You can read Bitcoin candlestick charts with no experience - here’s how to understand patterns, spot trends, and start making smarter crypto moves.
Key Points :-
• Bitcoin candlesticks are a popular tool among Bitcoin traders because they are easy to use and provide an intuitive way to understand market sentiment and trends.
• Bitcoin candlesticks are somewhat of an old tool. They were created by rice trader Homma Munehisa in Japan in the 18th century and were introduced to Western financial markets in the late 1980s.
• This information helps you understand bullish and bearish patterns in technical analysis. This knowledge will help you get started with trading Bitcoin.
• It should not be your only tool for making informed decisions. Combine it with other technical Bitcoin indicators, such as moving averages (MAs) or the Relative Strength Index (RSI).
Why do we use candlesticks?
• It helps traders visualize price movements over time.
• It helps identify bullish, bearish, or consolidation sentiments.
• It helps identify patterns such as reversals or continuations to predict future price movements.
The candlestick represents four key price points:-
• Opening price at the beginning of the period
• The closing price at the end of the period
• The highest price reached during the period
• The lowest price reached during the period.
The candlestick consists of a body, which is the large part between the opening price and the closing price.
It is green when the price rises in an upward movement, and the closing price is higher than the opening price. It is red when the closing price is lower than the opening price, meaning the price is in a downward movement as it falls.
The size of the body shows strong buying and selling pressure when it is long. It indicates uncertainty when it is short.
Example:-
Let's assume you are analyzing the four-hour chart using candlesticks, and the opening price of Bitcoin is $90,000. The closing price is $93,500, with a high of $95,000 and a low of $88,700.
In this case, the candlestick will appear as a green body ranging from $90,000 to $93,500. The upper wick reaches $95,000, and the lower wick drops to $88,700.
Here are some of the best tools that Bitcoin traders use to benefit from technical analysis, trading volume, and market psychology. These strategies give traders a competitive edge in the ever-changing cryptocurrency market.
1. Fibonacci Retracement
Fibonacci retracement is a technical analysis tool used to identify potential support and resistance levels, as well as price targets.
Example of Fibonacci retracement:-
To use this method, draw lines connecting the highest and lowest significant prices on the chart. Then calculate the retracement levels using Fibonacci ratios such as 23.6%, 38.2%, 50%, and 61.8%. You can use Fibonacci retracement as confirmation when used with trend lines or moving averages.
2. Volume Profile
Volume analysis is another tool for technical analysis. It shows trading volume based on price instead of time. Knowing where key trades are helps traders identify key price levels. These levels often form strong support and resistance areas.
3. Elliott Wave Theory
Elliott Wave Theory is a price movement forecasting model based on market psychology and wave patterns. According to this theory, the market moves in trends of five waves, followed by three corrective waves, reflecting the sentiments of traders.
4. Other Indicators
The Relative Strength Index (RSI) is one of the most common chart indicators. It measures the strength of Bitcoin's price movements upward and downward over time.
The Simple Moving Average (SMA) indicates the average price of the asset over time, which may help you understand the overall price movement of Bitcoin.
The Exponential Moving Average (EMA) is a better alternative to the Simple Moving Average (SMA) for identifying short-term trends. Like the Simple Moving Average, the Exponential Moving Average shows the average price of the asset over a time period, but it places greater emphasis on more recent days.