Candlestick charts are technical tools through which traders can interpret price patterns. It can give a clear idea of whether the market price moves towards the negative or positive side.
While the Candlestick pattern is commonly used for stocks, EFTs, and forex, you may wonder whether it works for crypto or not.
Fortunately, it does. Candlestick pattern works as an effective way for crypto traders to know about their next possible trading moves. Here’s more about it:
Understanding the Candlestick Pattern in Detail
A Candlestick pattern features different candlesticks to show the cryptocurrency price movement. Based on the fluctuations, the price development can be bullish or bearish.
Bullish, here, means that the price of the cryptocurrency will rise. Meanwhile, Bearish means that the price of the cryptocurrency will fall.
There are two features of a Candlestick pattern-
The body: The body in a crypto Candlestick pattern denotes the opening and closing price of the crypto. It also has two colours for price movement. For example, if the body of the Candlestick is red, it shows that the price is decreasing. Similarly, if the body turns green, then it means that the price is increasing.
The wick/shadow: The wick, on the other hand, lies just below the body and depicts the high and low price points over a certain time period.
To interpret a pattern, it’s important for the trader to evaluate multiple candles. That way, you’ll get an in-depth analysis of the same.
How are Candlestick Pattern Trends Represented?
In a Candlestick pattern, a trend is decided as per the highs and lows of an asset/cryptocurrency prices:
Upward Trend: Upward trend occurs when both the higher and lower price points are higher than their prior values. This type of trend usually indicates a bullish trend.
Downward Trend: Downward trend occurs when the current higher and lower price points are lower than their prior values.
Consolidation Trend: When the price fluctuates, and both the higher and lower points are close to each other, it’s called the consolidation trend.
How Do Candlestick Patterns Work for Crypto Trading?
In 2023, the cryptocurrency revenue is estimated to reach USD 4.67 billion in 2022. Its CAGR rate from 2023 to 2027 is projected to be 15.49%. So, crypto trading is certainly popular among traders. But, like any other trading domain, crypto trading requires a thorough understanding of the market.
So, as a trader, you must know when to put the long and short positions. You should also know when to exit the market when necessary. These things are just as important as choosing the best crypto brokers in 2023 for crypto trading.
Fortunately, Candlestick patterns give a fair idea of such possible events. You can easily analyse the color/length of the Candlestick in a pattern and understand what the market is going to be like. It’s an easy way to determine whether the market will strengthen or weaken in the coming time. Based on these Candlestick charts, you can make decisions for successful crypto trading.
Advantages of Candlestick Pattern for Crypto Trading
One of the biggest advantages of the Candlestick pattern in crypto is how it helps traders to know the probability of future movement. It’s also easy to understand, plus traders can get accurate and concise price patterns. If you can master the art of interpreting Candlestick patterns, you may even earn good profits by investing in cryptocurrencies with the highest trading volume.
The Candlestick pattern is also a proven Japanese technique that has been followed for 250 years. All these years, it has been useful to interpret stock prices perfectly. So you can stay assured of genuineness, potency and reliability through the same.
Best Candlestick Pattern for Crypto Trading
Although there are various Candlestick patterns in the market, some of them work great for crypto trading. These are quick to find and offer excellent signals to help you out:
- The Hammer Candlestick Pattern
- Bullish and Bearish Engulfing
- The Doji
- The Piercing Line
- Key Reversal
- Inside Bar
To sum up, Candlestick patterns work perfectly for crypto trading. Not only does it give a clear understanding of the crypto market, but it prevents you, the trader, from making any wrong decisions.