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What is a Japanese candlestick pattern? Read and understand Japanese candlestick chart in just 5 minutes

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What is a Japanese candlestick pattern? Read and understand Japanese candlestick chart in just 5 minutes

Introduction

As a newcomer to trading or investing, reading charts can be a daunting task. Some rely on their gut feeling and make their investments based on their intuition. While this strategy might temporarily work in a bullish market environment, it most likely wont in the long run.

Essentially, trading and investing are games of probabilities and risk management. So, being able to read candlestick charts is vital to almost any investment style. This article will explain what candlestick charts are and how to read them.

What is a candlestick chart?

A candlestick chart is a type of financial chart that graphically represents the price moves of an asset for a given timeframe. As the name suggests, its made up ofcandlesticks, each representing the same amount of time. The candlesticks can represent virtually any period, from seconds to years.

Candlestick charts date back to about the 17th century. Their creation as a charting tool is often credited to a Japanese rice trader called Homma. His ideas were likely what provided the foundation for what is now used as the modern candlestick chart. Hommas findings were refined by many, most notably byCharles Dow, one of the fathers of moderntechnical analysis.

While candlestick charts could be used to analyze any other types of data, they are mostly employed to facilitate the analysis of financial markets. Used correctly, theyre tools that can help traders gauge the probability of outcomes in the price movement. They can be useful as they enable traders and investors to form their own ideas based on their analysis of the market.

Application of Japanese candlestick pattern

The Japanese candlestick has many applications in trading because of its immediacy, intuitiveness and ease of use. The Japanese candlestick pattern has applications such as:

  • If the Japanese candlestick is considered as a technical indicator , then this is definitely the most used indicator in the world.
  • In addition, the application of Japanese candlesticks also helps in drawing accurate support and resistance . Without Japanese candlesticks, using a line chart would be difficult to draw support and resistance.
  • Because of the popularity of Japanese Candlesticks, candlestick charts are the most accurate psychological gauge in the financial market for all investors.
  • Candlesticks can show you price reversal signals, accumulation areas as well as signs to buy or sell

How do candlestick charts work?

The following price points are needed to create each candlestick:

Open The first recorded trading price of the asset within that particular timeframe.

High The highest recorded trading price of the asset within that particular timeframe.

Low The lowest recorded trading price of the asset within that particular timeframe.

Close The last recorded trading price of the asset within that particular timeframe.

What is a Japanese candlestick pattern? Read and understand Japanese candlestick chart in just 5 minutes

Collectively, this data set is often referred to as the OHLC values. The relationship between the open, high, low, and close determines how the candlestick looks.

The distance between the open and close is referred to as the body, while the distance between the body and the high/low is referred to as thewick or shadow. The distance between the high and low of the candle is called the range of the candlestick.

How to read candlestick charts

Many traders consider candlestick charts easier to read than the more conventional bar and line charts, even though they provide similar information. Candlestick charts can be read at a glance, offering a simple representation of price action.

In practice, a candlestick shows the battle between bulls and bears for a certain period. Generally, the longer the body is, the more intense the buying or selling pressure was during the measured timeframe. If the wicks on the candle are short, it means that the high (or the low) of the measured timeframe was near the closing price.

The color and settings may vary with different charting tools, but generally, if the body is green, it means that the asset closed higher than it opened. Red means that the price moved down during the measured timeframe, so the close was lower than the open.

Some chartists prefer to use black-and-white representations. So instead of using green and red, the charts represent up movements with hollow candles and down moves with black candles.

What candlestick charts dont tell you

While candlesticks are useful in giving you a general idea of price action, they may not provide all you need for a comprehensive analysis. For instance, candlesticks dont show in detail what happened in the interval between the open and close, only the distance between the two points (along with the highest and lowest prices).

For example, while the wicks of a candlestick do tell us the high and low of the period, they cant tell us which one happened first. Still, in most charting tools, the timeframe can be changed, allowing traders to zoom into lower timeframes for more details.

Candlestick charts can also contain a lot of market noise, especially when charting lower timeframes. The candles can change very quickly, which can make them challenging to interpret.

Heikin-Ashi candlesticks

So far, we have discussed what is sometimes referred to as the Japanese candlestick chart. But, there are other ways to calculate candlesticks. The Heikin-Ashi Technique is one of them.

Heikin-Ashi stands for average bar in Japanese. Such candlestick charts rely on a modified formula that uses average price data. The main goal is to smooth out price action and filter out market noise. As such, Heikin-Ashi candles can make it easier to spot market trends, price patterns, and possible reversals.

Traders often use Heikin-Ashi candles in combination with Japanese candlesticks to avoid false signals and increase the chances of spotting market trends. Green Heikin-Ashi candles with no lower wicks generally indicate a strong uptrend, while red candles with no upper wicks may point to a strong downtrend.

While Heikin-Ashi candlesticks can be a powerful tool, like any other technical analysis technique, they do have their limitations. Since these candles use averaged price data, patterns may take longer to develop. Also, they dont show price gaps and may obscure other price data.

Closing thoughts

Candlestick charts are one of the most fundamental tools for any trader or investor. They not only provide a visual representation of the price action for a given asset, but also offer the flexibility to analyze data in different timeframes.

An extensive study of candlestick charts and patterns, combined with an analytical mindset and enough practice may eventually provide traders with an edge over the market. Still, most traders and investors agree that its also important to consider other methods, such asfundamental analysis.

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Cryptocurrency Token vs Coin. What’s the difference?

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Cryptocurrency Token vs Coin. What’s the difference?

People often get confused by the terms cryptocurrency token and cryptocurrency coin. Let’s see what’s the difference between the two.

Cryptocurrency Coins:

Tokens are the digital assets issued by a particular project and can be used as a method of payment inside the ecosystem of that project. A token doesn’t have a blockchain of its own. Tokens have all the characteristics of a coin and additionally, they provide their owner a right to participate in the network of the project they belong to. The tokens are limited to time and place. For example, a cinema ticket is a real-life token with which you can watch a movie at a certain place and time but the same ticket can not be used to pay your bill at the hotel.

Cryptocurrency Tokens:

Cryptocurrency coins have a blockchain of their own and the main difference is they have value in and outside the project ecosystem. Like in the Binance Ecosystem, Binance coin has the blockchain called the Binance Smart Chain(BSC) so we called BNB a coin. On top of that, a BNB coin has value inside the Binance ecosystem as well as outside of it. Likewise, Ethereum uses the Ethereum blockchain (ERC).

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Crypto Knowledge

How Facebook Metaverse will change the social Experience?

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How Facebook Metaverse will change the social Experience?

Facebook rebranded itself to Meta and set on a mission that has untold possibilities of possible – or maybe the word impossible won’t exist anymore.

Facebook takes the social experience to a whole new level by promising a virtual world of eutopia where you can have what you imagine. You can choose your avatar like Mark is doing in the image above, join meetings and parties, experience travel, and do whatever you can think of. There were days when text messaging was socializing, then we upgraded to images, and with the video calls, we thought we have reached the apex of socializing through the internet.

Facebook metaverse allows users to make their own world with whatever they want. They can be, in that world, whatever they wish to be. This also changes the way the Ads will be served.

Facebook has been in news lastly for collecting data, and with the launch of the metaverse, privacy will be the biggest challenge for people. Just say, for example, someone hacks into your account of the metaverse, it will not be only limited to seeing messages or posting spam, that person can literally do whatever you do in that world – just let that sink in.

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HOW TO BUY BITCOIN FOR THE FIRST TIME (STEP-BY-STEP)

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HOW TO BUY BITCOIN FOR THE FIRST TIME (STEP-BY-STEP)

If you’ve never done it before, buying bitcoin can feel a lot like buying drugs. It usually goes down late at night when you’re bored. There’s always a friend of a friend involved who’s got the hookup. And even after you commit to it and cough up the money, you aren’t really sure about what you’re getting in return.

Your first experience with buying bitcoin doesn’t have to be a bad one. If you follow this guide step-by-step, you’ll learn how to buy bitcoin in no time.
View interactive via lucidchart

HOW TO BUY BITCOIN FOR THE FIRST TIME (STEP-BY-STEP)

Below is a list of recommended methods for buying bitcoin. Two things to remember as you’re going through this guide.

First, these methods are ordered from least fees to most fees but you can typically get your bitcoin faster by paying higher fees. For example, bank accounts ususally take several days to verify and often have zero fees, but a credit/debit card can be verified instantly or may not require verification and you can receive your bitcoin same day.

Second, this order represents my experience with buying bitcoin and might not be applicable to every person in every situation.Bank account or wire transfer (No fees)

Credit or debit card

Paypal

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