Note: Market trading involves staggering amounts of risk. This article is intended for entertainment purposes only and is not to be taken as advice for what to do with your money! There are risks in market trading that you must be aware of before you ever enter any market and this article will not go into all of those risks. Inform yourself before spending any money on investments or market trading and never invest more than you can afford to lose!
We’ve gone some into candlesticks and what they’re showing us. Now, let’s look at different ways to view a candlestick. As we’ve said before, a candlestick represents the price range within a set period of time. But, it doesn’t tell us exactly how the trading went throughout the range of time. It just gives us the open, close, high, and low. A trader needs to get the entire picture before entering into a market, and that means ‘zooming’ in on a day’s trading.
So far, in these articles, we’ve been working with mainly 1 Hour candlesticks. For this article we’re going to use a popular cryptocurrency exchange called Poloniex. We’ll focus in on a single 1 Day candlestick, April 27, 2016:
As you can see that day was a clear win for the Bears; the day opened at $467 per Bitcoin and closed at $443. As a trader that’s telling us plenty about that particular day, but we need more information. When did the Bears take over, when was volume at its highest during the day, when was it at it’s lowest, what kind of fight did the Bulls put up? That single day candlestick doesn’t answer any of those questions. To get a better picture of that day let’s turn this 1 Day candlestick into a series of 30 minute candlesticks.
There we go, a single day’s candlestick turned into 30 min candlesticks. We see that the day opened up with little fanfare and little action. At 12:00 the volume picked up and the Bears answered the call, driving the prices down to near $443. We can see where the Bulls put up their best efforts, and we can see there was a good amount of volatility in that time. Ultimately, though, the Bears won the day, but as you can see by the 1 day candlesticks above, it wouldn’t be long before the Bulls would get into the game. But those few hours, after 12:00 had the most volume and dictated the course of Bitcoin throughout the rest of the day. As those hours are of the most interest to us let’s break down those 15 minute candlesticks into 5 minute candlesticks.
Things look a little different, now, don’t they? It’s the same story, just more nuanced. We can see when and where the Bulls tried to make their stand, where it stuck, where the two sides couldn’t overcome one or the other, and where the Bears obliterated the Bulls gains. You will also notice, that this zoomed in, the candlesticks don’t always match up moving from Bullish to Bearish. This just has to do with the time being viewed and how fast a price can change in any given allotment of time, even milliseconds. These askew candlesticks are called ‘gaps‘ and are a side effect of viewing the market in candlesticks this close up.
As you can see, using various candlesticks from five minute, to day, month, and even year candlesticks (in some markets) adds to the tools in our growing toolbox. These tools helps us maneuver the field of play and understand it from a micro sense as opposed to just a macro view. The only way to assume which way the market is going to move at any given time is to study its past. With market trading you want to study it down to the very minute…or in this case, 5 minutes!
Don’t feel like gambling on the market just yet? Hop into some actual bitcoin casinos, until then!