What is Cryptocurrencies Candlestick Chart & How to Read it?
Are you wondering what cryptocurrencies are best to buy and when? A candlestick charts is a special price graph that you might come across when researching crypto assets. It’s worth taking the time to understand how they work.
Candlesticks are similar to line and bar graphs. They show time along the horizontal axis and price data along the vertical. Candlesticks provide more information than simple graphs. You can quickly see the highest and most recent price an asset has achieved in a given period of time, as well as its closing and opening prices.
What Is A Candlestick Chart?
Candlesticks give you an instant snapshot of whether a market’s price movement was positive or negative, and to what degree. The timeframe represented in a candlestick can vary widely. Coinbase Pro, for instance, defaults to six hours — with each candle representing a five-minute slice — but users can set it to be longer or shorter. (Also worth noting: unlike stock markets, crypto markets are open 24 hours a day. So the “open” and “close” prices are the prices at the beginning and end of the selected timeframe.)
Candlesticks Example :
Green candles show prices going up , so the open is at the bottom of the body and the close is at the top. Red candles show prices declining , so the open is at the top of the body and close is at the bottom.
The wicks and the body are the two main components of a candle. The candle’s body tells you the open and closed prices during its time period.
The wicks are the lines that run from the top to the bottom of the body. These are the prices at which the asset reached its highest and lowest prices during the trading frame.
What Can Candlesticks Reveal Us?
Candlesticks can show more than price movements over time. Trade professionals look for patterns to predict market direction and gauge market sentiment. These are just a few of the things they look for:
- For example, a long wick at the bottom of a candle might indicate that traders are investing in an asset as prices fall. This could be a sign that the asset may be on its way up.
- However, a long wick at the TOP candle could indicate that traders are seeking to make profits, signaling a potential sell-off.
- If the body takes up almost all of the candle’s space, and there are no visible wicks or very short wicks, it could indicate either a bullish sentiment on a green candle, or a bearish sentiment on a red candle.
One element of a trading strategy is technical Analysis. This allows investors to analyze past price movements and identify potential future opportunities.
Candlestick Vs. Bar Charts
The shadows or wicks are the parts located above and below the actual body. They display the highest and lowest prices for the day.
The up candle has a shorter upper wick, which means that the closing price is close to the highest. The relationship between the four indicators (open, close and low) determines the appearance of the candlestick. Shadows can differ in their size and length, as they are either longer or shorter.
Bars and candlestick charts display the same information, but the difference is in the way they are represented. Candlestick charts are more visual, because the colors and width of the real bodies highlight the differences in the price ratios during the day.
Candlestick Patterns
Predetermined patterns are used by traders to forecast price movements. There are two types of patterns: bullish and bearish. These indicate whether the price will rise or fall. It is important to remember that patterns cannot be trusted 100%.
Bearish Engulfing Patterns
A bearish engulfing signal indicates a negative trend in price. This means that there are more buy orders than sell orders. A long, reddish body will engulf a small, green one in such cases, signaling that sellers have the upper hand and that asset values will continue to drop.
Bullish Engulfing Pattern
A bullish engulfing is a situation in which buyers outnumber sellers. This is where a large green body surrounds a small one. Bulls outpace bears, which results in a positive price change.
Bearish Evening Star
The last candle in a pattern that was opened above the body the day before is what makes an evening star. Two days before the last candle is lit, it closes in the actual candle’s body. This pattern could indicate that there are more sell orders, which could cause a decrease in the price.
Bearish Harami
If a tiny red real body is located within the previous day’s body, this indicates that buyers are stalling. This pattern is called a bearish-harami. If the price continues to fall, it is a sign of a downtrend. However, if the up candle grows further, it will indicate the opposite trend.
Bullish Harami
A negative trend that has a small green body within the large red body of the previous day denotes the possibility for a shift. The price rise is imminent when bullish Harami is followed by another day of ups.
Bearish Harami Cross
A doji is a situation in which the candlestick has nearly the same open-close and close, it’s a bearish cross. The consequences of the bearish-harami cross are the same as those caused by the doji being completely within the body of the previous session.
Bullish Harami Cross
If a negative trend is observed and the candle that follows doji is down, it’s a bullish Harami. This time, the doji is in the actual body of the previous session, and the result will be the same as for the bullish harami.
Bullish Rising Three
This pattern starts with a long white candle, followed by a few sessions. Small real bodies begin to drop the asset value, but the candle remains long. The bulls prepare for another move upward in the two final days of this pattern.
Three Bearish Falls
This pattern is characterized by three small real bodies moving the price up after a day of decline, but the range stays within the first day. A fifth day of price declines is a sign that the sellers are back in control and ready to push the price down further.
One-candle signals are just one clue traders have to interpret correctly when studying markets. The profits that can be made with correct information are great. Seek out advice from a professional to be able to decide a trading approach that works for you.
