When we start in the technical analysis of crypto sometimes we ask ourselves " what are those little sticks on the screen?" today we will go over each one and what they mean. They are not there for no reason, each stick you see on the chart go by various names and each candle sticks has a meaning behind it. The method is called: The Japanese Candles sticks method. There are 6 types of candles: Doji or Rickshaw, Shooting Star, Engulfing Candle, Hummer, Gravestone and the dragonfly. now candles patterns is another article for another day. For today you will learn the basic meaning of each candle and how they are reared.
First the structure of the candle: When the candles or (Security) opens it begins from bottom to the top> meaning when it (security) opens it begins very small and the Body begins to fill depending on the demand of the bids or sells red or green. According to the time structure you have in place whether its by 1m or 1 hour for trading view. The Body is the main structure of the candle with shadows up or shadows down also called wicks.
Doji or Rickshaw: This candle can be identify on the chart up top the #14th candle and #22nd candle #28th candle on the chart from left to right. its call rickshaw for its long-legged Doji. The legs are long and the body is small + you can also call this candle neutral.
Shooting star: Are candles that try to move on a upward position when it opens but they end up closing low with a small body with a small tale but a long wick upward. on the Money Making Machine chart it the 7th candle from left to right (a shooting star is a type of candlestick that forms when a security opens, advances significantly, but then closes the day near the open again) Investopedia definition. link below.
Engulfing candle: Can be bearish or bullish depending on were you see them on the chart. a bullish engulfing candle: is a candle that Engulfs the previous red candle to the left and its (green) body is bigger then the candle that just closed. therefor it engulfs the previous candle. if the first candle is a red small body candle and the one that closes after is bigger (green) candle this can be a reversal engulfing candle. in the Money Making Machine chart we could se that reversal over the red bear, with a small red candle and next to it a green Engulfing candle and the pattern is no longer a down trend but the price went up after that. Example candles #39 & #40 and #43 & #44
Engulfing Bearish: is a candle that has a big red body and it engulfs the green candle previous to it. meaning that a down trend is coming soon usually you see this candle after s shooting star or a spinning top. after a big rise to the upside then you may start getting ready for a down trend. like on the Money making Machine chart up top. candles #12& #13 down trend.
Hammer: a hammer candle is a candle that ends a down trend. (A hammer occurs after a security has been declining, suggesting the market is attempting to determine a bottom). Investopedia definition. link below.
Bearish Gravestone: is a long term down trend indicator candle meaning that the Gravestone candle opens and closed at the same level with a long upwards wick or shadow. looking like a inverted hammer. this candle is represented on the chart above in the middle # 26 on the Money making Machine chart .
Dragonfly candle: candles are uncommon this candle you will see on a long term rather the a shorter term chart it look like a (T). But they are to signal a that the price could enter a reversal but you still have to wait for the next candle so its a very misleading candle.
guys I hope this article gave a good explanation to the new comers to Crypto chart analysis. chart analyst or just anyone that has interest in the trading world. like I wrote on my bio this blog is for education, trends and crypto analysis and news. hope you enjoy the chart I made.
The Money Making Machine blog