I started trading in 2013, and during the first six months, I didn't understand anything. I invested 10,000 as capital, following my mentor's instructions. I made small profits daily, and my capital accumulated to 600,000, but once I operated on my own whims, I definitely incurred losses, with my account shrinking by 50%.
At that time, I didn't even understand the most commonly used terms and trading rules in cryptocurrency, such as spot, contract, long, short, etc. I felt confused. Therefore, if I really wanted to continue on the trading path, I had to study diligently. Besides understanding the basics, I also needed to analyze news and research technical indicators. If I didn't conduct in-depth research and plan reasonably to manage my finances, my funds would eventually be depleted. In the end, as an ungrounded retail investor, I would only joyfully enter the market and leave in disappointment.
After that, I spent a full 11 months trading contracts, growing from 2000U to over 2 million U, an increase of 1000 times! Only relying on the strategy of 'position management + law + candlestick trading strategy' with a winning rate of 90%. Once learned, it becomes as easy as breathing! Your profits will flow like your 'ATM'!
If time could turn back to when I first entered the trading market, I would hope someone would remind me of the importance of candlesticks, telling me this is fundamental to trading. Then I wouldn't pursue a foolproof strategy, wasting time chasing different technical indicator parameters.
This way, I won't take so many detours.
Want to profit in the market, especially in the cryptocurrency sphere.
You may not know some very profound economic theories, you may not understand the indicators behind each economic data, and you can even ignore all technical indicators.
No need at all.
But there is one thing you must thoroughly understand, and that is candlesticks (K-line).
If you are just starting to learn about trading, you may find candlesticks complicated and completely incomprehensible. But don't worry, it's not as complicated as you think. In this article, I will use a very simple and clear method to guide you step by step from shallow to deep in understanding this matter. Friends who like this article, please remember to give me a thumbs up at the bottom; your support is my motivation!
In a chart, nothing is more important than the price.
Candlesticks present price fluctuations within a specific time visually, showing the results of both sides' confrontations, how the market thinks about direction, which side has control, and so on.
All of the above can find some clues through candlesticks. Candlesticks are the threshold to enter technical analysis.
If we understand the meanings behind each candlestick, no matter which type of technical analysis you prefer, you can achieve twice the result with half the effort.
Next, I will guide everyone to interpret candlesticks in three levels.
First, I will break down the candlestick into four parts.
To interpret its surface information.
Then I will summarize the candlesticks into five different levels of strength.
To interpret the hints that candlesticks give us.
Finally, I will introduce four common candlestick patterns.
How to define them,
Their meanings and application methods.
After watching, you will understand how to use candlesticks to find a wealth of information that helps you analyze the market. At the same time, you will also understand why I say that candlesticks are the foundation for making profits in the market.
Let's get started!
Here I will teach you how to interpret the surface information that a candlestick brings us.
When breaking down a candlestick.
Can be divided into four key points.
They are color, open-close high-low, body, and shadow line.
Before discussing the four key points, we must first know one thing.
Each candlestick represents the price fluctuations within a certain time period. If you are using a one-minute chart.
Each candlestick records the price fluctuations within that minute.
If you are using a daily chart.
Each candlestick records the price fluctuations within the past 24 hours.
Color is how we differentiate whether a candlestick is bullish or bearish.
In stocks, red represents the bearish line.
And green represents the bullish line.
The bullish line means that the closing price is higher than the opening price within a specific period.
While the bearish line is the opposite.
When the bearish line ends.
The closing price is lower than the opening price.
Therefore, we can know through the color of the candlestick whether the temporary control of the market is in the hands of buyers or sellers.
Next is the open-close high-low.
I believe you have mastered these basic knowledge.
This matter is very simple.
We will use bearish and bullish lines as examples.
The bullish line opens high and closes higher, then opens low.
As mentioned earlier.
Its closing price is above the opening price.
The bearish line opens high and closes low.
Opposite to the bullish line.
Its closing price is lower than the opening price.
Next, let's talk about the body line.
The body means the actual price movement range within a specific time.
Taking a daily candlestick as an example.
For example, if its opening price this morning was 10 dollars, after a full day of trading.
No matter if it once rose by 15 dollars.
Or it once fell by 7 dollars.
This position will only record the price at the moment the candlestick ends.
Its price is just that.
Lastly, it's the shadow line.
The shadow line represents the high and low prices that were once reached.
Many important messages can be seen from the shadow lines.
I personally think the shadow line is a very important part of interpreting the market.
I will keep some suspense here.
In the last part, I will utilize candlestick patterns (K-line patterns+).
Explain it to you in more detail.
Next.
We are starting to delve deeper.
If we use watching a movie as a metaphor.
After you appreciate a play.
You know the development of the story plot.
The information conveyed by the movie's surface.
Will you want to further think about this movie?
It wants to convey deeper meanings and information.
Will you have some insights and personal interpretations?
If we apply this concept to the market.
Each candlestick represents a story.
This story has both long and short aspects.
Short ones can be less than a minute.
And long ones can exceed a month.
It depends on what time frame you are using.
Every story has a beginning, process, and ending.
On the surface, this daily candlestick chart tells you:
My opening price is 10 dollars, and within 24 hours it once reached a high of 18 dollars. The lowest point was 7 dollars, and my closing price is 13 dollars.
These are the plot lines of a story.
If we delve deeper into interpreting and reflecting on this story.
You will have many surprising discoveries.
These discoveries can effectively help you interpret the market.
Next, we are going to enter [the secrets behind candlesticks].
I will provide several examples according to the intensity.
Explain it to you in more detail.
The secrets behind different types of candlesticks.
Here, I will summarize the candlesticks into five levels of strength.
The first type.
The body is very long.
And there are almost no shadow lines.
For the strongest candlestick pattern.
The entity represents that one party almost completely has control.
Taking this bullish line as an example.
The buyer has intention.
And have the ability to push prices higher within a specific time.
On the other hand.
The shadow part is almost invisible.
Represents no or very weak opposing forces.
We see that the upward or downward strength is almost smooth, indicating that most participants in the market agree on the price moving in this direction.
The second type.
We see that this type of candlestick has a long shadow line.
It was also once a candlestick with a very large body.
But has experienced strong pressure from the opposite direction.
The defending party shows strong determination and power.
In the end, all successfully recaptured lost ground.
Still having control when the candlestick ends.
Although its body is relatively short.
But if we think a little deeper.
You will understand.
It covers the same distance as the first type of candlestick. This type is called shooting star or hammer; we will look at some chart examples shortly.
OK.
When it comes to the third type of candlestick.
This type of candlestick body is actually not considered short.
But there is a place that will greatly diminish our impression of it.
This place is the shadow line.
Taking the bullish line as an example.
The price once surged to a high point.
But encounter opposing forces increasing their positions.
We see.
This bullish line has a shadow line at the top.
The shadow line represents rejection.
That is, the seller recovers part of the lost ground.
Compared to the first two types of determination.
Here we see hesitation and reservation.
The fourth type.
This type of candlestick.
It not only has a short body.
And each has a long shadow line above and below.
Represents that both sides have launched offensives.
But both sides are resolute.
Both sides temporarily do not have the strength to break this deadlock.
The only way we can judge whether the buyer or seller still has a small part of control is by color.
Everyone may feel that this type of K-line is quite similar to the second type.
But because they end at different places.
So the entire meaning is completely different.
Another main reason is that the shadow line proves that the market temporarily has no clear direction.
We call this type of candlestick a doji.
It could be a pause in a trend.
Or the market is accumulating strength to change direction.
Generally speaking, when the market is in an ambiguous situation.
We should not enter the market.
The fifth type.
Next, we come to the weakest candlestick.
We see that buyers or sellers have launched offensives upward or downward but encountered strong resistance and rejection.
Ultimately ending in failure.
It once seemed to possess the whole world.
But unfortunately, it was counterattacked by the opponent.
And has been retreating step by step.
At the end of the candlestick.
Can only guard the last remaining territory.
The situation is quite dangerous.
If you are trading with the trend at this moment.
That would be really cautious.
Seeing this.
I believe you have a considerable understanding of candlesticks now.
We finally arrive at the most important part.
This is the third level [K-line pattern].
We have discussed the four components that make up a candlestick.
And five different types of candlestick strength, their meanings. Based on the knowledge we just learned.
Learn some quantifiable methods.
The candlestick patterns that can really be used for trading.
I will teach everyone four common candlestick patterns (K-line patterns).
I will use chart examples to explain their definitions, formation principles, and application methods.
