Having a fundamental Knowledge about candlestick charts is a great starting point for anyone who is really interested in making profit than just playing games or gambling with his or her hard earn money in the crypto space. The same candle stick we have in the forex market which many financial institutions uses to develop their economic of their institutions is the same candle stick we also have in cryptocurrency exchanges
Candlestick charts were invented and developed in the 18th century. The earliest reference to a Candlestick chart being used in financial markets was found in Sakata, Japan, where a rice merchant named Munehisa where traders uses the candle stick to trade ojima rice .so is not a new thing especially for newbies who don’t know about candle stick .
The candle can be red or green color, white or black color, some few exchanges may allow you to define the color you which to call them. These candle signify bullish or bearish event.
https://imgur.com/iYJmiEiCandle stick helps you to identify the next price action movement of a crypto asset, hence there are different candle stick pattern you will encounter in exchanges that will determine your decision per time which are discuss below:
Types of candlestick
The candles are form due to pressure or force of movement of price which result to form a full candle without stick or with stick/wick. The stick are form in the candle because of continuous force pushing or pulling the price of the crypto asset.
Below is the diagrammatic representation of these candle for easy Identification.
https://imgur.com/a/glRJXWL1. The Hammer or The Inverted Hammer: bullish event is about to trend upwards after much black candles has trend downwards using an indicator to called the Bollinger band,
2. The shooting star: a bearish event is about to trend downward after much white candles has trend upwards. This can be found in the Bollinger band upper curve.
3. Hanging man: a bearish event is about to occur after much white candles has trend upwards. This is notice in the upper part of the Bollinger band.
4. Star Doji: indecision between bulls and bears lack of commitment from both traders result to this event.
5. Log legged Doji: major indecision of the market is occurring.
6. Gravestone Doji : possibly uptrend runs out of power to push price action movement , this is calls a downward trend
7. Dragon fly: possibly downward trend runs of power to pull down price action movement, this calls for an upward movement of the price.
8. Spinning top: the spinning top candle indicates indecision in the market it also act like the doji candlestick. After the candle closes the market will tend to move away from the spinning top quite rapidly this calls for a reversal.
For more info about types of candles
https://wizardcrypto.blogspot.com/2019/01/about-candlestick-pattern.htmlEvents in candlestick Bullish candle stick event: these are candlestick pattern you should identify when trading and if you are anticipating or excepting for a bullish reversal, these candle must appear at the downward trend of any crypto asset event on the crypto exchanges. Which will give you the go ahead to buy the dip. This candles are also form due to the pressure of the bears getting weaker.
The bearish candlestick event: are candlestick pattern you should identity at upward trend of a crypto asset which will give you direction to sell your asset. This candle are form as result of pressure of the bulls are getting weaker .series of lower high and lower low result of bearish event according to dow theory and Elliot wave theory .
Neutral candlestick event : These are set of candles you find in crypto exchanges where there are indecision whether to buy or sell an asset. At these point the whales or price movers are confuse if the trend should continue or reversal. The most common candlestick is the doji candle.
Why must you use candlestick i. Price movements of crypto asset are more easy to understand to know where the trend is actually moving into either is bear or bullish zone.
ii. It is easier to recognize the candle pattern and how they occur in price history of those crypto asset.
iii. Candlestick charts unveil a dynamic information in every areas of the price movement with respect to time. (Open, close, high and low) compare to other patterns such as the graph or line charts.
What makes people don’t use candlestickDue to the volatility of crypto instrument most traders tend not to read chart before trading due to the following reasons
1. Greed
2. Fear
3. Indiscipline
4. Lack of patience
These are the major factors makes trader don’t care about the candle stick pattern.
Final thoughtUnderstanding candlestick pattern is key factor to manage your portfolio in the crypt space for maximum returns of your investment therefore make the trend your friend. Candlestick hence helps trader to detect trend reversal and price action breakout in the market which helps to build a strong and effective trading strategy .Never move against the trend .Hope you find the piece of information useful?
