Interpreting Candlestick Chart For Beginners
Seeking cryptocurrency trading opportunities but don’t know the right asset, time, and price to invest? Well, no worries, Candlestick charts have come in handy for millions of traders while taking a decision or analyzing the coin’s performance. Hence, it’s best to obtain an insight on how to read a candlestick chart.
What Are Candlestick Charts?
Now, you’re probably wondering what candlestick charts are and how do they aid the process? Let’s take it one step at a time. If you’re new here, you’ll be familiar with how and when to use a candlestick chart effectively by the end of this article.
Candlestick charts are graphs representing periodic price movements within a cryptocurrency. It can help a trader determine in an instant whether the market shows an upward or downward position. Generally, users set a timeframe; let’s take a default setting for five hours wherein a candle reflects movements after repeated five-minute intervals.
The determined period and intervals vary based on the user’s preferences. One may extend or lower the hours in a timeframe. A point to keep in mind is, Distinct from the stock markets; cryptos run 24/7. It means that the open and close positions for the coin’s pricing refer to the prices attained at the beginning and end of the fixed period.
Demonstrating The Candlestick Chart
Candlesticks are relatively similar to the age-old bar graphs. The horizontal axis displays varied timing, and the vertical axis shows the prices. What differentiates a candlestick from a regular bar graph is the detailed indications and movements it exhibits.
The demonstration laid down will assist in clarifying the basic concepts in a chart;
- A candle comprises two parts, the wick, and the body. While the body depicts the prices during the opening and closing, the wick indicates the price fluctuations.
- The wick spreads from the head through the foot of the body. It also spots the highest and lowest prices reached within the period.
- A green candle depicts a favorable position with a rise in prices. The lower end of a green candle body represents an opening, and the upper end discloses a closing.
- Red candles show an unfavorable position with a fall in prices. Contradictory to green candles, the upper end of the red candle body indicates an opening and closing towards the lower end.
Reading Candlestick Charts Based On Wick Positioning
Candlestick charts render information beyond price indications. That’s one reason why it makes for an incredible tool. For crypto traders looking up investment patterns, market conditions, and more to predict their subsequent investments, learning how to read wick positioning can work wonders.
- An extended wick towards the upper end of a candle indicates that traders are looking out for a profit. It suspects that a massive group of traders are likely to sell off their coins shortly.
- Candles with an elongated wick at the bottom represent urgency among the buyers due to a drop in prices. It’s a positive sign that the coins are likely to flourish with the rising number of buyers.
- Green candles with an extensive body and tiny wicks on both ends represent a notably bullish market.
- In contrast, red candles with an outstretched body and short wicks show a notably bearish market.
Evaluating candlesticks regarding market circumstances and particular assets is part of a trading strategy called technical analysis. This strategy is implemented by traders using price movements over the past to determine future markets and opportunities.
Interpreting Single Candlestick Reading For Short-term Traders
Long-term and future-based traders often glance at a detailed picture. The short-term traders emphasize the study of single candles to back their intraday trades. In short, your knowledge of candlestick charts is incomplete without the ability to read one-candle indications.
To bridge the gap, we’ve listed four such one-candle indications;
1. Tall Upper Shadow
It signals that the market may undergo a bearish trend. As a result, traders may end up selling their holdings while taking away profits. Thus, a taller upper shadow means higher chances of a bearish trend.
2. Tall Lower Shadow
It indicates a bullish market trend. It denotes that traders are expected to buy more assets resulting in a hike in the prices. The taller, the lower shadow, the higher the probability of the indicator.
3. Doji Candlestick
Doji means error, according to the Japanese traders who were the first to implement candlestick charts back in the 18th Century. A Doji candlestick displays no body as the opening and closing price is said to be the same. Therefore, it’s referred to as an error since it’s questionable to open and close down on the same numbers.
A Doji often signifies that the market is witnessing a phase of indecision and may encounter a reversal in its prices.
4. Hammer & Hanging Man Candlesticks
Hammer and hanging man are two popularly known umbrella indicators. Umbrellas are candlesticks with exceptionally tall bottom wicks. A “hammer” is a red umbrella candlestick that reflects a climb in the buyers and speculated price lift.
A green umbrella goes with the dreary name “hanging man”. It shows the state of the market with upscaling sellers and a reverse effect to that of hammer’s indications.
Single candlestick reading plays a determining role for a short-term trader. However, what it lacks is the ability to be complete. An expansive view can allow traders to gain more in-depth knowledge. It’s easy to understand the chart. However, nailing the accuracy of reading might not be so. This is where knowledgeable, skilled, and experienced personnel at Blockchain TradeIn come into the picture.
Attaining guidance from an expert at BTI can make all the difference. Skyrocket your investments with the right choices.
The ideas and views expressed here are merely those of the author and do not necessarily reflect the opinions of Blockchain TradeIn. Moreover, every investment and trading option involves risk; you should conduct your own research when deciding.