ALL ABOUT CRYPTO TRADING CANDLESTICKS
Candlesticks date back to 1750 trailing its invention to a wealthy Japanese rice merchant, Munehisa Homma, who began trading at his local rice exchange using his own personal candlestick analysis. Homma became a legendary rice trader and amassed a huge fortune. Since then reading candlesticks forms the base for trading. The core principals have been intact to date but were modernized in 1800 by journalist Charles Dow.
When you learn how to read and use crypto trading candlesticks you can have the advantage to gain more opportunities for profit and also to protect yourself from losses.
Understanding Crypto Candlesticks
The activities of buying and selling of cryptocurrencies over the world for a specific time period ranging from a minute to a month can be shown by a single candlestick. This information can give you a lot of insight into how are the trades truly feeling about a particular coin i.e. it shows you the market sentiment. Provided you understand this sentiment you can estimate the direction of the price i.e. whether the price will go up or come down. For this, we begin with understanding the three components of a candlestick.
- A Real Body that is the rectangle you see in fig 1.0 which can be red or green.
- An Upper Shadow which is the line above the real body.
- And a Lower Shadow i.e. the line below the real body.
Understanding Crypto Candlesticks
The activities of buying and selling of cryptocurrencies over the world for a specific time period ranging from a minute to a month can be shown by a single candlestick. This information can give you a lot of insight into how are the trades truly feeling about a particular coin i.e. it shows you the market sentiment. Provided you understand this sentiment you can estimate the direction of the price i.e. whether the price will go up or come down. For this, we begin with understanding the three components of a candlestick.
- A Real Body that is the rectangle you see in fig 1.0 which can be red or green.
- An Upper Shadow which is the line above the real body.
- And a Lower Shadow i.e. the line below the real body.
Reading Candlesticks
To read a candlestick you need to understand the four crucial prices in a candlestick. These prices are deciding factors for many things including the colour of the candlestick.
Opening price — The price that was the first trade on the candlestick you are looking at. The colour of the candlestick will be green if the current price is trading above the opening price. It will be red if the current price is trading below the opening price.
High price — This is the highest traded cryptocurrency price for the candlestick that you are looking at. You can see this based on how big the upper shadow is. If there is no upper shadow, then the high price is the opening price.
Low price — This indicates the lowest traded price for the candle. It depends on the size of the lower shadow. If there is no lower shadow, then the low price is the closing price.
Closing price — The closing price is the last price of the crypto asset that was traded on the candlestick that you’re trying to read. Prices which have trended upward are green and those which are trending down are red. This will be in relation to whether the closing price is above or below the opening price.
To get a better picture lets to look at a Bitcoin trading chart from CoinDCX dated 23rd and 24th August 2019 i.e. The two candlestick in the yellow area have a time period of one day each.
From what we learned till now we can now understand that the 24th august candlestick is red in color because it opened at 10388.16 USDT and went ahead to reach a high of 10419.42 and a low of 9890.00 during the day but it closed at 10128.64 (Current price at the end of the day) which was lesser than its opening price. Similarly, you can now read the 23rd August Candlestick.
Using the above information you can identify patterns that may indicate the price directions which help you gain more coins.
Types of Candlesticks
The Doji
The classic doji candle representing an indecisive market comprises equal-length wicks and a very thin, centrally located body.
The Hammer
The Hammer is consisted of on upper shadow but a lower shadow that is twice the size of the real body. Hammers are formed when price sinks below the open only to later return and then close above the open. Such price action signifies that at one point during the trading period sellers/buyers temporarily gained control but quickly gave it back.
The Shooting Star
The shooting star occurs at the peak of an uptrend when the bulls rally to start the trading period, but eventually, lose control of the bears who drag prices to a close below the open.
The Marubozu
A Marubozu is a candlestick with no shadows but a complete real body. A bullish marubozu indicates markets estimate a strong upward trend. A bearish marubozu indicates a strong downtrend.
Chart Basics:
Let’s start with Upper left corner you can set time intervals for the candlesticks. Next to it, you have an option to select the kind of chart you prefer the most preferred one is a candlestick chart. Indicators are technical analysis tools. Upper right corner you have a full-screen option to view the chart in device screen size and can use selection and drawing tools. The Depth Chart gives you a perspective on the volume of trading in terms of price. The camera sign next to it allows you to take a screenshot. Settings can help you customize the complete chart in terms of preferred Style/Scales/Background/Timezone/Sessions. The bottom left durations are to select the duration frame that is preferred to be displayed on the chart. Go to… helps you get to a specified time and date if you keep the candlestick duration as one min you can get the exact values of your trades. The bottom right settings tab also gives you quick access to customizations on the chart but is limited. Auto is the default scaling it can also be in log or % as per your preference. The time shown next can be changed as per your preference.
You are 100% ready to read the trading charts at CoinDCX.
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