How to Read a Crypto chart if you’re a Complete Beginner?

In technical analysis, trading using the candlestick price chart is a necessary skill to learn. The candlestick chart can help us determine entries, exits, the direction and strength of the trend, reversals, and much more.

The construction of a candle is made up of four prices (open, high, low, and close), but the resulting candlestick shape can take on various forms. Price action reading can help us interpret the different shapes of the candlesticks.

There are 3 main elements that make up a candlestick:

1. The body of the candlestick, which is the solid part or, in other words: the rectangular portion of the candle. The real body represents the price range between the opening and closing prices.

2. An upper wick is attached to the top of the body. The top of the upper wick is the highest price.

3. A downward wick is attached to the bottom of the body. The bottom of the downward wick is the lowest price.

The two lines above and below the body are known as shadows, wicks, or hairs.

How to Interpret Candlesticks

In general, we can identify three types of candlesticks, namely:

• A bullish or upward price movement over any given time frame is identified when the closing price is greater than the opening price.

• Conversely, a bearish or downward price movement over any given timeframe is identified when the closing price is lower than the opening price.

• Finally, neutral candlesticks are identified when the current closing price is the same (or very close to) as the opening price.

Four basic candle patterns to help you get started

Engulfing Bearish

The Engulfing Bearish is a bearish reversal pattern represented by two candles.

The second candle totally engulfs the first one and starts a downward movement.

During an uptrend or upward movement, the first candle is still increasing, however, the bears respond aggressively creating a red candle that engulfs the previous one. Represented by a long decreasing candle, the sellers take over the market and push the price down.

This pattern usually precedes to lower prices due to the higher pressure of the supply on the price. Therefore, it will signal a sell if selected in your automated strategy.

Engulfing Bullish

The Engulfing Bullish is a bullish reversal pattern represented by two candles.

The second candle totally engulfs the first one and starts an upward movement.

During a downtrend or downward movement, the first candle is decreasing, however, the bulls respond aggressively creating a green candle that engulfs the previous one. Represented by a long increasing candle, the buyers take over the market and push the price up.

This pattern usually precedes higher prices due to the higher pressure of the supply on the price. Therefore, it will signal a buy if selected in your automated strategy..

Morning Doji Star

The Morning Doji Star is a bullish reversal pattern represented by three candles.

During a downtrend, the first candle is a long decreasing candle, followed by a Doji closing below the previous low. The third candle is a long increasing candle closing above the midpoint of the first candle.

During a downtrend, the indecision pattern, Doji, appears. This means that the current trend is losing strength, and the next candle confirms it. The third one initiates a bullish movement that could reverse the price direction.

Evening Doji Star

The Evening Doji Star is a bearish reversal pattern represented by three candles.

During an uptrend, a long increasing candle is followed by a Doji. The third candle decreases, has a long body and closes below the midpoint of the first candle.

It is a very used pattern in trading, especially used to anticipate bearish moves in the chart. It is usually found during upward moves. Afterward, an indecision candle, Doji, forms at the top of the pattern and is followed by a long decreasing candle that starts a bearish move.

The Evening Doji Star pattern represents how bears and bulls fight during an upward movement, which creates a Doji. Finally, the bears take over the market with a long red candle, therefore signaling a sell.