That red and green chart actually hides the emotional password of the market.
As a female analyst who has been in the cryptocurrency space for many years, I still remember the confusion I felt when I first encountered candlestick charts. Those candlesticks that flew up and down once dazzled me. But now, candlesticks feel more like the market's 'emotional diary' to me, with each one telling the story of the battle between bulls and bears.
Today, I want to share my personal insights on interpreting candlestick charts in the simplest way possible. I hope to help you avoid detours in cryptocurrency trading!
1. The essence of candlesticks: Isn't it just the market's 'emotional thermometer'!
Many people think candlesticks are profound and mysterious, but they are actually quite simple: they record four key pieces of information about the price within a specific time frame—opening price, closing price, highest price, and lowest price.
Imagine each candlestick as a report card of a game:
The body part (the fat body): the difference between the opening and closing prices. The longer the body, the stronger one side's power (long green = bullish strong, long red = bearish fierce).
Shadow part (the thin line): the highest and lowest points the price has attempted to reach. A long upper shadow indicates that the peak was rejected, while a long lower shadow indicates the price was bought back after a drop.
One special point about candlestick charts in the cryptocurrency world is that they operate 24 hours without rest. Unlike the stock market, which has fixed opening and closing times, the cryptocurrency market is always in motion, hence candlesticks are generated continuously.
2. Understand the 'subtext' of a single candlestick
I personally look at candlestick charts, mainly focusing on three things: color, body size, and the length of the shadows. These are the most direct expressions of market sentiment.
① Large bullish candlestick / large bearish candlestick: one side completely controls the situation
When I see a long green candlestick (large bullish candlestick) with almost no shadow, it means that the bulls have controlled the situation from beginning to end, and the buying power is very decisive. Conversely, a long red candlestick (large bearish candlestick) indicates that the bears have completely taken the advantage.
But I want to remind you: location is very important! If a large bullish candlestick appears after a significant rise, it may not be a buying point but rather a signal of exhaustion, so be cautious of getting trapped after chasing highs.
② Hammer candlestick: can't fall anymore?
The hammer candlestick has very distinct characteristics—a small body and a long lower shadow, resembling a hammer. When it appears in a downtrend, I pay special attention: this indicates that the price was once pushed very low, but the bulls managed to pull it back up.
Personally, I like to look for such signals after a continuous drop, but I will definitely wait for the next candlestick to confirm (for example, if the next one starts to rise) before considering action.
③ Doji: the market is indecisive
A doji is when the opening and closing prices are almost the same, and the body shrinks to a line, which may have upper and lower shadows. This pattern tells me: both bulls and bears are temporarily at a standstill, and the market is searching for direction.
If a doji appears after a continuous rise or fall, it often indicates that the trend may soon reverse, and I will be especially cautious.
3. Candlestick combinations: understanding the 'soap opera' is key
A single candlestick might deceive, but the reliability increases significantly when combined. For me, candlestick combinations are like watching a soap opera; they reveal a more complete story.
Bullish combination:
Morning star: sounds beautiful, doesn't it? It consists of three candlesticks—first a large bearish candlestick (crashing down), then a doji or small body (stopping the fall), and finally a large bullish candlestick (rising up). This is a classic bottom reversal signal.
Bullish engulfing: a large bullish candlestick completely engulfs the previous bearish candlestick, as if it has eaten it. This indicates a sudden outbreak of bullish strength, and the trend may reverse.
Bearish combination:
Evening star: the opposite of the morning star, first a large bullish candlestick, then a doji (stopping the rise), and finally a large bearish candlestick (falling down). This is a top reversal signal, and I will be particularly cautious when I see it.
Dark cloud cover: the first candlestick is a large bullish candlestick, and the second is a bearish candlestick that opened high and closed low, falling into the body of the previous bullish candlestick. This indicates that the bears are starting to exert force, which is a warning signal.
4. My practical strategies: three years of lessons learned from pitfalls.
Just recognizing candlestick patterns is not enough; knowing how to use them is key. This is the experience I gained with real money, and I hope it helps you:
1. Look big and act small; cycle resonance
I never look at a single time frame! My habit is: the daily chart determines the trend, the 4-hour chart finds direction, and the 15-minute chart identifies entry points. If the signals from all three time frames are consistent, the success rate will be much higher.
For example, if the daily chart is in an uptrend, and a hammer candlestick appears after a pullback on the 4-hour chart, followed by confirmation of a rebound on the 15-minute chart, that is a good entry opportunity.
2. Volume does not lie
I firmly believe: prices can be manipulated, but volume is relatively real. Any candlestick signal is only reliable if confirmed by volume.
For example, when a large bullish candlestick rises, the volume must also increase; this is a healthy rise. If the price reaches a new high but the volume shrinks, it is likely a false breakout, and I usually avoid such situations.
3. Support and resistance are the 'background board' of candlesticks
No matter how beautiful the candlestick signal is, if it appears near key support or resistance levels, its meaning is completely different.
For example, if a hammer candlestick appears at a long-term support level, the likelihood of a reversal greatly increases; whereas the same hammer candlestick appearing in a random downtrend is much less significant.
4. Always preset that you might be wrong
This is my core principle: candlestick analysis is a probability game, with no 100%. Therefore, every time I enter a position based on a candlestick signal, I always set a clear stop-loss point.
For instance, if I see a morning star signal to buy, I set my stop loss just below the lowest point of the morning star. This way, even if my judgment is wrong, the loss is manageable.
5. The pitfalls that beginners are most likely to fall into; I hope you avoid them.
Overtrading: beginners are most likely to get addicted to 1-minute and 5-minute candlesticks, chasing rises and falls, resulting in significant losses from fees. I recommend beginners start with the 4-hour and daily charts; slow is fast.
Blind faith: treating candlesticks as a prophetic tool, going all in upon seeing bullish signals. In fact, candlesticks only reflect probabilities and need to be combined with other indicators for comprehensive judgment.
Searching for the sword on the boat: memorizing patterns by rote, insisting on finding the perfect textbook shape. In reality, understanding the logic of the comparison between bullish and bearish forces is more important than recognizing patterns.
Candlestick charts are the language of market communication; mastering them allows you to understand the temperature changes of market sentiment. But remember, they are just tools, like a doctor's stethoscope, which can help you diagnose but cannot guarantee a cure.
In this highly volatile cryptocurrency world, surviving is more important than making quick money. Candlestick analysis can help improve your win rate, but always be aware of the risks.
I hope my sharing helps you! Remember, the market is never short of opportunities; what it lacks is players who can last longer. Follow Ake to understand more first-hand information and precise points in the cryptocurrency world, becoming your guide in the crypto space; learning is your greatest wealth!#ETH走势分析 #加密市场观察 $ETH
