What Is a Candlestick Chart
A candlestick chart (also called a Japanese candlestick chart) is the most commonly used price chart in financial markets. Each candlestick represents price movement within a time period, containing four key prices: open, close, high, and low.
Candlestick charts originated from the rice markets of Japan's Edo period and were later adopted in stock and cryptocurrency markets. They're widely used because they clearly display price trends, volatility range, and market sentiment all in a single chart.
On Binance's trading page, candlestick charts are displayed by default. Understanding how to read them is the foundation for any trading decision.
Components of a Single Candlestick
Each candlestick consists of three parts: the body, the upper wick (shadow), and the lower wick (shadow).
Body: The thicker middle section of the candlestick. The top and bottom of the body represent the open and close prices (or vice versa, depending on whether the price rose or fell).
Upper wick: The thin line extending above the body. Its tip represents the highest price during that time period.
Lower wick: The thin line extending below the body. Its bottom represents the lowest price during that time period.
Color distinction for gains and losses:
When the closing price is higher than the opening price (price went up), the candlestick displays in green (in Binance's default color scheme). In this case, the bottom of the body is the open price and the top is the close price.
When the closing price is lower than the opening price (price went down), the candlestick displays in red. In this case, the top of the body is the open price and the bottom is the close price.
Note: Different platforms may use different color schemes. Some platforms use green for up and red for down; others use the opposite. You can customize the color scheme in Binance's settings.
Choosing Timeframes
Candlestick charts can be set to different timeframes, with each candlestick representing a different time duration:
Common timeframes:
- 1 minute, 5 minutes, 15 minutes: suitable for scalpers and ultra-short-term traders
- 1 hour, 4 hours: suitable for day traders
- 1 day (daily): the most commonly used timeframe, suitable for most investors
- 1 week (weekly): suitable for medium to long-term investors
- 1 month (monthly): suitable for long-term trend analysis
In the Binance app's chart interface, you can find timeframe switching buttons above the chart and tap to select your desired period.
What timeframe should beginners use?
Beginners are recommended to start with the daily chart. Daily charts clearly reflect each day's price movement without the noise of short timeframes or the over-generalization of long timeframes.
If you trade short-term, refer to the 1-hour and 4-hour charts. For long-term investing, weekly and monthly charts are more valuable.
Common Candlestick Patterns
By observing candlestick shapes, you can gather valuable market information:
Large bullish candle (marubozu): A long green body with very short wicks. Indicates strong buying pressure with significant price increase. Usually a bullish signal.
Large bearish candle: A long red body with very short wicks. Indicates strong selling pressure with significant price decline. Usually a bearish signal.
Doji: The open and close prices are nearly identical, with a very small or line-like body. Indicates balanced forces between bulls and bears—market indecision. Appearing at the top or bottom of a trend may signal a reversal.
Hammer: A small body at the top of the candle with a long lower wick. Indicates the price dropped significantly during the period but was pulled back. If appearing at the end of a downtrend, may signal a rebound.
Shooting star (inverted hammer): A small body at the bottom of the candle with a long upper wick. Indicates the price rose significantly but was pushed back down. If appearing at the end of an uptrend, may signal a pullback.
Spinning top: A relatively small body with wicks of moderate length on both sides. Indicates market volatility without clear direction.
How to View Candlestick Charts on Binance
Step 1: Open the Binance app, go to "Trade," then "Spot."
Step 2: Select the trading pair you want to view (e.g., BTC/USDT).
Step 3: The chart in the middle of the trading page is the candlestick chart. Tap the chart to enlarge.
Step 4: Select your timeframe above the chart.
Step 5: Swipe left and right on the chart to view historical candlesticks. Pinch with two fingers to zoom.
Step 6: Long press on a candlestick to view its detailed data: open, close, high, low, and trading volume.
How to Read Volume
Below the candlestick chart, you'll typically see a volume bar chart. Each bar corresponds to the candlestick above it.
Volume represents how much of the asset was traded during that time period. Higher volume indicates greater market activity and more reliable price movements.
Price up, volume up: Price rising with increasing volume means the rally is supported by market capital—the trend may continue.
Price up, volume down: Price rising with decreasing volume means the rally is losing momentum—a pullback may be imminent.
Price down, volume up: Price falling with increasing volume means heavy selling pressure—the decline may continue.
Price down, volume down: Price falling with decreasing volume means selling pressure is weakening—the bottom may be near.
Simple Trend Analysis Methods
Even without understanding complex technical analysis, beginners can use these methods for simple trend assessment:
Watch highs and lows: If each successive high is higher than the last, and each low is higher than the last, it's an uptrend. Conversely, if both highs and lows keep declining, it's a downtrend.
Watch moving averages: You can add moving average (MA) lines to the Binance chart. The most commonly used are MA7 (7-day moving average) and MA25 (25-day moving average). When the short-term MA is above the long-term MA, it's generally an uptrend; the reverse indicates a downtrend.
Watch price relative to MAs: If price consistently runs above the moving average, sentiment is bullish; if consistently below, sentiment is bearish.
Practical Tips for Beginner Chart Readers
Don't over-interpret a single candlestick: One candlestick provides limited information—analyze it in context with surrounding candlesticks.
Use large timeframes for direction, small timeframes for entry: First determine the overall trend on daily or weekly charts, then switch to hourly charts to find specific entry or exit points.
Focus on key price levels: Previous highs and lows often have significance. Price may encounter resistance near previous highs and find support near previous lows.
Don't watch charts every minute: If you're a medium to long-term investor, checking the daily chart once a day is sufficient. Frequent chart watching is influenced by short-term volatility and leads to impulsive decisions.
Practice with simulated trading: Before fully mastering candlestick analysis, practice with simulated trading or trade with very small amounts.
Candlestick chart reading is a skill that requires long-term experience accumulation. Take your time learning through actual trading and don't expect to understand every price movement overnight. The most important thing is to develop your own analytical framework rather than blindly trusting any single candlestick pattern.