Candlestick Patterns That You Need to Understand

If you are just starting out in making trades, you should be knowledgeable with market dynamics. You must know the indicators that will direct you on your investing career, just as you must understand the indicators that will lead you on your trading adventure. In addition, the candlestick is one of the most important signals to monitor. 

What are Candlesticks?

Let us take a quick look back in time to find an answer. The candlestick was invented by the Japanese. They used their older version to swap rice in the 17th century. It is, however, very different from the present candlestick. 

Candlestick charts were first used in the modern sense in 1850. Of course, it was changed in the end. Candlesticks are used by traders in a variety of time frames, including daily, 1-hour, 5-minute, and 1-minute. The candlestick is green in colour and red, and the “Body” component in this case is the one that is named “Body.” Finally, shadows are tiny lines on the top and bottom of the body that show the high/low range but are more commonly referred to as “wicks” or “tails.” When it comes to wicks, the largest point is called “high,” and the weakest point is called “low.” When a coin closes above the initial price (usually characterized by green candlesticks), the starting price will be at the very bottom of the body of the green candle, and the closing price will be at the top. 

When a coin decides to close below its initial price (the red candle), the top of the red candle’s body represents the opening price and the bottom represents the closing price. It is important to note that the green candlestick represents buying pressure, while the red candlestick represents selling pressure. There are also three types of traders: buyers, sellers, and undecided. Consumers want to buy coins for a cheap cost, while merchants want to sell them for a high price. This can be seen in buyers and sellers orders on exchanges. As a result, the price of a coin appears to be the result of hundreds of traders — buyers, sellers, and those unsure whether to buy or sell a coin. As a trader, you want to look at the chart to find a good balance. It is up to you to determine which group is the right choice. 

This battle, thankfully, can be seen on candlestick charts; however, you must understand how to interpret them. Consumers purchase since they believe the value of a coin will rise. Merchants are selling because they think that the price of cryptocurrency will fall. Buyers drive up market prices (buyers have clout), while sellers drive them down (sellers control the game). Undecided traders hasten this process in order to create a sense of urgency in buying and selling. You can form an opinion on a currency’s overall sentiment if you learn to interpret candlesticks. This is referred to as “price action.” In trading, it is critical to understand who has price control. If you want to look at the most recent updates about market volume, price predictions, and cryptocurrency trends, Dart Europe is a good place to start. 

The Various Kinds of Candles in Crypto

Doji candlestick

The Doji candlestick comes in a variety of shapes, but its distinguishing feature is that its body is usually small or non-existent. It’s almost like a spinning top. Both are undecided. That is, a Doji on a chart indicates that no one has yet won the battle between bulls and bears. Dojis are shaped like a spinning top. Specific dojis, however, such as shooting star Doji, do not have the same wick length at the top and bottom.

Spinning tops

Spinning tops are candles that have exactly equal high and low wicks that are frequently longer than the candle body. Experts refer to this situation as indecision. It shows that customer and supplier power is roughly equal, and nothing is superior. The amount of this type of candle is frequently minimal. Market participants are watching to see who will win the battle among both sellers and buyers.

Hammer Doji

The Doji is a hammer Doji if the lower wick is longer. It denotes that sellers were unable to reduce the value of a currency. This indicates that purchasing power is increasing, which could lead to a bullish reversal.

Shooting star Doji

When the wick of a Doji candle is longer in altitude, it indicates that buyers were unable to push the price higher. It is still an indecision candlestick, but it indicates that the bulls and bears are losing power and will no longer control the price.  

Top reversal strategy

Bulls have taken control with the top reversal, which means buyers are pushing the price higher. Its apex is the shooting star doji, which implies market indecision. The bears then take command. Sellers are attempting to negotiate a lower price.

Bottom reversal strategy

All Dojis represent hesitancy and possibility reversals. When the Doji creates a positive trend, it simply means that the bulls’ power has been depleted, and the bears will soon maintain control of the price. Likewise, when the Doji forms on a negative downward trend, it indicates that the bears are tiring and that the bulls will soon take control.

It’s important to remember that once you’ve mastered the candlestick. You shouldn’t get too excited because candles aren’t perfect. Please keep in mind that these candles only represent indecision and not a definitive reversal. Examine confirmation candles as well as other technical indicators such as support and resistance levels. 

Source: https://images.pexels.com/photos/7173040/pexels-photo-7173040.jpeg?auto=compress&cs=tinysrgb&dpr=1&w=500 

The Bottom Line

Candlesticks are just one of several technical indicators in the cryptocurrency market; therefore, a merchant should not base his action purely on this tool. At first, these trends are difficult to identify. However, with enough practice, you will start adapting to them.