Definition of Candlestick
Reporting from Coinmarketcap, candlestick is a chart method that shows the price movement of an asset over a certain period of time. This method is widely used to monitor price movements of various assets, from stocks, forex to cryptocurrencies. The graph shows four main components, namely the price of the asset when it opens (open), closes (closes), highs (highs) and lows (lows).
In order to make the right decisions, many bitcoin and crypto investors are starting to learn how to read candlestick movements. One of the reasons is because bitcoin candlestick analysis can predict signs of a bullish or bearish reversal so that traders can make trading decisions faster than other traders.
Candlestick Advantages
As explained earlier, this candlestick is popularly used by traders because it has advantages over other charts, namely:
- How to read candlesticks is relatively easy, just know and recognize the elements without having to understand dozens of patterns.
- The visuals are pleasing to the eye and impressive.
- Candlesticks can show the psychology of the market clearly. This allows traders to know which party is dominating, whether the seller or the buyer.
- Candlesticks are also able to show signals or signs related to future stock price fluctuations.
Candlestick Anatomy
In order to practice how to read candlesticks easily, here are the four main components you need to know, namely:
1. Open Price
As the name implies, the open price is the first price offered in a given time period and the price is shown at the top or bottom of the bar. The candlestick will be green or white if there is an upward price trend, and red or black if the price trend is down.
2. Close/Current Price
Close or current price is the last price offered. For writing the price will be displayed at the top of the bar when it is green or white, and at the bottom if it is red or black.
3. Highest Price
When it is at the highest price, there will be a wick line above the body of the candle or also known as the upper tail. However, if the open price at that time was also the highest price, then there would be no top tail.
4. Lowest Price
The lowest price offered at a certain time period will also be indicated by the wick line but below the body of the candle. Same with the highest price, if the opening price is the lowest price, then there will be no tail below it.
How to Read Bitcoin and Crypto Candlesticks Easily
When learning to read candlesticks, you need to know the four main components that appear on candlesticks, candlestick patterns, and how to read crypto candlestick charts correctly.
Basically, candlesticks have four main components, namely:
- The open that shows the price of the asset when trading started for a certain period of time.
- Close (close) which shows the price when the trade is closed for a certain period of time.
- The high (high) and low (low) components represent the highest and lowest prices reached by the asset during a certain period of time.
Bullish and Bearish Candlestick Type
In general, there are 2 types of candlesticks as shown in the previous picture, namely bullish (green) and bearish (red).
A bullish candlestick will appear when the closing price is higher than the asset’s opening price for a certain period of time. In the crypto market, this candlestick is green.
A bearish candlestick occurs when the closing price is lower than the asset’s opening price. In the crypto market, this candlestick is red.
For example, if the bitcoin asset’s open price is at IDR 696 million and the closing price is IDR 700 million, the candlestick that appears will be green and is called a bullish candle.
On the other hand, if the bitcoin asset’s open price is at IDR 696 million, and the closing price is IDR 690 million, the candlestick that appears will be red and is called a bearish candle.
Trading Cryptos Based on Candlestick Patterns
There are a wide variety of candlestick patterns on the crypto market. In order to make good decisions, traders must understand each pattern well. Then, how to analyze bitcoin candlesticks and cryptocurrencies easily?
Sam Quimet from CoinDesk revealed that there are three main candlesticks that can be used to predict possible changes in market trends, namely Doji, Hammer and Shooting Star.
Doji shows the condition of investors’ doubts about market conditions and is symbolized by a long axis with the same sized top and bottom division with a thin body in the middle.
Meanwhile, the Hammer candlestick is symbolized by a hammer-shaped candle, which is a long axis downward and a small body at the end. This pattern shows asset prices that had fallen, but then rose again before closing prices.
Meanwhile, Shooting Star shows the opposite condition, where asset prices have increased but dropped drastically before closing prices.
When to Open Position with Candlestick
Connor Blenkinsop of Cointelegraph revealed that candlesticks can help traders to see fluctuations in the price of crypto assets in detail within a certain time frame.
Each candlestick pattern can be used to predict whether the crypto asset price trend will go up or down.
But in general, it is very important for traders to consider short-term and long-term conditions, and be on the lookout for possible volatility when opening positions with candlesticks.
Well, that’s how to read crypto graphs easily and simply. A complete explanation of the meaning of each candlestick pattern will be discussed in more depth in the next article.