Candles and levels
Lesson 3 of 39 in the course “Crypto”. Free, with animations and a quiz.
One candle = one time period
Price charts are usually drawn with candles. One candle shows one time period, for example an hour or a day. The open is the price at the start of the period, the close is the price at the end. The thick part, the body, runs from open to close. The thin lines, the wicks, show the highest and lowest price in that period. Green candle: close above open. Red: close below open.
Floor and ceiling
A level is a price where the chart has already turned more than once. Support, the floor: price falls to the level and bounces up, because many buyers wait there. Resistance, the ceiling: price rises to the level and stalls, because many sellers wait there. A breakout, meaning a candle closing beyond the level, often starts a strong move. Often, not always.
Volume = strength of a move
Volume is how many coins were bought and sold during the period. It is usually drawn as bars under the candles. If price rises and the bars are tall, a lot of money is behind the move, so the rise is more trustworthy. A rise on small volume rests on few trades and often fades fast. This is a guide, not a law: volume confirms a move but guarantees nothing.
Check yourself
- The candle is red. What does it mean?
Correct answer: It closed below the open. A red candle: by the end of the period price was lower than at the start. The colour says nothing about volume. - Price fell to the same level several times and bounced up. What is that level called?
Correct answer: Support. A level below price that it bounces up from is the floor, called support. Resistance works from above, like a ceiling. - Price is rising. Which rise deserves more trust?
Correct answer: One on high volume. High volume means many trades and a lot of money are behind the rise. It is a confirmation, not a guarantee.