Atani has an excellent selection of market chart styles and charts visual settings that you can use, and among them is our default selection, the candlestick chart. The purpose of this is to allow you to best perform what is perhaps the most demanding task of any trader: observe price patterns within the market in order to predict the future price of an asset.
Predicting the future price of an asset within a market may seem like an impossible task for someone who is just starting out in the cryptocurrency market. Especially, if we keep in mind the high volatility of cryptocurrencies. However, market charts, their styles, indicators and other technical market analysis tools have been created to make the impossible a reality. And all this, so that you can make investments in the cryptocurrency market that allow you to improve your positions and make money with them, having the lowest possible risk.
For that reason, from Atani we have decided to give you a hand, and help you to know and how to read candlestick charts, so that you get the most out of this type of market charts.
Learning how to read the candlestick chart in Atani.
Selecting the candlestick chart
By default, Atani already makes use of the candlestick chart to make the representation of market data in your application. However, it is good to know where the selector for this type of chart is located in case you have changed it. That said, you can choose the candlestick chart from the menu below:
With that we will activate the display of market data with the candlestick chart style within Atani.
Reading a candlestick chart
First of all, a candlestick chart is a 2D representation of market data. Thus we have an x and y coordinate system, where this data is plotted.
On the x-axis, the time interval of the market is represented. This measurement can be set in time intervals (known as timerate) ranging from 1 minute to 1 month, and with this we are looking for a time scale on which to measure our trades within the market’s operating time.
On this x-axis, the values are viewed in this way:
- Those furthest to the right are the most recent.
- Those on the left are the oldest.
On the other side, the y-axis represents the price of the asset which can go up or down, according to the time interval. That is to say:
- The higher the candlestick pattern, the higher the price.
- The lower the candlestick pattern, the lower the price.
It is in this coordinate system, where candlesticks are drawn, which are rectangles used to show the range between the opening and closing price in a given period of time.
Attached to the body of these rectangles we find lines extending from the bottom and top of the actual body, which are known as the lower and upper candlestick (or lower and upper shadows).
To see this graphically, the following image highlights each of the parts of a candle.
- Wick, also known as lower and upper shadows. These shadows indicate the lowest or highest price recorded in the market.
- Body, indicates the entry and exit price for a given period. The body and wick are usually shown in red when the candlestick is bearish (opens at a high price and ends at a low price), and in green when the candlestick is bullish (opens at a low price and ends at a high price).
Identifying prices in candlestick patterns
Identifying the price of an asset using Atani and candlestick charts is very simple. First, the current price of the selected asset is displayed in several places that we mark in the following screenshot:
We highlight the properties of each of these spaces:
- The price shown in the trading form , is the last market price of the asset within the exchange and uses a pressure of 5 decimal places.
- On the chart you can also see the price of the asset, as well as the minimum and maximum prices of the last 24 hours, the volume of the 24 hours and 30 days, and the difference in percentage gain or loss of the price of that asset.
- Within the chart you will see a price reference marker line acting on the y-axis of the chart. This price is the current price of the asset.
- And in the list of pairs of the exchange (located on the left side) you will also be able to see the price of the asset and its price variation in the last 24 hours.
In addition to this, it is possible to see the price of an asset by reviewing the previous candles within the chart in order to know the price history of the asset. To do this, just hover over the desired candle and use the cursor to see the price of the asset at the entry or exit of that time interval.
In this screenshot, you can see how we have used the cursor to position over a candle. And at the top of the chart, the high, low, open and close price of that specific candle is shown.
Tips for candlestick reading
Now, you know the basics of candlestick reading. But, analyzing what each candlestick tells us is a job that requires constant practice and experience. For that reason, here are some tips that can help you in this regard:
- First of all, you must be aware of the context in which a market reaction is shown by a candlestick chart. Market reality is full of psychology, moments of confidence and distrust. As well as, a number of factors that cannot be considered in isolation. Keep this in mind and you will be able to foresee reactions within the markets. A good example of this can be the rise that Cardano (ADA) has undergone during 2021. In this case, psychological, developmental and news factors drove and maintain its price upwards so far.
- Never forget to analyze the market trend. This will be able to show you if the candlestick chart pattern is consistent with reality. In this way, it becomes easier to recognize support and resistance in the price. Thanks to this, you will be able to better decide when to make your investment.
- Always keep your stop loss in sight. Candlestick charts are useful because you can mark your entry into the market. Also, you can create a reference line at that point for make your stop loss order. This will help you avoid large losses on your investments.
- Combine the candlestick chart with other technical analysis tools and indicators. Learn how to combine tools to obtain market information in the best possible way.
Basic Candlestick Chart Patterns
Candlestick charts are also capable of showing clear patterns within market data. In fact, there are currently more than 40 patterns identified. All of them quite useful for predicting the behavior of a market using candlestick charts.
Among these patterns we can mention:
Doji patterns occur when we are facing a candlestick in which the opening and closing prices during the candlestick period are the same or almost the same. This makes Doji patterns are seen as neutral patterns of future price action and represent a period of indecision in the market in which neither bulls nor bears could successfully move the price of the traded asset.
Five such patterns have been identified, which are good to know in case you encounter them in a market. At such times, it is good to remain neutral and keep a stop loss to avoid losses in case a bear market starts.
That said, the Doji patterns identified are:
This pattern shows Doji candlesticks with small wicks or shadows extending from the “body” of the Doji, which is centered on the candlestick. Seeing them tells us that there is no confidence to follow a trend (bullish or bearish), so wait for another candlestick to confirm the trend.
In this case, we can see how there are long wicks or shadows extending from a centered Doji body. The price moved dramatically above and below the opening price before closing at or near the same price. Viewed by itself, a long-legged Doji is not reliable for indicating a continuation or reversal of the current trend.
Here we can see a long lower wick or shadow extending from the body of a Doji. The opening, closing and high prices are the same or almost the same. It resembles a “T”. Bears were able to push the price below the opening price, followed by an equal reaction from the bulls. It can be considered a reversal signal if it forms at the bottom of a downtrend. Note that a single Doji candlestick alone can indicate neither the end nor the continuation of a trend.
A pattern where we can see a long upper wick or shadow extending from the body of a Doji. The opening, closing and low prices are the same or virtually the same. The bulls were able to push the price above the opening price, followed by an equal reaction from the bearish. It can be considered a reversal signal if it forms at the top of an uptrend. Note that a single Doji candlestick alone can indicate neither the end nor the continuation of a trend.
A horizontal line with no wick or shadow. All four prices (Open, High, Low and Close) are the same or nearly the same. Found in low activity markets at low time periods (e.g., 1-minute candlesticks). Often indicates a period of very low or no trading activity. Confirm low or no trading activity with a volume indicator.
Marubozu patterns appear in front of us when we are faced with a candlestick that lacks a wick or shadow. This type of candlestick represents periods when one side of the market (bullish or bearish) was in control from the open to the close.
Despite indicating absolute control in a trend, Marubozu patterns are not reliable predictors of future price action by themselves. So, in these cases, it is good to wait for confirmation or use confluence to predict trends.
Other common patterns.
Morning star, is a pattern in which we can observe a bearish candlestick which is then accompanied by a succession of bullish candlesticks. The “star” is a small-bodied candlestick or doji that opens at or below the close of the previous candlestick. The star can be bullish or bearish.
Dark Cloud Cover
This is a bearish pattern that you will see in the markets. It is considered a “nightmare” for those who enter a market “too late” because waiting for a trend confirmation with another candlestick can lead to significant losses.
Dark Cloud Cover may or may not be accompanied by a bearish confirmation, so certain conditions are created:
- If the previous candle is bullish, the current candle is bearish and the next candle confirms the pattern, we have a Dark Cloud Cover, as long as the body of the bearish candles is at least 50% of the size of the last bullish candle.
- If the previous candlestick is bullish, the current candlestick is bearish and the next candlestick is bullish, the Dark Cloud Cover pattern holds if the new bullish candlestick does not recover the price range, and the next candlestick in the time frame is again bearish.
In this screenshot, we can see a Dark Cloud Cover that meets the second condition, which is then sustained by a set of bearish candles, taking the price of the LINK token from $46 to $41 in 8 15-minute candles (2 market hours).
This pattern occurs when we are facing a bearish or bullish candlestick that has a small body near the top with little or no upper shadow and a longer, lower tail.
Considered a bullish pattern during a downtrend.
A variation of the Hammer, it is a bearish pattern consisting of a small body that has a large lower wick or shadow.
Now that you know some very common candlestick patterns, it’s time for you to get to know our technical analysis tools. Tools designed to get the most out of this type of charts in our Atani application.
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