How can beginners in the cryptocurrency market use candlestick charts to predict future trends?
Currently, Bitcoin's market fluctuations are not very large, so during this downtime, I'd like to talk to everyone about technical analysis, which is very important.
In the digital currency market, technical analysis is a crucial indicator for predicting short-term market trends, commonly referred to as candlestick charts. Regardless of whether you believe in or admire technical analysis, it is essential to understand candlestick charts. Excluding technical issues like chart patterns, indicators, and the battle between bulls and bears, basic information such as a currency's price trend, trading volume, lowest point, and highest point can also be reflected in candlestick charts. Therefore, today I will explain some basic introductory knowledge about candlestick charts.
1. Look at the bullish and bearish candles, which represent the trend direction. Personally, I like to view red candles as bearish and green candles as bullish. Most exchanges and analysis software in the cryptocurrency market use red to represent bearish candles and green for bullish candles. A bullish candle indicates that prices will continue to rise, while a bearish candle indicates they will continue to fall. For example, in a bullish candle, after a period of struggle between bulls and bears, if the closing price is higher than the opening price, it indicates that the bulls are in control. A bullish candle suggests that the next phase will continue to rise, at least ensuring that the initial phase will have upward momentum. Conversely, the downward momentum of a bearish candle is the same.
2. Look at the size of the body; the size of the body represents the underlying momentum. The larger the body, the more apparent the momentum for rising or falling is; conversely, the momentum is less apparent. Taking a bullish candle as an example, its body is the portion where the closing price is higher than the opening price. The larger the body of the bullish candle, the stronger the upward momentum is. A larger body indicates greater inherent upward momentum, meaning its upward momentum will be greater than that of a smaller bullish candle. Conversely, the downward momentum of a bearish candle is the same.
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 prices to move in that direction. That is, the longer the upper shadow, the less favorable it is for prices to rise; the longer the lower shadow, the less favorable it is for prices to fall. 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 bearish or bullish, the upper shadow has formed resistance for the next phase, making it more likely for prices to adjust downward.
