Trading Basics

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  • Published At: 03.02.19 23:28
  • Last Updated At: 21.05.19 00:46
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How to read a candle chart-

 Candles accurately record the price action of an asset within a pre-determined time frame.  For example, on a 1 hour chart each “candle” represents 1 hour of price action.  Candles are made of two parts- the body and the wick.  The candle body represents the opening and closing price of the asset within the specific time frame.  The wick, which are straight vertical lines protruding from either side of a candle, represents the price range of the asset in the given time frame.  The opening price of a red candle will be the top of the body, and the bottom of the body shows the closing price.  The opposite is true for a green candle, with the bottom of the candle representing the opening price, and the top being the close.


How to understand the different timeframes-

 A chart’s timeframe delineates how much time is represented by each candle.  On a daily timeframe, each candle represents a day.  On a 5 minute timeframe, each candle represents 5 minutes.  The timeframe designation can usually be found in the top left corner of a chart, accompanied by the name or pairing of the particular asset.

How to draw on the chart and why-

 Drawing on charts can be done with various tools provided by the platform being used to view the chart.  On TradingView, a list of tools runs down the left side of the chart.  Trendlines, support, and resistance are the most common lines drawn on a chart, and they help to give a visual picture of how an assets price action is moving.  A Trendline is drawn by connecting the furthermost candle point to the most recent candle point.  The trend line, once drawn on a chart, will show the direction of the assets price action, and will help to spot reversals when price breaks the trend.


What is volume?

 Volume is the amount of the specific asset that is being traded.  On most charts, volume is represented by vertical bars along the bottom of the chart.  In most cases, the bars are colored green or red indicating whether selling (red) or buying (green) volume dominated the timeframe.  Current trading volume is usually shown in the top right corner of a chart, and reflects the total amount of crypto currency or fiat being traded in real-time.  In order to ensure that your buy and sell orders are filled there has to be a sufficient amount of the asset being traded in the market.  For example, if you place a buy order for 10 Bitcoin @ $10,000, there has to be at least 10 Bitcoin for sale at that price to execute the trade.  Most traders usually stay away from low volume assets due to the inherant risk of not having a buyer willing to pay the asking price of your sell order.  

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