The Candles talk to you!
As I mentioned last week, it is advisable to get a little basic knowledge of how to read a chart with Candlesticks. Regardless of whether you want to trade yourself, it is also nice if your basic knowledge of the market, and how interpreting all the information contained in these candlesticks, can determine the right time to determine the coin you are going to. looking to buy or sell.
Buy the dip, or miss the flip
It is nice if you can estimate a bit where a possible dip will end up so that you do not buy too high, but it is just as nice if you can estimate where a possible peak will end so that you can take the full profit in that peak and does not sell too quickly. Now I am not claiming that reading Candlesticks you can see everything. That is not the case. Certainly not. In addition to the Candlesticks, you certainly need other technical indicators to be able to do more with this. But you can tell from the Candlesticks whether a market is Bullish or Bearish. These Candlesticks show you a clear story in it, and each Candlestick gives you information about it.
Learning about the Candles
Lately I have been cautiously entering the market to learn how to trade better. For that it is of course necessary that I would also take in some technical information, because only trading on the principle of Buy Low, Sell High is nice… but it does not really work well when the market shows strong fluctuations. It is extremely stressful that way, especially if you have no insight at all about what the expectation is in the longer term. And how high can you put the Sell order in the market, how low can you put a Buy order. Of course, it doesn't make sense if the market is very bullish, and you don't see that, you think, “Oh wow, I sell 10 euros profit NOW and put a Buy order 200 euros lower because then I have a lot more”. That way you miss out on a lot of profit, and you can cut yourself in the right direction. Conversely, if you do not realize that the market is bearish, it can cost you dearly, and you can lose quite a bit if you do not sell because you think it will soon go up again. Now there is no real loss when the price recovers, but at such a moment you could still have a good ride on a 'Buy the dip' movement. If you had known that the price would drop quite a bit when you started selling.
I've been on both sides
And believe me, over the years I have tried to trade more often, and with a lot of stress, and with a lot more luck than wisdom being able to grab a little profit now and then. But also just as often see my hard-earned cryptocurrencies evaporate due to the volatility of the prices. Where I could have made a lot of profit IF I had only had the insight into the Candlesticks and the other technical indicators that help with this. Because, I have to add that, learning to read and understand is a good thing to do. But no 100% guarantee that you can never lose again. We must not forget that. Ultimately, it remains a story of supply and demand, and yet the buyers and sellers largely determine what happens to the price.
Well, a long introduction in which I think I say the same 4x… now really on with the Candlesticks.
Because what are they actually telling us?
We now first dive into the different types of Candlesticks. And to understand that, you need to know what exactly those Candlesticks are telling us. You know those things… if you are going to trade in an investment product you will see those red and green cubes in the price chart. They can vary in shape from a straight bar, to crosses, but they always contain information for you. Candlesticks are essential for successful trading. A candlestick is a kind of mini graph that shows the highest price (high), lowest price (low), opening price (open) and closing price (close) of a cryptocurrency within a certain period. These are used to predict which direction the cryptocurrency price will (most likely) go. The period over which the candle shows this can vary from 10 seconds to many years. Having a good grasp of candlesticks will make it a lot easier to decide when to buy or sell a crypto.
I choose to show you a DOGE chart because it was hot topic for the last days
Red and Green
You have green and red candlesticks. A green candlestick means that the price has gone up, while a red candlestick means that the price has gone down. With a rising price (and therefore a green candlestick), the high (the highest price within that period) is displayed at the top, with the close (the price of the cryptocurrency at the end of the period) below. At the bottom, the open (the price of the cryptocurrency at the start of the period) with the low (the lowest price within that period) below it. With a red candlestick, the "open" and the "close" are logically the other way around (falling price means that the price closes lower than it opens). The "stalk" from the very top of the candlestick to the very bottom thus shows the price range of the relevant period.
- High: The highest value of the cryptocurrency within the period
- Low: The lowest value of the cryptocurrency within the period
- Close: The value of the cryptocurrency at the end of the period
- Open: The value of the cryptocurrency at the beginning of the period
What information can you get from this?
The information you can get from candlesticks are mainly "chart patterns" or chart patterns. Candlesticks can signal whether a trend is continuing in the same direction or not.
Therefore, a distinction can be made between three patterns:
- Continuation: The trend continues in the same way
- Indecision: It is not clear which direction the trend is heading. Buyers and sellers both seem to pull the course equally hard.
- Reversal: the trend is turning. The price goes from falling to rising or from rising to falling.
The 4 main candlestick patterns
There are a lot of candlestick patterns that can indicate what is going to happen to the price, but an entire article can be written about that in itself. For now I will limit myself to what I have been told what the most important and powerful patterns should be.
Bullish Engulfing (Bridging) Candlestick
A bullish engulfing candlestick is formed when the price of a cryptocurrency within a certain time period has been both higher than the highest price of the previous period and lower than the lowest price. It bridges (engulfs) both prices. This pattern basically shows that the price of the cryptocurrency has gone down, but has found support here, making a bullish upward movement back to break the high of the previous period. This candlestick is often the sign of an upward trend change.
Bearish Engulfing Candlestick
The bearish engulfing candlestick is logically the opposite of the bullish engulfing candlestick. In this case, it also bridges both the high and low of the previous period, but the close is lower than the open. This candlestick can occur at the top or within a trend, which signals that the trend will continue downward.
Hammer Reversal Candlestick
This candlestick mainly occurs at the bottom of a downtrend or at the top of an uptrend. The candlestick owes this name to its shape; it is very much like a hammer. When you come across the hammer reversed hammer candlestick, it could be a sign that the trend is about to reverse. The longer the "handle" of the hammer, the more this indicates that the market has tested the support of resistance. After this "low" or "high" has been tested, the bulls (traders who think the market is rising) or bears (traders who think the market is falling) take over again and a reverse trend can be expected.
DOJI
A Doji candle shows indecision in the market. It is not clear whether the market will rise or fall further. These candles have the shape of a cross. At this point, bulls and bears are battling each other out which way the market will go. The Doji candlestick therefore has a small body (with the open and close close together) and a somewhat longer "stem". With Doji candles it is usually not a good idea to trade because the market can go up and down from that point on. It can, however, be a clear indicator of a signal that the market's sentiment may change.
These are not the only Candles
There are many other candlesticks that can send a signal, but I am not even that far in my learning process, and that it is quite a learning process may be clear. Still, I have already made a nice start with these four, and you can already get ahead with these four Candlesticks. In any case, the graphs become a bit clearer if you keep this in mind. And at least you know a bit more WHAT these Candlesticks are telling you anyway. It is a fact that these candlesticks only give a very little information, and you should always use this in combination with other indicators such as volume and chart patterns.
Continue to learn
I hope that this week I will be able to learn more about this myself, because that is another small step further in my goal to be able to trade profitably by learning to better estimate what a course is going to do ... and what I'm on could bet. In this way I hope to gain more insight for myself, so that FOMO and FUD become a thing of the past.
I would love to hear and learn from YOU
Obviously I hope you have benefited from this too, and I would like to be recommended for more information, because as it may be clear, I have only just started discovering all this and have still a big learning curve ahead of me.
