Crypto Candlestick Charts Analysis For Beginners In 2020
What Are Japanese Crypto Candlestick Charts?
Cryptocurrency candlestick charts are the visual patterns of the movement of the prices of crypto assets (coins, tokens, security, derivative etc.) for a specific period, be it a minute, an hour, a week, a month or any time. The history of Japanese rice trading and charts has been updated and utilized while crypto trading and charting the candlesticks. Technical analysis can be initiated by reading these simple and visually appealing candlesticks. Crypto candlestick charts provide you with the insight of the behaviour of buyers and sellers in the crypto markets and ultimately the chance to predict bearish and bullish markets, and accordingly to invest in the cryptocurrencies.
Let’s Start With The Basics Of Candlestick
Why are the patterns called candlesticks? Some of you might have understood after observing the visual. Yes! Right. They are known as candlesticks because of their rectangular shape and the wicks of lower and upper shadows of closing and opening prices respectively. For better-understanding crypto candlestick chart for beginners, it can be stated that for a defined period, multiple candlesticks are plotted to form the patterns to analyze the bullish and bearish market conditions.
What do the rectangular body and wicks of the candlesticks signify?
Rectangular Body: Wide midsection off the candlestick depicts the opening and closing of the price of a particular asset for a specific period of observation. Open: Bottom of green and top of red; Close: Top of green and bottom of a red.
Wick: Thin lines extended above and below of the body represents high and low prices.
Thus, green candlestick represents a “bullish” market when the closing price is higher than the opening price. And red candlestick represents a “bearish” market when the closing price is lower than the opening price in crypto candlestick charts.
Simplifying The Reading Of Candlestick Chart Patterns
How to read candlestick chart patterns? One question which made you want to read this article. Let us try to simplify the pattern analysis so that you can improve your skills of technical analysis.
Crypto Candlesticks Types
Before going into the analysis of patterns of the crypto candlestick charts, let us try to understand the major types of the candlesticks, which can help you in reading the charts without any complications. Three of the most significant candlesticks which are used to gauging the sentiments of the market are given below:
Doji: Thin sticks with equal length on both sides represents the indecisive market. Most of the time, swaying of asset prices in both the directions before closing near its opening price is signified by Doji(signal of neutral markets).
Hammer: When the wick of the stick is two times greater than the length of the body (something like a hammer), it represents the formation of the bottom or the indication of price rise (technically, a precursor to downtrend reversal). The pattern of the hammer is formed when the price of an asset drowns below the open price only to return later and then at the end closes more than the open price (Signal of bullish markets).
Shooting Star: When the wick of the stick is two times lower than the length of the body (something like a shooting star), it indicates that bulls might be losing controls to the bearish markets and prices are expected to fall. It occurs at the peak of an uptrend when bulls start to rally uptrend (Signal of bearish markets).
Crypto Candlesticks Patterns
Before you begin reading candlestick patterns, you must be clear about what the patterns actually mean! The series of price movements over a specific period which signifies the ups and downs in the prices of assets is called the pattern. There are several patterns which are used to analyze the market technically. Still, initially, you should start getting familiarized with patterns associated with bullish markets or uptrends in crypto candlestick charts. Few of the significant bullish crypto candlestick patterns are:
Bullish Engulfing Candle: Indicates an increase in buying pressure by appearing at the bottom of the downtrend. This pattern has the potential to reverse the trend as it indicates the entry of buyers in the market, which might raise the prices. Bullish engulfing is confirmed when the second candle fully engulfs the body of the last red candle, and therefore both the candles show the equal bottom.
Piercing Line Pattern: Indicates that bulls are taking the control and traders are interested in buying—two stick patterns with a long bearish candle being followed by a long green candle. The pattern is made when at the beginning of the trading session, buying pressure increases and the second candle closes more than halfway up the body of the first.
Three White Soldiers Pattern: Indicates the strong bullish signal after the downtrend and signifies the advancement in the buying pressure. Three consecutive green sticks with small wicks make the three white soldiers pattern which means that prices are opening and closing higher than the previous day.
How do candlestick charts work? Thus, till now, you must be familiar with underlying patterns of the crypto candlestick charts. With the tools of the trading View, Coingy, Coinalyzer, etc., you can enhance your knowledge and analytical skills so that you can achieve the expected profits from the crypto markets. But you need to be cautious and clearly understand the concepts before entering the crypto markets.
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