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Candlestick & Depth Charts Explained + Buy & Sell Walls, Day/Swing/Position Trading | Crypto Jargon - YouTube
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[Music]
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hello and welcome to crypto jargon the
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series where I am breaking down the
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complex crypto related terminology in
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this episode I'll explain what is a
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candlestick chart depth chart and
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trading walls and I will also talk about
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the types of trading such as day trading
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swing trading and position trading okay
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so let's get started with Candlestick
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charts these originated in Japan in the
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18th century when the Japanese rice
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trader Mauna Kea Houma discovered that
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while there was a link between price and
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the supply and demand of rice the
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markets were strongly influenced by the
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emotions of traders he invented the
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candlestick chart where there is a
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multitude of candlesticks showing that
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emotion by visually representing the
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size of price moves with different
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colors
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traders views the candlesticks to make
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trading decisions based on regularly
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occurring patterns that helped forecast
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the short-term direction of the price a
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candlestick shows the markets open and
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close price as well as the high and low
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price for a fixed time period if that
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period is a day we call it a day candle
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or if the parameters are set to one hour
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it's an hourly candle it can also be a
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weekly or even monthly period or as
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little as one minute or five minute or
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15 minutes and so on if you are a
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position trader for instance you
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wouldn't care much about these smaller
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timeframes you would rather analyze the
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daily weekly or even monthly
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candlesticks but if you are a day trader
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you would care about the smaller
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timeframes as you would be working
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within a very short time limit I'll get
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to the types of traders in a moment but
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first let's use the daily candlestick
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and give an example of what it looks
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like and how to read it the candlestick
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has a white part which is called the
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real body the real body represents the
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price range between the opening and the
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closing prices of that day when the real
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body is filled in green or black it's a
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bullish candle meaning the close was
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higher than the open so the prices went
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up that
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day if the real body is red or white the
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close was lower than the open in other
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words the prices went down that day they
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were higher when the trading day started
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then when it ended just above and below
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the real body are the shadows all weeks
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the weeks show the highest and lowest
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price points of that day's trading if
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the upper shadow on a Down candle is
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short it indicates that the open of that
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day was near the high of the day or when
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it's much longer it shows us that the
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prices went up much more during the day
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but the day started at the price that
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was far below the high in short the wick
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of the candle extends to the highest and
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lowest price of that day while the full
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body indicates the price range between
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the open and close for that day there's
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a lot of activity during a day and all
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that activity is represented by that one
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candle if we look at this smaller time
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frame these are all 15 minute candles
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over a period of one day we see a much
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more detailed picture on what is going
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on throughout that day the price is
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going down and up and down again
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multiple times during the day so all of
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this information is squeezed here in
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this one day candle the main body shows
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us the opening and the closing price and
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the week tells us where the highest and
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lowest prices were and the length of
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that week compared to the length of the
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body is also indicative which is why we
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have some really short candles
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indicating that there wasn't much
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volatility in the price range for that
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day or it can be a very long candle when
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the prices were moving quite a lot with
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a larger margin this is why there are
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many types of candlesticks such as the
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doji the evening star or the morning
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star a hammer a hanging man and many
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others candlesticks are really
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containing a lot of information about
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the trading activity of their time frame
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and this is why they are the most widely
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used methods of technical analysis there
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are other charts that traders use
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besides candlestick charts and one of
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these is called a depth chart
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a depth chart is a graph showing how
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many limits sell orders and limit buy
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orders are currently open on a certain
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exchange limit order by the way is
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explained in another episode of crypto
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jargon so make sure you watch that one
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to see the description box for more
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details the depth chart shows the
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cryptocurrencies liquidity at that
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exchange buy orders are displayed in
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green and the sell orders in red by
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reviewing the depth chart you will find
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the likely market appetite for a certain
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buy or sale price the higher the volume
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of orders at any given price the higher
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the amount of green or red field will be
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when there is an extremely high volume
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of orders at a certain price level the
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graph can resemble a wall which is
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referred to as a trading wall if a wall
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is created by a large buy order it's
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called a buy wall and if it represents a
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sizeable sell order it's called a cell
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wall this can also be called bid walls
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and in many occasions they can even be
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fake walls meaning that wealth or other
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market manipulators are placing these
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orders temporary only to sway other
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traders into a certain direction and
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move the market fake trading walls
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often disappear shortly after the
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targeted price movement happens and
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before they get executed and they are
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only relevant to day traders since they
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are the ones who trade within really
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short timeframes so let's explain day
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trading this is the practice of buying
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or selling an asset with the beginning
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to end process of it taking place within
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24 hours day traders look for small
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price shifts minute to minute and do
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their best to maximize their profits or
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minimize their losses by making several
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transactions a day but without leaving
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any open orders overnight day traders
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depend on micro trends which are
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miniscule shifts in the market value as
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compared to position traders who may
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observe the trends of an asset over
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several days weeks or even months before
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taking an action next I want to mention
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swing trading which is a style of
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trading that attempts to capture gains
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in an asset over a period of a few
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days to several weeks swing traders
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primarily use technical analysis but
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they may also utilize fundamental
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analysis to look for trading
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opportunities and they are not concerned
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with the long term value of an asset
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swing trading is mainly used by at-home
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traders and some day traders as well
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large institutions trade in sizes that
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are too big to move in and out quickly
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while the individual trader is able to
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exploit such short-term price movements
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without having to compete with the major
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traders and moving on to position
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trading which I mentioned already in
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contrast to day trading this is an
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investing strategy in which open
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positions are held for an extended
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period and by extended I mean weeks or
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months and even longer position traders
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will hold their asset for a while with
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the expectation that it will appreciate
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in value they are less concerned with
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short-term fluctuations and the news of
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the day unless it impacts the long term
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view of their position in this regard
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they do not trade actively many of them
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place less than 10 trades a year
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position traders are by definition
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trained followers their core belief is
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that once a trend starts it is likely to
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continue only the bite and hold long
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term investors who are classified as
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passive investors hold their positions
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for longer periods than the position
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traders enjoying this content go check
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