Wednesday, August 10, 2022

How To Read Candlesticks Crypto

Opening High And Closing Low Price Explained

How To Read a Crypto Candlestick Chart: Complete Idiot’s Guide to Crypto

The OHCL is a candlestick chart type that shows the open, high, close, and low prices for a particular time.

The open price is the price level when the previous candle closes, and the current candle appears. Later on, the price will move up or down and will create a high or low. Lastly, when the candle closes at a price, it will point to a closing price. The future price of a candlestick stock depends on how these levels appeared.

Sounds confusing?

Lets have a look at an example.

Lets say the Bitcoin price moved above the $50,000 level on a particular day and made a high above the $50,000 crucial level. However, the price moved lower and closed the daily candle below the $50,000 level by forming Doji or Pinbar.

What does this mean for you?

It means buyers tried to take the price above the $50,000 level but failed thus, sellers took control over the price. It is a clear indication that the price failed to get stable above the $50,000 level, and it might be a good idea to sell now.

How To Read Crypto Charts Beginners Guide

Developing the right skills on how to read crypto charts is an art. This new skill will help you not only track the price of your favorite coin, but the crypto candlestick charts will actually tell you a lot about the trend of the market as well.

Our team at Trading Strategy Guides is a strong advocate of using charts and technical analysis. Crypto candlestick charts give you a more objective view on the cryptocurrency price versus something thats a little bit more subjective like using your intuition.

Timing the market is a common problem that many new traders have. If you want to have accurate entry and exit points you need to use cryptocurrency charts. You can have a really great trading idea and believe that Bitcoin is about to go up, but if you pick the wrong point, youre going to start losing money left and right.

If you exit too early or you exit too late you can also leave money on the table. Using crypto charts in combination with technical analysis, you can balance that out.

In this cryptocurrency guide, were going to cover just some basic fundamentals on how to read crypto charts and the cryptocurrency analysis tool that you need to succeed in this business.

Were also going to outline our favorite cryptocurrency analysis tools and resources for trading Bitcoin and altcoins.

The Story Of A Candlestick

While candlesticks may appear to be completely analytical in nature, they actually convey a complex story that is constantly evolving through contributions of market participants.

Observing an assets candlestick development over time enables you to form a deep understanding of its psychology.

The implications are profound.

Here are some scenarios that you might come across.

BTC/USD has risen 5% in the last hour. Should you change to a bullish bias?

A single hour of price action is usually not enough to change biases. If BTC/USD has risen 5% in the last hour, zoom out to a 4h or 1D timeframe to get the big picture.

If this one-hour move is contained within a bearish candle formation on larger timeframes, its probably not a good idea to flip biases until there is a reason to do so.

You’re sitting on a 15% gain on XRP/JPY now. Should you exit your position?

In a bullish move like a 15% gain on XRP/JPY, any sign of a bearish candlestick pattern would be a good place to exit a position either temporarily or permanently.

ETH/USD is in a freefall. When would be a good time to enter a long position?

When an asset is seemingly in freefall, buying down or dollar cost averaging can be a bad strategy for traders, especially those that who do .

In this scenario, it may be wise to wait for a high-volume bullish engulfing candle followed by a bullish candlestick pattern before entering a long position on ETH/USD.

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How To Start Using Candlestick Patterns On The Cryptorobotics Platform

In order to start using candlestick patterns on the Cryptorobotics trading platform, you need to follow these steps:

2). Pass the registration process.

3). Create an account on the exchange that is integrated into the terminal.

4). Link the account that is created on the exchange to the terminal by using the API key.

5). Transfer your funds to an exchange wallet

6). Click on the Trade button.

7). Select a trading exchange.

8). Select the crypto pair.

8). Select Candles.

9). Start conducting the technical analysis with the help of using a chart in the Cryptorobotics terminal.

How Do I Understand One

How To Read Crypto Charts On Robinhood

Trading in very small time frames often concentrates on a single candle. It is important to be familiar with the one-candle signals that can be beneficial for you as an aspiring trader. In the picture below, youll see four standard one-candle signals.

A prolonged upper shadow may be an indication of a bearish market, which means that investors are trying to sell their shares and make a profit. The longer the shadow, the more reliable an indicator it is.

A longer shadow on the lower side can be a positive signal and indicate that investors are seeking to buy, which can drive prices higher. The longer the shadow is, the more reliable the signal is.

A Doji candle does not have a body since the prices for the open and close are identical. This is usually considered to indicate an indecisive market and may be an indicator of a price change that is coming. (Why doji? Candlestick charts were first utilized to track prices by Japanese traders in 18th-century rice. Doji means error, likely since its not usual for prices to close and open at the exact time.

Umbrellas are distinguished by their longer bottom wicks. An umbrella that is red is called the hammer. If you spot a hammer, it usually means that the asset has received an intense buy-in and that the price could soon be heading upwards. Green umbrellas, however, are known as hanging men. Theyre usually a sign that sellers are eager to take a profit and reverse the upward trend.

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What Is A Green Candlestick

If a candlechanges to green, the price of the asset increased and closed above its opening price.

Wicks simply depict the difference between opening/closing prices and highest/lowest prices achieved during the specified period. For example, lets consider a green 10-minute candle that looks like the one depicted above. The upper wick means that at some point during the 10 minutes, the price rose above the ultimate closing price. The difference between the highest achieved price and the closing price is represented by the upper wick. Similarly, the lower wick represents the difference between the opening price and the lowest achieved price during that 10-minute period.

What Are The Bullish Candlestick Patterns

The Hammer

When it comes to appearance, the Hammer is one candlestick that is very easy to recognize. The bottom of the downtrend has a long lower wick, just like a regular hammer. The body is often small, and it may have little or no upper wick. A hammer can either be green or red.

Depending on the situation, it may indicate a prospective price increase or a strong reversal trend. The image below shows that after a period of high selling pressure, a bottom was hit. Immediately after, buyers began gaining momentum, hence the long lower wick. Once the Hammer was formed, the trend was reversed, and prices began to increase.

The Inverted Hammer

The only difference between the inverted Hammer and the Hammer is the long wick directly above the body instead of below. An inverted Hammer can be green or red.

An Inverted Hammer signifies the potential start of an uptrend in the same way that the Hammer does.

The Bullish Engulfing

Two candlesticks form this pattern at the end of a downtrend. The first candlestick is red , while the second candlestick is green and much larger than the other one. Simply put, the body of the second candle is large enough to fully engulf the previous candle. In addition, there should be a small gap between the opening and closing price of both candles. In most cases, these gaps are not often seen in cryptocurrency markets.

This pattern reveals that buying pressure has significantly increased and is overwhelming selling pressure.

The Piercing Line

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Japanese Candlestick Cryptocurrency Charts

One of the most popular among cryptocurrency charts types, candlesticks provide enough information at a single glance. That is if you can read them. Usually, they allow you to see the minimum price of the asset for a certain time period, the maximum price, and the shift in the price. However, different types of candlestick cryptocurrency charts offer different information. Here you can see the basic explanation of common patterns, for more in-depth information you can visit Investopedia.

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Multiple Timeframe Analysis Using Candlesticks

Candlesticks can be used for technical analysis by comparing crypto price trends across different timeframes. This is called multiple timeframe analysis. This technique allows you to establish the trend buildup progressively from a short timeframe to a larger one or break a longer-term trend into shorter timeframes.

For example, a 1-minute candlestick shows the price fluctuation during that minute. It shows the opening price, the highest and lowest price attained, and the closing price for that period. The same applies to every other timeframe.

You can also view it this way a 5-minute price chart is a combination of five 1-minute timeframes since it shows the price fluctuation for 5 minutes. Similarly, a 1-hour timeframe is a combination of 60 1-minute timeframes. In this case, the opening price of the 1-hour timeframe is the same as the opening price for the first 1-minute candle. Similarly, the closing price for the 1-hour timeframe is equal to the closing price of the 60th 1-minute candle.

You can use this logic to break down any timeframe into smaller timeframes or build a larger timeframe from a series of smaller timeframes.

Colour Of The Candlestick

The body of each candlestick will most often be coloured in green or red. Green means that the overall price movement during that period was positive. Red means that the price movement was negative.

Interesting Fact

The traditional Japanese candlestick charts used white for positive movement and black for negative movement. Some traders still choose to use this traditional colour scheme in their charts others use different colours altogether.

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Anatomy Of A Candlestick

A candlestick represents the price activity of an asset during a specified timeframe through the use of four main components: the open, close, high and low.

The “open” of a candlestick represents the price of an asset when the trading period begins whereas the “close” represents the price when the period has concluded. The “high” and the “low” represent the highest and lowest prices achieved during the same trading session.

Every candlestick uses two physical features to display the four main components.

  • The first feature, known as the body, is the wide midsection of the candlestick and it depicts the open and close during the observation period
  • The close is represented at the top of the body in the green candlestick and at the bottom of the body in the red candle.
  • On the opposite is true of the open, which forms the bottom of the green candlestick and the top of the red candlestick.
  • The final two components, the high and low, are represented in the second feature of the candlestick known as the ‘wick.’ Wicks are simply displayed as the thin lines extended above and below the body.
  • Cryptocurrency traders tend to take advantage of the inherent market volatility by using charts on the intra-day time frames. Each candlestick typically represents one, two, four or 12 hours.

    What Do Candlesticks Say About Us

    How to Read Crypto Candlesticks Charts

    Candlesticks reveal more than simply price fluctuations over time. Professional traders are able to spot patterns to determine market sentiment as well as forecast the direction that the market is heading next. Here are some examples of the types of patterns theyre looking for:

    A long wick at the bottom of a candle, for instance, could mean that investors are investing in the asset when prices decrease or rise, which could be a sign that an asset may be headed upwards.

    A long wick at the top of a candle could indicate that traders are seeking profitssuggesting a major sell off in the near term.

    If the body takes up almost the entire candle with very small wicks , it could be a sign of a strongly bullish outlook or a strongly bearish sentiment .

    Understanding what candlesticks could mean within the context of an individual asset or in specific market conditions is an aspect of a trading strategy called technical analysis, through which traders attempt to make use of price fluctuations in the past to determine trends and future opportunities.

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    What Do The Different Parts Of The Candlestick Mean

    The difference between the two images above, besides the price action, is the opening and closing end. When price action goes up, the opening price is the bottom of the body while the closing price is the top. On the other hand, when the price action is negative, the opening price is the top and the closing price the bottom.

    In addition, the length of the body denotes how much price action occurred during the time frame. For example, a long body on a green candle would indicate significant gains in price, while a short body would indicate small gains. And yes, a price can open and close on or near the same price. The candlestick body for that scenario will look flat. See the image below.

    The image above has a price index on the side. And you can see the candlestick represents one hour. The wick shows the price went as low as $2 during the hour and as high as $14 during the same. In addition, the body shows the price started the hour at $4 and ended the hour at $8.

    Nice gains.

    Next, well look at what it means when the candles body is located on different parts of the wick.

    Candlestick Patterns Based On Price Gaps

    There exists a huge number of candlestick patterns that use price gaps. A price gap is created when a financial asset opens above or below its previous price that is closed. Due to this, a gap appears between the two candlesticks. As it is allowed to trade in the crypto markets 24/7, patterns grounded on these kinds of price gaps are not available. In this case, price gaps can be in illiquid markets. Although they occur mainly because of low liquidity and high bid-ask spreads, they might not be useful as actionable patterns.

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    What Is The Basic Structure Of A Candlestick

    The basic structure of the candlestick is composed of a body, a wick, and shadows. These three parts form the shape of the candlestick.

    The body is the part that is formed by the opening and closing prices. It can be green or red depending on whether it is higher or lower than its opening price.

    The wick represents how high or low the closing price was concerning its opening price. Finally, the shadow shows how much trading volume happened during that period.

    Below is an example of one candlestick and definitions of its parts when the price of a cryptocurrency is going up.

    Next, here is an image of the price going down.

    The wick

    The candles wick shows the lowest price of the cryptocurrency for the time frame and the highest price for the time frame . The wick never inverts. The bottom of the wick is always the lowest price the cryptocurrency saw in a given time frame, and likewise, the top shows the highest.

    Note: The wick is referred to as the shadow more commonly. When analysts describe the candlestick and its static parts, they call it the wick. But when its referred to in technical analysis, they call it the shadow. Im not sure why its referred to as the wick initially, but there you have it.

    The body

    In the next section, well look at those parts in more detail.

    How To Draw A Candlestick Chart

    HOW TO READ CANDLESTICK CHARTS : Crypto Trading For Beginners (Binance & Tradingview)

    TradingView is a great platform for drawing charts that features several useful tools. In particular, the trend line tool and the horizontal ray tool are commonly used by traders and investors. The Trend Line tool is used for connecting candlesticks to create the patterns like those mentioned above. The Horizontal Ray tool is helpful for marking support levels, resistance levels, and for highlighting your buy and sell targets.

    It is important not to become emotionally attached to a coin, because this may influence the patterns that you draw, and you may in fact identify patterns that are not supported by any real evidence. Thats when you can find yourself in a lot of trouble. Therefore, we must always try to draw charts based on the available evidence and never based on emotion, sentimentality, rumour, or what you think the coin is worth.

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