Trading Cryptocurrency Candlestick Must "Three Looks

Trading cryptocurrency requires knowledge of candlestick charts, which is essential for every investor and a necessary learning step for beginners. Faced with various candlestick combinations, beginners may feel a bit overwhelmed. In fact, complex candlesticks can be simplified into three basic observations: first, look at the color (bullish or bearish), second, look at the size of the body, and third, look at the length of the shadows.

1. Look at the color: The color represents the trend direction. A bullish candle indicates that prices will continue to rise, while a bearish candle indicates that prices will continue to fall. Taking a bullish candle as an example, after a period of struggle between bulls and bears, if the closing price is higher than the opening price, it signifies that the bulls are in control. A bullish candle suggests that prices will continue to rise in the next phase, at least ensuring an initial upward momentum. Conversely, the downward momentum of a bearish candle behaves similarly.

2. Look at the size of the body: The size of the body represents the inherent strength. The larger the body, the more pronounced the upward or downward momentum. Conversely, a smaller body indicates less momentum. Taking a bullish candle as an example, its body consists of the portion where the closing price is higher than the opening price. A larger bullish body indicates stronger upward momentum, meaning its upward strength will be greater than that of a smaller bullish candle. Conversely, the downward momentum of a bearish candle behaves similarly.

3. Look at the length of the shadows: The shadows represent reversal signals. The longer the shadow in one direction, the less favorable it is for the price to move in that direction. Specifically, a longer upper shadow is less favorable for price increases, and a longer lower shadow is less favorable for price decreases. Taking the upper shadow as an example, after a period of struggle between bulls and bears, if the bulls are defeated, regardless of whether the candlestick is bullish or bearish, the upper shadow portion has formed a resistance level for the next phase, making a downward price adjustment more probable.