Candle charts are made up by open, high, low, and the close data. Figure 1 demonstrates a candle chart of BTC/USDT.
Figure 1: BTC/USDT Daily Candle Charts
The rectangular sections of the candle lines showed in Figure 2 and Figure 3 are called the real body, which represents the range between the session’s open and close. When the real body is red, it means the close of the session was lower than the open. If the real body is green, it means the close was higher than the open.
Figure 2 : Red Candle Line
Figure 3: Green Candle Line
The thin lines above and below the real body are the shadows which represents the session’s price extremes. The shadow above the real body is called the upper shadow and the and the shadow below the real body is called the lower shadow. Accordingly, the peak of the upper shadow is the high of the session and the bottom of the lower shadow is the low of the session.
Speak of session, the normally seen duration are 1min, 5mins,15mins, 30mins, 1hour, 2hours, 6hours, day, week. For example, daily candle line shows the open, close, high, low of the day and the 15mins candle line demonstrates the open, close, high, low of 15 minutes.
Through observations of real body’s size and color, and the length of high and low shadows, we may interpret the strength of short and long.
For example, in Figure 2, the short side win over the long side during the session. However, the big lower shadow indicates that during the session, the short side pull down the price to the low but is not able to keep it at this level as the long side fight back. This may be a signal for the price to increase, however, one single candle doesn’t bear enough information for investors to forecast the trend. One needs to see the candle charts, and combine technical indicators to make estimation.
We will have more candle line introduced and interpreted in the coming articles. Stay tuned!
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