What you need to know about candles and patterns?
Can candlestick charts and cryptocurrency patterns be used as a standalone analysis method?
Some Common Patterns in Crypto
Candlestick patterns in cryptocurrency trading are universal tools that suit different trading styles and strategies. The ability to work with price charts and candlestick patterns helps a trader analyze the current market situation, recognize trends to make optimal trading decisions in a rising or falling market. Candlesticks are an important element of technical analysis, on which many trading strategies are built that bring high profits. Let's consider several of the most popular patterns and their meanings.
What you need to know about candles and patterns?
Candlestick charts are cryptocurrency price charts with Japanese candlesticks, they are used to evaluate the market. This type of chart is necessary to track the dynamics of the cryptocurrency rate over a certain period of time, depending on the time frame. The trader chooses the time interval for analysis himself, following his trading strategy. For each candlestick, you can use different time frames (time intervals), from a minute to a month. Working with candlestick charts is more difficult than with simple linear ones, but they are more informative and effective, so it is worth learning.
A candle is a separate column or bar, it shows the dynamics of the rate and contains the following data: opening rate, closing rate, the highest and lowest price level for the selected time period. The opening price is the rate at the start of the trading period. Accordingly, the closing price is the rate fixed at the end of the trading period.
The candle consists of several elements:
upper wick – maximum course value;
body – the difference between the start and end value of the trading period;
lower wick – minimum course value.
Important! Traditionally, candles are colored green and red, but other colors may be used on different platforms. A green candle signals the closing of trades at a rate higher than the price at the start of the trading period. Conversely, a red candle means the closing of trades at a price lower than the opening.
A candlestick pattern in cryptocurrency trading is a figure that can consist of only one or several Japanese candlesticks at once. The pattern displays a certain situation that has developed on the market. There are many different patterns, below we will consider the most popular and effective ones.
Can candlestick charts and cryptocurrency patterns be used as a standalone analysis method?
Japanese candlesticks are an effective technical analysis tool that allows you to track the market dynamics for a specific asset over a certain period. Such charts show the direction of the asset rate movement and the general mood of market participants regarding the selected cryptocurrency, for example, increased interest.
Cryptocurrency candlestick patterns formed from individual candlesticks should not be considered as a signal to buy or sell. This is only a way to study the current situation on the market, and in order to make a profitable trading decision, the result of candlestick analysis should be confirmed with additional tools.
Candlestick patterns of Bitcoin and other coins should be considered in the context of a comprehensive analysis. A good addition would be such tools:
relative price index (RSI);
Ichimoku cloud;
support and resistance levels;
stochastic RSI.
Some Common Patterns in Crypto
To make it easier to understand the differences between patterns, they are divided into ascending and descending. The first ones belong to the bull market, when prices are rising, the second ones belong to the bear market, they are formed when rates are falling.
Popular bull market patterns:
Hammer. An easily recognizable figure. It is almost always a candle with a small body and a short wick on top or without it at all, and a long lower wick. It can be red or green, and signals an increase in the value of the coin or a change in trend.
Hammer upside down or inverted. The same hammer as the classic one, but the inverted one has a long wick located not at the bottom, but at the top. Like the regular one, this hammer can signal the beginning of a growth period.
Bullish Engulfing. The figure is formed by two candles, it begins to be built at the end of a bearish trend. The figure begins with a red candle, the second is green. The first candle is significantly smaller than the second. That is, the green one is so much larger than the red one that it could engulf it. This figure displays a change in trend from bearish to bullish under pressure from buyers.
Morning Star. The figure is formed from three separate candles and is located at the lower line of the downward trend. It begins with a long candle, in the middle there is a short candle with long wicks, and ends with a pattern of candles shifted towards the growing trend. The figure indicates a weakening of bearish pressure on the market and the beginning of an upward trend.
Now let's look at popular bear market patterns:
Hanged Man. An alternative to the hammer, but in a bear market. The figure is formed at the end of an upward trend, this is a pattern with a small body and a long lower wick, it can be red and green. The figure shows a weak upward trend, which will gradually change to a downward one, signals the need to sell cryptocurrency.
Shooting star. The figure is built from a candle with a short lower wick, a thin body and a longer wick at the top. It appears at the peak of a bullish trend and indicates a decrease in the asset rate immediately after significant growth - this is a signal of a market reversal to the bearish side.
Bearish Engulfing. The figure is formed by two candles - this is an analogue of a bullish engulfing, only in reverse. The first candle is green and small, and the second is red and large. The pattern signals a change in trend from bullish to bearish.
If you enjoyed the content, please click "subscribe", "like", "comment" and "share" with others. Thank you!❤️
