After much thought, I decided to share my short-term trading strategy, which started with 50,000 and grew to 53,980,000 in just two years in the crypto space!
If you are currently at a loss but want to make cryptocurrency trading your second career in the future, please read carefully; you will definitely gain something, and I recommend saving it!
I went from a huge loss to financial freedom, achieving a 2000 square meter villa and a Land Rover + a small Rolls Royce in Shanghai! [Remember to check the comments]
With ten years of experience, I tell you, if you don't understand 'candlestick chart patterns', don't enter the market! Otherwise, you will definitely lose! (With illustrations)
Candlestick chart patterns are a way to read market price action.
It is well-known that candlestick charts originated in Japan, invented by a rice trader named Munehisa Homma, who utilized historical rice prices to observe technical analysis patterns such as head and shoulders, resistance lines, etc.
After hundreds of years of continuous development and refinement, candlestick charts have become very popular and are adopted by most traders worldwide, mainly because they are easy to read and gather information.
Candlestick charts consist of four main data points: opening price, highest price, lowest price, and closing price.
With candlestick charts, we can clearly see the opening and closing prices, as well as the highest and lowest points of the price.
If the candlestick closes in green (some other charts show it as white), it means that the price has risen; conversely, if it closes in red (or black), it means that the price has fallen.
It is important to note that in international markets, a red candlestick represents 'down', while a green candlestick represents 'up', which is exactly the opposite of the Chinese market. In China, red represents 'up', and green represents 'down'.
Additionally, in candlestick charts, the opening price of a bullish candlestick is always lower than the closing price, while for a bearish candlestick, it is the opposite.
The time frame is also very important. You can use 1-minute charts, 5-minute charts, hourly charts, daily, monthly, or yearly charts. Which time frame to use mainly depends on what type of trader you are.
By using candlestick charts and looking for candlestick patterns, you can reduce emotional trading and trade in the direction of the market, using it to gain an advantage in trading profits.
◑ What are Candlestick Chart Patterns?
Regarding candlestick patterns (or 'K-line patterns'), we have previously introduced many types. In fact, candlestick patterns are specific candlesticks or combinations of candlesticks on a chart that, in most cases, indicate changes occurring in the market.
A good way to understand it is: each candlestick tells a 'story'.
For example, let's take the 'bullish engulfing' candlestick pattern to understand the 'truth' behind it.
In fact, bullish candlestick patterns are essentially chart patterns on lower time frames.
This means that for every bullish candlestick pattern seen on a lower time frame, there will always be a 'story', or a 'battle' between buyers and sellers.
Why is this important?
The reasons are as follows:
Many traders may overly focus on specific candlestick patterns before entering a trade.
"Oh, I have to wait for the bullish engulfing pattern before I can enter the trade."
"Morning star candlestick pattern? Uh, I'd rather wait for the hammer candlestick pattern."
◑ Look for Support and Resistance
You can use candlestick patterns to look for support and resistance levels just like any other chart.
But remember, don't just look at the opening and closing prices; you should also observe the upper and lower shadows, as this highlights the highest and lowest points, giving you a clearer understanding of support and resistance levels.
◑ Determine Trend Reversal
This may be the most useful thing you can do with candlestick chart patterns. If you're trading trends, then candlestick patterns are very useful.
Long shadows and small bodies in candlesticks may indicate that the current trend is about to end, and a new trend will begin.
That is to say, you should still wait for confirmation from the next candlestick to determine whether the signal indicated by the last candlestick will actually occur.
Remember, never trade based on the information from a single candlestick.
◑ The Most Commonly Used Candlestick Chart Patterns
As we said, each candlestick tells a story, and no two candlesticks are exactly the same. Many may look similar, but the market context behind each candlestick is different.
For instance, the shooting star and inverted hammer mentioned below look the same in shape, making it easy for inexperienced traders to confuse them. What differentiates them is the position they occupy and the market conditions at that time.
Now, let's take a look at some of the most commonly traded candlestick patterns.
◍ Hammer
The hammer candlestick pattern indicates that the bearish trend may be ending and a bullish trend may begin.
The opening price and closing price are very close, and it looks like a hammer because there is a long shadow below the candlestick.
To consider the hammer line pattern valid, the shadow must be at least twice as long as the body. If there is a shadow above, it must be very short.
The hammer line is a bullish pattern, but it doesn't mean that the trend will reverse immediately; you need to wait for further confirmation of the trend signal.
◍ Inverted Hammer
The inverted hammer pattern is completely opposite to the hammer pattern.
The inverted hammer pattern is a variant of the traditional hammer pattern. Essentially, it is an inverted hammer, meaning that in the inverted hammer candlestick, the relatively long shadow is above the candlestick body and is typically at least two-thirds of the entire candlestick structure's length.
In the inverted hammer pattern, the lower shadow is very short or almost non-existent, named for its resemblance to an 'upside-down' hammer.
◍ Hanging Man
The hanging man has a long lower shadow, no upper shadow (or a very short one), and a small body located at the upper end of the trading range. The hanging man is very similar to the hammer.
The difference is that it appears in an uptrend, generally indicating that the uptrend is about to end.
The shadow of the hanging man candlestick pattern is also usually twice as long as the body.
◍ Spinning Top
The spinning top pattern may indicate that the price direction is unclear. It is characterized by long upper and lower shadows and a short body.
This indicates that the power between buyers and sellers is balanced, with neither side having an advantage in the market, and both sides lacking control over the market.
If the spinning top forms in an uptrend, it indicates that the buying pressure is weak, and the price trend may reverse from up to down.
Conversely, if it forms in a downtrend, it means that the selling pressure is weak, and the price trend may reverse from down to up.
◍ White Marubozu
In fact, the white marubozu is a type of bullish candlestick; it is a very simple candlestick pattern with a long body and no upper or lower shadows.
This basically means that the opening price is the lowest price, and the closing price is the highest price.
◍ Black Marubozu
The black marubozu is the exact opposite of the white marubozu; it is a bearish candlestick pattern. This candlestick pattern means that the opening price is the highest price, and the closing price is the lowest price.
◍ Doji
The doji candlestick pattern has many different variants, such as the classic doji, dragonfly doji, gravestone doji, etc.
The doji is characterized by the opening and closing prices being very close or almost the same, and both upper and lower shadows are short and of similar length.
The difference between these dojis lies in the length of the upper shadow.
◍ Dragonfly
As mentioned above, the doji pattern has many variants, and the dragonfly doji is one of them.
The dragonfly doji has its opening and closing prices near the high point, with a very long lower shadow and almost no upper shadow. This indicates increasing buying pressure, pushing the market towards higher prices.
◍ Gravestone
The gravestone doji is very similar to the shooting star, characterized by a long upper shadow and little or no lower shadow.
It is the opposite of the dragonfly doji, indicating that there is significant selling pressure above, making it difficult for prices to rise further, suggesting that the price trend may reverse downwards.
◍ Shooting Star
The shooting star has no lower shadow and features a long upper shadow, typically 2-3 times the length of the body. Only candlestick patterns formed in an uptrend are considered shooting star patterns.
The shooting star pattern has the same shape as the inverted hammer, but in a different position.
The inverted hammer usually appears at the bottom of a downtrend, while the shooting star appears at the top of an uptrend.
The appearance of the shooting star pattern generally means that at the market opening, buyers control the market and prices rise.
However, over time, selling pressure increases, causing the price to decline, with the closing price lower than the opening price.
[Check the comments]
