Tuesday, June 28, 2022

How To Read Crypto Candlestick Charts

How To Use Candlestick Patterns

How to Read a Candlestick Chart in Crypto

There are a huge number of candlestick patterns in order to determine an area of interest for a certain period in the graph.

They are intended for opening long-term positions, day trades, trading on fluctuations in the value of a coin. Some patterns allow traders to understand the balance between buyers and sellers, while others are able to figure out a trend reversal in the market, continuation , or indecision of market participants.

Every trader or investor needs to understand that candlestick patterns do not give a direct signal to sell or buy a certain cryptocurrency. Instead, they provide a way to look more deeply at the structure of the market and the potential signals of possibilities in the near future. Anyway, it is desirable to become familiar with such patterns in their respective contexts. This could be the context of the technical pattern on the chart, as well as the broader market environment and many other factors.

Candlestick patterns work well when it is combined with other types of analysis such as the Dow Theory, the Elliott Wave Theory, the Wyckoff Method, and different technical analyses , such as:

  • The Relative Strength Index ,
  • Trend Lines,
  • MACD.

How Do Candlestick Charts Work

The following data sets or price points are required to create each candlestick:

OpenHighLowCloseOHLC values.The distance between the open and close price points is called the bodywhile the distance between the body and the high and low points is called the wick or shadow

Candlestick charts give an advantage over bar charts as they are more visual. Additionally, bar charts make it difficult to visualize which direction the price moved, which candlestick charts help with.

How To Read Candlestick Chart

candlestick chart may be used and viewed in a variety of ways. Candlestick chart evaluation is dependent on the trading technique and time period you pick. Some tactics try to spot price trends, whereas others reap the benefit of candle formation.

Candlestick charts formations can be interpreted in a variety of ways.

Individual candlesticks may provide a wealth of information about market sentiments. Candlesticks such as the Shooting Star, Hammer, and Hanging Man provide insight into shifting movement and the possible direction of market values.

A hammer candlestick pattern might signal a trend reversal. The hammer candle has a small body with a lengthy bottom wick. The final price is higher than the beginning price. The hammer formations point is simplistic: the price sought to fall, but investors hit the market, driving the price up. Entering the market, tightening stop-losses, or closing out a shorter investment is positive.

Once the hammer candle has shut, investors can enjoy the benefits of hammer formations by entering a more extended trade. Since traders may employ hammer candles to establish tight stop-losses, they are helpful. Take-profits must be positioned in a way that the risk-to-reward ratio is favourable. As a result, the profit margin is higher.

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How To Read A Crypto Candlestick Chart

During the designated time frame, candlesticks exhibit the following data attributes:

  • Opening price: This is the price of the first trade during the candlestick period.
  • Closing price: This is the last price traded during the candlestick period.
  • Highest price: This indicates the highest price traded during the candlestick period.
  • Lowest price: This indicates the lowest price traded during the candlestick period.

Here are the elements of the candlestick and different analysis they can represent.

  • Body: This is the wide part of the candle that looks like a vertical rectangle. The body indicates the open and close during the designated time frame. So this part will show you the difference between the opening price and the closing price.
  • A long candlestick body that leads to rapidly increasing prices, suggests there is more interest in buying and there is a strong price move.
  • If the size of the body gets larger over the specified time, then the price trend accelerates.
  • If the size of the body gets smaller over this period, this can foreshadow a prevailing trend that is going to be over soon. There is typically a stable strength ratio between the sellers and buyers.
  • If a candlestick body remain constant, then its projected there is a stable trend.
  • If the body shifts from long rising candlesticks to long falling candlestick, this demonstrates massive trend changes and powerful market forces.
  • If there shadow is short, this can indicate a stable market.
  • A Complete Guide: How To Read Candlestick Charts In Crypto Trading

    How to Read Crypto Candlesticks Charts

    Did you know it is possible to predict the market by reading the candlestick chart?

    Of course, the global financial market can be very unpredictable, including crypto. But it is possible to understand how the market works when technical and fundamental analysis, asset management techniques are used correctly.

    And of the most powerful technical tools is the candlestick chart.

    This guide will reveal the ins and outs of candlestick patterns and some useful trading tips that will steer you in the right direction.

    Lets dive right in!


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    Each Candle Shows The Open Close High And Low Price

    Take a look at the following image:

    The wide part of the candlestick is called the body. It represents the open and close of the period. This means that if the chart is a 1 hour chart, then each candlestick body will show the opening price for that 1 hour period and the closing price for that 1 hour period. The wicks at the top and the bottom of the candlestick show the highest and lowest price reached during that 1 hour period. A chart that displays the open, high, low and close price for a given period is referred to as a OHLC chart.

    The different colours of the body tell you if the candlestick is bullish or bearish . At tradimo, we have set our candlesticks to orange for bearish candles and blue for bullish candles. It does not matter what colour your candlesticks are they can be set to any colour in your trading software.

    If the candlestick is bullish, then the opening price is always at the bottom and the closing price is always at the top. If the candlestick is bearish, then the opening price is always at the top and the closing price is always at the bottom.

    OHLC:OHLCOHLC charts

    The different colours simply provide a means for you to instantly tell if they are bullish or bearish.

    The Market Incorporates New Information As Soon As It Becomes Available

    The price of the asset changes to take any new news into account. Asset price is an accurate reflection of the hopes, fears, and expectations of the market participants. The market price integrates factors such as interest rate movements, earnings expectations, revenue projections, major elections, product initiatives, etc.

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    What Is A Cryptocurrency Candlestick Chart

    This type of chart is based upon the Japanese charting style. The graph is plotted with bars that look much like candles and hence the name candlesticks.

    Each candle has five components:

  • Open
  • Close
  • Shadows/wicks
  • The most interesting aspect of a candlestick is the time frame which can range from 1 second up to 1 year. Depending on the setting you have, one candle can indicate 1 second or 1 year which means that it took 1 second to create the candle or 1 year.

    The shadows or wicks are extensions of the body of the candlestick and indicates where the price has been during the time the candle was created.

    The reason we use this type is to illustrate the relationship between price movement and time. The patterns that follow is what we call candlestick chart pattern and they are visible in all cryptocurrencies that you can trade.

    How To Read Japanese Candlesticks

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

    Most traders consider that candlestick charts are much easier to read than line charts or conventional bars. Despite the fact that all of these graphs provide the same information, candlesticks help get more understandable data about the price movement in the market.

    Candlesticks show the bulls and bears resistance within a specific timeframe. Generally, the longer the body, the stronger the buying or selling pressure was. Short wicks at the candlestick indicate the high price of a certain period of time that it was near to the closing.

    The color and settings may differ depending on the charting tools, but in general, if the body is green, then the assets closing price was higher than the opening price. Red means that the price moved down during the timeframe, and the candle closed below the opening price.

    Some traders prefer black and white representation. In this case, instead of using green and red charts, they represent upward movements in the form of hollow candles and downward movements in the form of completely black candles.

    The essence of candlestick pattern analysis boils down to one goal finding some similar candlestick combinations that are periodically found on price charts. Such combinations are called Japanese candlestick patterns, which can be represented by 13 candles or more. There are a lot of such patterns, and each of them has an original name: Evening Star, Abandoned Baby, Hammer, Harami, and others.

    • Reversal patterns.

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    How To Read Crypto Charts Binance

    Before we further understand the Binance chart, you should know a little about Dow Theory as a beginner.

    The cryptocurrency market considers everything during its pricing, and both previous, new, and upcoming information has already been factored into asset prices.

    When it involves crypto, the items considered multiple variables like current, past, and future demands and any regulations that may impact the crypto market.

    Using Japanese Candlesticks In The Cryptorobotics Trading Terminal

    The Cryptorobotics trading terminal provides traders with a huge number of tools that significantly improve the cryptocurrency trading process and make it less risky. One of these opportunities for platform users is the use of Japanese candlesticks in cryptocurrency trading. Thus, thanks to this, the trader can analyze the market trend and predict the price of the coin.

    Lets take a closer look at the patterns by using the example of the tools presented in the Cryptorobotics trading terminal.

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    Examples Of Candlestick Patterns Crypto Investors Analyze

    There are many different types of patterns when analyzing candlestick charts. Here are a few of the primary patterns:

    Crypto traders use candlestick signals to analyze all periods of trading from a daily or hourly cycle, sometimes even examine just minute-long cycles of a trading day. There is a ton of analytical data you can gather to make more educated estimates with market trends as you begin to understand candlestick patterns within crypto.

    Trends Tend To Continue

    A Beginner Crypto Trader

    Figuring out exactly when a trend is about to reverse can be difficult if not impossible much of the time. Many believe its better to just identify existing trends and try to ride on that momentum.

    But how do you know exactly when a trend has changed? Its difficult to say, and traders might disagree. In general, its when a pattern breaks down or prices close above resistance or below support, for example, the trend may have changed course.

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    The Three Movements Of The Market

    Out of the three movements, the primary movement is the leading movement that can last from less than a year to several years, depending on the bullish or bearish.

    The second movement is the medium swing which can last ten days to three months.

    The final movement is the short swing or minor movement that varies according to market speculation from hours to a month or more.

    These are the three movements that can happen simultaneously.

    How To Read Candlestick Patterns

    patternsevening star,evening star

  • 1.The first candle must be a bullish candle with more body than wick. A higher body-to-wick ratio signals a stronger decision in price.
  • 2.The second candle must have a very small body-to-wick ratio. Candles with equal or nearly-equal Open and Close prices are called Doji, and represent indecision. Though a Doji appears in the pattern above, it isnt necessary to complete the pattern. Any candle representing indecision will do.
  • 3.The third candle is a bearish candle, again with more body than wick, representing a new decision in trend direction.
  • 1.Buyers were in control of the market for the first period.
  • 2.During the second period, no decision could be made on the trend.
  • 3.By the end of the third period, sellers took control of the market.
  • evening star

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    How To Read Candlestick Charts A Crypto Example

    Below you will see a 5-minute chart of Bitcoin and U.S. dollar . A bullish candle is highlighted. As you can see, the box with all of the information on this candle is provided for you. The time of this candle was between 1:05 pm and 1:10 pm on December 12, 2021. You can see the opening price of the top of the candle and the closing price from the information provided.

    Youll see that all of the information on this chart is based on price action. Here you will see some bullish candles and the market pushing higher as the price increases. A bullish candle trend means there is a lot of confidence in the market.

    Bearish candles show that the price is decreasing and the market is falling. There is a lot of fear in this type of market.

    You should also notice that most of the candles have wicks that you can see on both ends of the candle.

    If you continue to look at the chart, youll also see some Doji candles, where the price has opened and closed near the same price.

    Dow Theory And The Six Tenets Of Dow Theory

    Reading A Crypto Candlestick Chart Basics

    Charles Dow helped to create the first stock market index in 1884. The creation of this index was followed by the creation of the Dow Jones Industrial Average , which is a price-weighted index tracking the 30 largest publicly traded companies in the United States. Dow believed the stock market was a reliable way to measure business conditions within the economy and that by analyzing it, it was possible to identify major market trends.

    Dows theory has undergone some changes thanks to contributions from several other analysts, including William Hamilton, Robert Thea and Richard Russell. Over time, some aspects of Dows theory lost emphasis, including its focus on the transportation sector. While traders still track the DJT, its not seen as a primary market index, while the DJIA is.

    The theory has six main components known as the six tenets of Dow theory. Lets go over them one by one in the sections below.

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    The Three Black Crows Pattern

    This is a triple pattern candlestick. It appears at the end of an uptrend after there has been an enormous unstable momentum. It is a reversal pattern that provides a strong signal which indicates a take-profit action. This pattern suggests that there is an increase in the price of a commodity due to the influx of sell orders.

    Chapter 3 Reading The Candlestick Charts

    Candlesticks charts are like a book where a trader can easily read the price from left to right.

    While its not technical to read it but there is a learning curve to analyzing the chart.

    Here is how to read the candlestick chart:

    There are no specific rules for this, but it is preferred to start reading candlesticks from the far left until you see the first candlestick.

    For example, if you are trading in a 15 minutes timeframe, you can see the last months data, but not before that.

    You should focus on the speed of the trend and candlesticks formation at the end of the trend.

    Lets have a look at a practical example for a better understanding:

    Here we can see the daily chart of Bitcoin, where the price started to move higher with a bullish engulfing pattern. Later on, the trend becomes corrective and moves lower. After that, the price forms another bullish engulfing, and the price moved higher and formed a new high.

    Still, the best way to interpret the data of a candlestick chart is by using technical tools like a for an accurate price direction.

    Important Note

    To read the candlestick chart accurately, you should:

    1. Use higher time frames

    2. Focus on price action located at key support and resistance level

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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 To Read Crypto Charts: A Beginners Guide

    How To Read Crypto Charts and Candles

    The first time you look at crypto price charts, they may look like hieroglyphics to you. But the good news is price charts are actually easier to read than you may think.

    In this guide, you will learn how to read charts, and how to use some basic technical analysis tools that you can use to help you make trading decisions.

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    Bearish And Bullish Candlesticks

    Third, we need to distinguish that there are two types of candlesticks:

    • Bearish candlesticks
    • Bullish candlesticks

    For bullish candlesticks, the bottom of the thick section represents the opening price while the top of the body represents the closing price. The candlesticks wicks represent the highest and lowest prices during the selected time period.

    *Note: Apply the same rules in reverse for bearish candlesticks.

    The candlesticks will come in different shapes and forms. These candlestick price formations are a great way to predict future market trends. There are many candlestick combinations that can predict what will happen next and we call them chart patterns.

    In order to discern the information you get from the crypto candlestick charts you need the right tools:

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