Trading for beginners: why do we need candles on the charts of cryptocurrencies and what they say

I have been reading stories about successful traders who raised as Dogecoin? And by the way, the owners of brand new Lambo virtually indistinguishable from the Japanese rice traders of the seventeenth century. In addition to bragging about their new riches, they analyzed the emotions of market participants on the price movement of the asset.

The principles of displaying prices on the chart has almost not changed over the past three hundred years. All these years, technical analysts evaluated the condition of the market on the price movement of an asset. But the best display of the progress of trading — Japanese candlesticks, invented by the same traders rice. A detailed guide about the structure of Japanese candlesticks was published in Coindesk.

Anatomy of candles

Candle provides information directly about the four factors for a certain temporary period: the opening price and the closing, a maximum and a minimum.

The point of opening/closing is the price of the asset at the start/end of trading in that span of time (minute, 5 minute, hour and so on). Min/max — the lowest and highest prices of the asset during this time.

To find all four points on the spark is easy enough to define her body and the shadows.

  • The body is the broad middle part of the figure, often painted in green or red. In the first case, the candle is bullish and the second bearish;
  • the opening price is at the bottom of the body of the green candle and the top of the red;
  • closing price, on the contrary, located at the top of green candles and red at the bottom;
  • the minimum and maximum rates are the same for both types of candles, they are located at the ends of thin lines coming out on both sides of the body.

How do you determine the state of the market one type of candle? Do not try to do it on short time intervals (shorter time, etc.). Best candlestick patterns work on a 1 day chart in tandem with the levels of support/resistance.

Time to make money

The volatility of the stock market is so high that the original form of suppositories can be very hard to change. Therefore, to draw conclusions only on the basis of already closed candles.

Over time, traders noticed that under certain conditions on the chart of the asset repeats the combination of similar formations. The three most frequent pattern even got their names: doji, hammer and shooting star.

Doji is an excellent example of the indecision of the majority of market players. In this case, the closing coincides with the opening price, the candle body is transformed into a thin line. The shadows can be as long and as short as possible.

If doji is formed after a series of green candles is the first signal to the phase accumulation of the asset. The picture on the chart can be interpreted as: bulls all the time pushed the price up, but in the end the bears managed to equalize the forces. It’s time to pay attention to support levels and technical indicators.

Hammer is a great opportunity for the bulls to make money is to change the bearish trend. The characteristic shape of the candle shows that, from the outset, the price fell significantly below the opening, but then returned to their positions. Most often in such situations there is a strong buyer who can expand the price movement.

To recognize the hammer can according to four criteria:

  • length of the lower shadow is two to three times the length of the body;
  • the upper shadow is very short or missing;
  • the body of the candle is the lowest point of the local trend;
  • the body color is not important.

Finally, the shooting star is the complete opposite of hammer. This candle is most often appears on the local peak and signals a strong seller.

Don’t forget to judge the situation on the market for only one candle impossible! For good bargains you need to consider many other factors that we’ll cover in future articles.


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