Bottom line upfront: Each "small candle" on a candlestick chart represents four prices within a specific time frame: open, close, high, and low. Green represents a price increase, while red represents a decrease (Binance's default color scheme, which can be changed). The length of the body reflects the magnitude of the price change. Beginners don't need to learn complex technical analysis; understanding these basics is enough to place orders. If you don't have an account yet, register on the Binance Official Website and download the Binance Official APP; Apple users can refer to the iOS Installation Guide.
Four Prices of a Single Candlestick
If you casually click open the BTC/USDT chart, each thin "candle" looks like this:
- Top thin line (Upper Shadow/Wick): The highest price during that time period.
- Top of the body: The opening price or closing price (depending on the price direction).
- Bottom of the body: The other opening/closing price.
- Bottom thin line (Lower Shadow/Wick): The lowest price during that time period.
Green (Bullish Candle): Closing price > Opening price, indicating the price went up. Red (Bearish Candle): Closing price < Opening price, indicating the price went down.
The longer the body, the more drastic the price change during that period.
What is a Time Frame?
Below the candlestick chart, there is a row of time tags: 1m, 5m, 15m, 1h, 4h, 1d, 1w. This represents the duration each candle stands for.
- 1m: 1 minute per candle (Suitable for ultra-short-term trading, beginners should avoid).
- 15m / 1h: Looked at for intraday trading.
- 4h: Medium-term observation.
- 1d (Daily chart): Most commonly used by beginners, each candle represents one day.
- 1w (Weekly chart): Used to determine long-term trends.
In the first stage, beginners are advised to only look at the daily and 4-hour charts. The "fluctuations" on the 1-minute and 5-minute time frames are mostly noise and will only mess with your mindset.
Understanding These Forms is Enough for Beginners
Beginners must learn the following four basic candlestick patterns:
Long Bullish / Bearish Candle
Candles with exceptionally long bodies. This implies an extreme imbalance of long and short forces within a single day.
- Long Bullish: Strong buying pressure, market sentiment is improving.
- Long Bearish: Strong selling pressure, market panic.
When beginners see a long bullish candle, don't rush to chase it; when you see a long bearish candle, don't rush to panic sell. Wait for the next candle to form before judging the direction.
Doji
The opening and closing prices are almost equal, and the body is very small (leaving only two thin lines). This means longs and shorts are in a stalemate, and the direction is undecided.
It usually appears at the end of a trend and serves as a reversal signal. However, it could also be a continuation pattern, so don't overinterpret it.
Long Upper and Lower Shadows
The body is very short, but the upper and lower shadows are exceptionally long. This means the price experienced severe volatility but returned to the starting point. It indicates that there is strong support or resistance at this price level.
Consecutive Bullish / Bearish Candles
3-5 consecutive candles of the same color. A signal of a strong trend. Beginners who chase buys during consecutive bullish candles often get stuck at the top, and those who try to buy the dip during consecutive bearish candles often get cut catching a falling knife.
A Few Most Useful Auxiliary Lines
Binance candlestick charts come with a few moving averages by default. You can long-press the chart to turn them on/off:
| Moving Average | Meaning | How Beginners Use It |
|---|---|---|
| MA7 | Average closing price of the last 7 candles | Short-term trend |
| MA25 | Last 25 candles | Medium-term trend |
| MA99 | Last 99 candles | Long-term trend (Bull/Bear boundary) |
The simplest way to judge:
- Price above MA99 → General direction is bullish.
- Price breaks below MA99 → General direction is bearish.
- MA7 crosses above MA25 → Short-term signal is bullish (Golden Cross).
- MA7 crosses below MA25 → Short-term signal is bearish (Death Cross).
Beginners just need to remember these two crossover signals; don't touch other indicators for now.
Trading Volume is Also Important
The bars below the candlestick chart are the trading volume. Each bar corresponds to the candle above it; the taller the bar, the more active the trading during that period.
How to judge:
- Price goes up with high volume → A real uptrend, high credibility.
- Price goes up with low volume → A fake uptrend, stay alert.
- Price goes down with high volume → A real downtrend, prioritize stopping loss.
- Price goes down with low volume → Selling pressure is weakening, might be bottoming out.
Looking at trading volume alongside candlesticks is more useful than any complex indicator.
Common Chart Pitfalls for Beginners
Pitfall 1: Staring at small time frames. Staring at 1-minute or 5-minute charts to trade makes you feel like there are many opportunities every day, but 90% of them are noise. Over a week, your trading fees will exceed your profits.
Pitfall 2: Memorizing indicators and formulas. MACD, RSI, Bollinger Bands, KDJ... Beginners get dizzy after researching for three days. These indicators are references, not crystal balls.
Pitfall 3: Ignoring the general direction. Looking for short-term rebounds to go long in a daily downtrend is almost always going against the trend and throwing money away.
Pitfall 4: Only looking at the coin you bought. If BTC drops, the entire market drops; if BTC rises, the entire market rises. Always look at the weekly direction of BTC first before deciding to trade a specific altcoin.
Simplifying the Decision Process
If beginners follow this process to place orders, they generally won't make huge mistakes:
- Open the BTC daily chart and determine the trend: Above MA99 is bullish, below is bearish.
- Switch to the 4h chart and look at the pattern of the latest three candles: Long Bullish / Long Bearish / Doji.
- Check if the trading volume is increasing to confirm the move.
- After determining the direction, switch to the specific trading pair (like ETH) to place your order.
- Set an OCO (One Cancels the Other) take-profit and stop-loss order immediately upon entry.
Once you get used to this process, your win rate might not be extremely high, but you won't suffer massive losses.
A Complete Example of "Reading Candlesticks"
Suppose the current status of the BTC daily chart is as follows:
| Dimension | Current Status | Meaning |
|---|---|---|
| Price vs. MA99 | 8% higher | Long-term bullish |
| MA7 vs. MA25 | Golden Cross for a week | Short-term bullish |
| Last 3 daily candles | Bullish - Bullish - Small Bullish | Uptrend continuing |
| Trading Volume | Volume up 30% | Uptrend supported by volume |
| 4h Candle | Long upper shadow appears | Short-term resistance |
Comprehensive judgment: The general direction is bullish, but there is short-term resistance. How a beginner should handle this: Don't chase highs, wait for a pullback. For example, place a limit buy order near the MA7 and wait for a retracement to buy.
What Can You Do by Long-Pressing the Chart?
Long-pressing the chart on the Binance APP will enter "Full Screen Candlestick" mode. Here's what you can do:
- Switch time frames.
- Add/remove moving averages and indicators.
- Draw trend lines and horizontal support/resistance levels.
- Switch between candlestick charts, line charts, and area charts.
- Invert colors (change from the default drop=red/rise=green to drop=green/rise=red).
Beginners don't need to tinker with these for now; the default settings are sufficient.
Relationships Between Different Time Frames
The table below shows the practical correspondences for various time frames:
| Time Frame | Who Looks at It | Decision Time | Signal-to-Noise Ratio |
|---|---|---|---|
| 1m | High-frequency pros | A few minutes | Very poor |
| 15m | Intraday traders | A few hours | Fair |
| 1h | Intraday/Overnight | Half a day to a day | Fair |
| 4h | Medium-term traders | 1-3 days | Good |
| 1d | Medium to Long-term | 1-2 weeks | Good |
| 1w | Long-term investors | Several months | Excellent |
In which time frame do beginners lose the least? 4h + 1d. The shorter the time frame, the faster you burn money.
FAQ
Q: On a candlestick chart, does green mean up and red mean down, or is it red for up and green for down? A: Binance defaults to green for up and red for down (international convention). The Chinese A-share market uses red for up and green for down. You can invert the colors in the settings.
Q: There are so many candlestick indicators; do I have to learn them all? A: Not at all. For the first 3 months, beginners only need to focus on these four things: candle bodies, shadows, moving averages, and trading volume. All other indicators are just extensions.
Q: Why does my chart look different from someone else's? A: It could be due to differences in color schemes, time frames, or whether moving averages are displayed. The Binance APP and web version show the same data; if you both look at the BTC/USDT 4h chart, it will be absolutely identical.
Q: Can candlestick charts predict price increases and decreases? A: They cannot predict; they can only infer probabilities. The market is unpredictable; you can only make decisions that put the odds in your favor.
Q: How long does it take for a single candle to form? A: It depends on the time frame you selected. On a 1h time frame, a candle takes 1 hour to complete; on a 1d time frame, it takes one day. The current one is called an "unclosed candle" and will keep changing until the time frame ends.
Q: How do I see how much the price has risen over a year? A: Switch to the 1w weekly chart and scroll left by 52 candles. Or just look at the "Annual Change" on the "Markets" page.
Q: Is technical analysis reliable? A: It has reference value, but it's not a crystal ball. There are people in the market who make a living on technical analysis, and there are those who only trade on fundamentals and ignore charts. For beginners, learning how not to lose big money is 10 times more important than learning how to predict price movements.
Beginners must remember: Candlestick charts are merely auxiliary tools; capital management is king. If your positions are well-controlled, you won't get liquidated whether you look at charts or not; if your positions are out of control, even the most brilliant chart analysis won't save you.