Japanese candlesticks are used to analyze past price movements and predict possible changes. The program is based on the emotional inputs of traders on the market and prices.
It represents price change visually. It uses colors to show a difference in market movements. This visual representation of crypto charts is helpful to crypto traders. They can predict price movements based on historical data. Another great strength of Japanese candlesticks is that they visually represent supply & demand for every price action.
Japanese candlestick represents four crucial data –
- Asset opening price
- Asset closing price
- High within a specific timeframe
- Low within a particular timeframe
Japanese candlestick body, wick, and color
- The candlestick’s central part is the body that represents the price range between opening & closing price.
- The standard setting for colors – Bullish candles are green and bearish candles are red [traders are allowed to choose colors they desire]. If the body is red means the closing price is less than the opening price. If the body is green means the opening price is less than the closing price.
- Besides the body, there is a wick on the upper and lower part. Upper wick represents the price range between body top and highest price during candlesticks timeframe. The lower wick represents the price range between the body’s bottom and the lowest price during the candlesticks timeframe.
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Japanese candlesticks strategies to use in the crypto trade market
The hammer pattern
During downtrends, the hammer candlestick pattern occurs. It is a bullish candlestick pattern characterized by a lengthy lower wick and higher closing price. The body of the candle is too short, while the lower wick’s length is twice that of the body. When the price makes a new low, a reversal occurs because bears start to exit and the price finally bounces back.
Shooting star pattern
It is a pattern opposite to a hammer. The candlestick pattern is a bearish reversal formed at an uptrend indicating reversal is possible to occur. The pattern is potent in combination with a failed breakout at a crucial resistance level.
In this pattern, the opening and closing rates are the same. They can look like a plus sign, an inverted cross, or a cross. It is a reversal pattern, which indicates a potential modification in trends because indecision is established in bulls and bears. With the Doji candlestick pattern, reversal chances are low in comparison to shooting star and hammer. Doji is connected with market hesitancy and uncertainty.
Understanding patterns will help crypto traders read complex charts from cryptocurrency exchanges. Japanese candlestick patterns are useful to review cryptocurrency history and predict its potential future.
Other factors also need to be taken into consideration. Fundamental analysis, overall market trends, and sentiments, major news & timeframe you will be using. Never depend on a single tool but choose to make an educated trading decision. ZenGo X is a platform that offers informative resources associated with crypto and you can even get the Tezos wallet necessary to make a trade.