Cryptocurrency NewsGuides

Understanding Candlesticks in the Crypto Space

There is no doubt that candlesticks are a very important tool that can help you assess when is the ideal time for you to buy a certain crypto asset or sell it for that matter if you already have one. So how can you exactly leverage these candlesticks, what information do they reveal to us and how can we read them to make our crypto assessments in the most reliable manner? If you want to find out, you are in the right place indeed! Read on to learn more about it!

What do Candlesticks Inform Us?

An important that you need to know about candlesticks I that these can reveal much more than just the movement of crypto price over time. Experienced crypto traders look for trends in order to assess market sentiment and to make certain predictions regarding where the crypto market may be headed next. The following are a few of the types of things they are looking for:

  • A long wick on a candle’s bottom for example may mean that crypto traders are purchasing into a crypto asset as prices go down, which might be a positive indicator that the crypto asset is on its way upwards.
  • A long wick at the candle’s top, however, can indicate that crypto traders are looking to make big profits and that signals a big potential sell-off in the foreseeable future.
  • If the body takes up almost all of the candle with short wicks on either of the sides, that may signal a strong bullish sentiment (on the green candle) or strong bearish sentiment (present on the red candle).

Having a firm understanding of what candlesticks may mean in the context of a certain crypto asset or within particular market conditions is one component of a crypto trading strategy referred to as technical analysis — by which crypto investors make an attempt to make use of past movements in price to identify potential future opportunities and trends!

Reading One Candle Signals

Crypto traders most of the time operate in really short time windows and at times just focus on simply one candle.  When you acquaint yourself with these one-candle signals, it can help you a lot especially if you are a crypto beginner. Read on to learn about the different one candle signals.

  • Long lower shadow can be a bullish indicator and that means that crypto investors are looking to purchase, thus making the prices go up. What you should know is that Longer the lower shadow, the more you can expect the signal to be reliable and dependable.
  • Long upper shadow could indicate a bearish trend and that means that crypto investors are looking to take and sell profit. The longer you see the upper shadow to be, the more strong an indicator is.
  • A Doji candle which is another type of one candle signal does not feature anybody, because the close and open prices are the same. You can generally interpret these to mean there is indecision in the crypto market and is a likely indicator for an upcoming reversal in price (In case you are wondering why “doji”?, crypto candlestick charts were first used by rice traders in Japan way back in the 18th century. “Doji” is the translation of error — most likely because it would be uncommon for prices to close and open in precisely the same place. )
  • Umbrellas have a certain long bottom wick that can help you identify them. A red umbrella is also referred to as a hammer. When you observe a hammer it usually indicates that the crypto asset is receiving some serious purchase action — and the price may very well be on its way upwards. These green umbrellas, on the flip side have a nickname called hanging men which is rather ominous. They are most of the time a signal that crypto sellers are ready to cash out — and that reverses the upward cycle.
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