movement: a green bullish candlestick indicates the close is higher than the open, signaling a rising market; a red bearish candlestick indicates the close is lower than the open, signaling a falling market.

Candlesticks can be divided into three categories based on the cycle, to meet different analysis needs:

Short cycle: 1 minute, 1 hour, suitable for capturing short-term market fluctuations.

Medium cycle: 1 day, 1 week, used to judge medium-term trends.

Long cycle: 1 month and above, to grasp the overall market direction.

Candlesticks are the core foundation of all technical analysis. Common indicators like moving averages, EMA, MACD, etc., are all derived from candlestick patterns. Learning candlestick analysis logic can be applied across various investment markets.

Next are the most commonly used candlestick reversal patterns in practical trading, which are simple to recognize and are key signals for judging market trends.

The Morning Star appears at the end of a downtrend, characterized by a pattern of continuous decline beforehand + a doji candlestick in the middle + a subsequent bullish candlestick. The doji has long upper and lower shadows. This signals a market rebound or bottoming out, indicating a high probability of trend reversal to the upside. Combining this with previous low points makes the signal more accurate.

The Evening Star is the opposite of the Morning Star, appearing at the top of an uptrend. Its pattern is continuous rise beforehand + a doji candlestick in the middle + a subsequent bearish candlestick, signaling a market top and an imminent decline. It suggests the trend is likely to reverse and weaken.

Bullish Engulfing: a large bullish candlestick completely engulfs the previous bearish candlestick, indicating strong buying pressure. The bulls have completely suppressed the bears, which is a clear buy signal. The larger the bullish body, the stronger the reversal signal.

Bearish Engulfing: a large bearish candlestick completely engulfs the previous bullish candlestick, often appearing at the top of an uptrend. It indicates that the bears dominate the market, serving as a clear sell signal.

In practical trading, remember: a single candlestick pattern cannot be used as the sole basis for trading decisions. It needs to be validated with multi-timeframe analysis, support and resistance levels, and multiple signals overlapping. When multiple signals coincide, the accuracy of judgment greatly improves. For example, if a Morning Star appears at a previous low or an Evening Star at a previous high, the signal’s reference value is higher.

The candlestick logic on-chain trading is completely consistent with mainstream markets. Learning candlestick analysis not only helps understand the trends of mainstream cryptocurrencies but also makes it easy to interpret the price fluctuations of on-chain tokens. It is the core first step in technical analysis.

This article only represents the author’s personal opinion and does not reflect the platform’s stance or views. It is for informational sharing only and does not constitute any investment advice to anyone.