A Practical Guide For Candlestick Patterns!

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Intraday trading is a method of investing in cryptocurrencies where the trader buys and sells cryptocurrencies on the same day without any open positions left by the end of the day. Intraday traders aim to either purchase a cryptocurrency at a low price and sell it at a higher price or short-sell a cryptocurrency at a high price and buy it at a lower price within the same day. This requires a good understanding of the market and relevant information to help them make the right decisions. In the cryptocurrency market, the price of a cryptocurrency is determined by its demand and supply, among other factors.

Tools such as candlestick chart patterns are very helpful to traders. We will discuss these candlestick charts and offer steps to help you read them.

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Candlestick Graphs/Charts

Candlesticks are a visual representation of the size of price fluctuations. Traders use these charts to identify patterns and gauge the near-term direction of prices in the cryptocurrency market.

Composition of a Candlestick Chart

This is what a candlestick chart pattern looks like:


As you can see, there are several horizontal bars or candles that form this chart. Each candle has three parts:
1. The Body
2. Upper Shadow
3. Lower Shadow

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How to Analyze Candlestick Chart for Cryptocurrencies
The body of the candle in a candlestick chart represents the opening and closing price of the trading done during the period for a particular cryptocurrency. Understanding this is crucial for candlestick trading. Traders can quickly see the price range of the cryptocurrency for the said period by looking at the chart. Moreover, the color of the body indicates whether the price is rising or falling. For instance, if a candlestick chart for a month with each candle
representing a day has more consecutive red candles, then traders know that the cryptocurrency's price is falling.

Vertical lines called wicks or shadows above and below the body show the highs and lows of the traded price of the cryptocurrency. Traders can use this information to analyze the sentiment of the market towards the
cryptocurrency.

Candlestick Chart Patterns

Candlestick charts are an excellent way of understanding investor sentiment and the relationship between demand and supply, bears and bulls, greed and fear, etc., in the cryptocurrency market. Traders must remember that while an individual candle
provides sufficient information, patterns can be determined only by comparing one candle with its preceding and next candles. To benefit from them, it is important that traders understand patterns in candlestick charts.
Let's divide the patterns into two sections:
• Bullish Patterns
• Bearish Patterns
Analyzing these patterns can help traders make informed decisions about buying or selling cryptocurrencies.
Bullish Patterns
• Hammer pattern
This is a candle with a short body and a long lower wick. It is usually located at the bottom of a downward trend. It indicates that despite selling pressures, a strong buying surge pushed the prices up. If the body is green, it indicates a stronger bull market than a red body.

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• Inverse Hammer pattern
This is a candle with a short body and a long upper wick. It is usually located at the bottom of a downward trend too. It indicates buying pressure followed by selling pressure. It also indicates that buyers will soon have control.

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• Bullish Engulfing pattern
This is a pattern of two candlesticks where the first candle is a short red one engulfed by a large green candle. It indicates a bullish market that pushes the price up despite opening lower than the previous day.

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• Morning Star pattern
This is a three-candle pattern that has one candle with a short body between one long red and a long green candle. There is usually no overlap between the short and the long candles. This is an indication of the reduction of the selling pressure and the onset of a bull market.

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• Three White Soldiers pattern
This is a three-candle pattern that has three green candles with small wicks. These candles open and close higher than the previous day.
After a downtrend, this is a strong indication of an upcoming bull trend.

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• Hanging Man pattern
This is a candle with a short body and a long lower wick. It is usually located at the top of an upward trend. It indicates that the selling pressures were stronger than the buying thrust.
It also indicates that bears are gaining control of the market.

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• Shooting Star pattern
This is a candle with a short body and a long upper wick. It is usually located at the top of an upward trend too. Usually, the market opens higher than the previous day and rallies a bit before crashing like a shooting star. It indicates selling pressure taking over the market.

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• Bearish Engulfing pattern
In candlestick chart analysis, this is a pattern of two candlesticks where the first candle is a
short green one engulfed by a large red candle.
It usually occurs at the top of an upward trend.
It indicates a slowdown in the market rise and an upcoming downtrend. If the red candle is lower, the downtrend is usually more significant.

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• Evening Star pattern
This is a three-candle pattern that has one candle with a short body between one long red and a long green candle. There is usually no overlap between the short and the long candles. This is an indication of the reversal of an upward trend. This is more significant if the third candle overcomes the gains of the first candle.

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• Three Black Crows pattern
This is a three-candle pattern that has three consecutive red candles with short wicks.
These candles open and close lower than the previous day. After an upward trend, this is a strong indication of an upcoming bear market.
Potential

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Pattern Definition: A bullish harami is a two-candlestick pattern in technical analysis.
First Candlestick: The first candle is a large bearish (red or black) candlestick.
Second Candlestick: The second candle is a small bullish (green or white) candlestick that is completely contained within the body of the first candle.
Market Indication: This pattern indicates potential reversal of a downtrend.
Significance: Suggests that selling momentum is decreasing, and a possible upward move may follow.
Confirmation: Traders often look for additional bullish confirmation on the third day or subsequent trading sessions.

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Definition: The Bearish Harami candlestick pattern is a two-candle reversal pattern that signals potential bearish trend reversal.

Structure:
First Candle: Large bullish (upward) candlestick.
Second Candle: Small bearish (downward) candlestick completely contained within the body of the first candle.
Indication: Suggests that the upward momentum is slowing down and a reversal to the downside may occur.
Context: Often found at the top of an uptrend.
Confirmation: Strengthened by subsequent bearish candles following the pattern.


Chart patterns can be used to understand trends and sentiment in the cryptocurrency markets. There are several other patterns to explore in order to gain a deeper understanding of market movements. Use this as a starting point and continue to learn and refine your analysis skills.

Happy trading and successful investing!

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The Famous Monkey Story in Every Market!

Once upon a time, a rich man from the city arrived in a village. He announced to the villagers that he would buy monkeys for $100 each.

The villagers were thrilled, as there were hundreds of monkeys in a nearby forest. They caught the monkeys and brought them to the rich man, who paid $100 for every monkey they gave him. The villagers began making a living by capturing monkeys from the forest and selling them to the rich man.

Soon, the forest began to run out of monkeys that were easy to catch. Sensing this, the rich man offered $200 for each monkey. The villagers were ecstatic. They went back to the forest, set up traps, caught more monkeys, and brought them to the rich man.

A few days later, the rich man announced he would pay $300 per monkey. The villagers started climbing trees and risking their lives to catch monkeys and bring them to the rich man, who bought them all. Eventually, there were no monkeys left in the forest.

One day, the rich man announced he would like to buy more monkeys, this time for $800 each. The villagers couldn’t believe their luck. They desperately tried to catch more monkeys.

Meanwhile, the rich man said he had to return to the city for some business. Until he returned, his manager would handle transactions on his behalf.

Once the rich man left, the villagers were unhappy. They had been making quick and easy money from selling monkeys, but now the forest had no monkeys left.

This is when the manager of the rich man stepped in. He made an offer the villagers could not refuse. Pointing to all the caged monkeys, he told the villagers he would sell them for $400 each. They could sell them back to the rich man for $800 each when he returned.

The villagers were over the moon. Buy for $400 and sell for $800 in a few days—they had found the easiest way to double their money. They collected all their savings and even borrowed money. There were long queues, and within a few hours, almost all the monkeys were sold out.

Unfortunately, their happiness did not last long. The manager went missing the next day, and the rich man never returned. Many villagers kept the monkeys, hoping the rich man would come back. But soon, they lost hope and had to release the monkeys back into the forest, as feeding and caring for the noisy monkeys became extremely difficult.

This is exactly what happens when you buy low-quality companies in the stock market. There will be a low-priced stock that no one is interested in buying. A few rich men will suddenly start buying it. The stock price will rise because there are suddenly many buyers and very few sellers—a classic case of huge demand and no supply, like the monkeys in the forest.

The stock gets plenty of coverage on business channels and newspapers. These rich men will also use tricks like sending out bulk SMS messages, asking people to buy the shares for huge returns, and giving free tips. New and inexperienced investors, hoping to double or triple their investment, get lured in. Finally, the big players who bought the stock early when no one wanted it sell it back to inexperienced investors at high prices.

Don’t be greedy—there is no quick money in the stock market or in life. It takes time and effort to become wealthy, and there are no shortcuts.

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