Candlestick chart and moving average

Image Source

Basically Candlestick charts give a 5D representation of data. There are 5 independent variables here 

• Open The opening price
• Close The closing price
• High  The highest price reached 
• Low   The lowest price reached
• Time frame The time duration of each candle e.g. 5min, 1day, 1 week

Please take those Bullish(Green, Opening Price < Closing Price) and Bearish(Red, Closing Price < Opening Price) words by their face value as individual candles can't suggest whether there's a bullish or bearish thing going on. 

Example:

Chart Source: Zerodha Kite, Scrip name Polycab, 1 Day chart.

This is how candlesticks look like in real life. Here every candlestick = capture of data points e.g. open, high, low and close in 1 day. 1st one is a red candle. The opening was at 4420.7, low was at 3801, close was at 3878.45 and high was at 4420.7. Check opening and high are the same here. Check the second candlestick. It is a green candlestick. The closing price > the opening price. 

Chart Source: Zerodha Kite, Scrip name Polycab, 1 Day chart.

Don't try to infer anything. But this is what a real world chart looks like.

Chart Source: Zerodha Kite, Scrip name Polycab, 1 Week chart.

In the above chart every candlestick represents (Open High Low Close) data points over 1 Week. 

Just google about green n red candle, you will get better explanations. 

Moving Averages:

What do we mean by the term average? = (Sum of values)/(Number of values)

• 12, 13, 13.5, 12.9, 12.8, 14, 14.1, 14.4, 14.7, 14.75, 14.9, 15  (12+13+13.5)/3 = 12.833
• 12, 13, 13.5, 12.9, 12.8, 14, 14.1, 14.4, 14.7, 14.75, 14.9, 15  (13+13.5+12.9)/3 = 13.13
• 12, 13, 13.5, 12.9, 12.8, 14, 14.1, 14.4, 14.7, 14.75, 14.9, 15  this is your task 13.06 (How?)
• and so on

3 rows of individual numbers and average of three consecutive underlined numbers are shown above. Check the second row, the place, under which the underline has been started, has been shifted 1 place to the right. Same thing has happened in the third row. Right? This is how a moving average (Simple) works. It takes account of closing prices (default setting, which can be changed) and the software plots its locus on the chart itself as you can see the red (50 EMA) and yellow (200 EMA) lines.

Significance of moving average: 

Though moving average derives its value from the price itself, the price tries to track the moving average. That's a theory and it mostly works but there are anomalies. 

Source: Zerodha Kite, Nifty, 1 Day 

Death Cross: When lower time frame moving average (here 50) crosses higher time frame moving average (here 200) and goes below it then the condition is called Death Cross. (Red Circle)

Golden Cross: When 50 EMA crosses up 200 EMA then the condition is called Golden Cross. (Yellow Circle)

There are already premade screeners in Stockedge, Trendlyne-Golden, Trendlyne-Death, Screener-Golden, Screener-Death, Chartink-manually search for it, Tradingview - you gotta set it up.

This is the first step towards reading a candlestick chart.