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!
Let’s talk about what candlesticks are telling us and some about patterns. Humans are great at seeing patterns, we always have been. We think it’s a survival mechanism. You’re looking out into the serengeti and think you see a lion in the tall grass…but it turns out the grass was just creating a pattern that, to our brains, looked like a lion. Well, because we saw danger in the pattern we’re better off as a species. Why? Because if there had been a lion there, and because we saw it, it would have lost the element of surprise, increasing our likelihood of surviving that encounter. The fact that there wasn’t a lion there cost us nothing, except for maybe a bit of an adrenaline spike but at least something to laugh about around the fire in the cave later that night.
Seeing, and understanding, patterns in the market is also key to your survival. And that starts with understanding the candlestick:
There’s an entire story as to what happened in the block of time that candlestick is representing, and it doesn’t need to have any numbers. Here’s the story of this candlestick; the price of Bit-slots-coin (our fictional Bitcoin) went higher in this span of time (it’s green), a good amount higher, this candle represents a clear win for the Bulls. The Bears weren’t idle and did everything they could to drive the price down, but it didn’t stick. Ultimately the price of Bit-slots-coin closed higher than the candlestick before, though the Bears did manage to keep it from being as high as it could have been.
Now, lets reveal the scores of this candlestick on the ‘scoreboard’ we referenced in one of our previous articles.
O: 3, H: 8, L: 1, C: 7
So, using the scoreboard and numbers, here’s what we know. The market opened (O) at 3, went as high (H) as 8, as low (L) as 1 and ultimately closed (C) at 7. See how that lines up with the story I told you before? Let’s put the candlestick and the score together.
The ‘wax’ of the candlestick represents the final open and close, the color of the wax tells you whether the price went up or down, and the wicks represent the range of trading in that time. Let’s look at a Bearish candle.
O: 7, H: 8, L:1, C: 3
So, because it’s a red candlestick, a Bear candlestick, we look at the top of the wax to see what price the market opened and the bottom of the wax to see where it closed. The numbers themselves don’t change. It’s how we read the candlesticks based on its color that changes. Green wax, bottom to top. Red wax, top to bottom. Let’s put these candlesticks together side by side.
Assuming this market opened at $3 per Bit-slots-coin, and each candlestick represents one hour of trading, what is the price of Bit-slots-coin after two hours? Let’s put the scores side by side.
12PM – 1PM O: 3, H: 8, L: 1, C: 7 ** 1PM – 2PM O: 7, H: 8, L:1, C: 3
Seeing a pattern? Let’s look at our previous Bitcoin price chart again, and see if you can, without worrying about any of the numbers, see the story just the candlesticks are telling you.
Stay tuned for our next article, until then how about hop into some bitcoin online casinos?