CANDLESTICK PATTERNS - STEEMIT CRYPTO ACADEMY SEASON 5 - HOMEWORK POST FOR TASK 10

in SteemitCryptoAcademy2 years ago

Hello crypto lovers, I am here once again with this Season 5 Homework task 10 post for professor @reminiscence01, which is my last introductory task. This task is all about Candlestick Patterns, I will take my time and answer the questions below.


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Questions


1a) Explain the Japanese candlestick chart? (Original screenshot required).
b) In your own words, explain why the Japanese Candlestick chart is the most used in the financial market.
c) Describe a bullish and a bearish candle. Also, explain its anatomy. (Original screenshot required)


(a) Explain the Japanese candlestick chart? (Original screenshot required).


The Japanese candlestick chart can be defined as a graphical display of multiple candlesticks together that displays the price movements, operations, and interactions between crypto traders in the market.


ChartExample.png
Example of a candlestick chart - ETH/USDT chart || Screenshot from tradingview.com

The screenshot above displays the Japanese candlesticks charts with different types of candlesticks. I think this chart shows price movements on different cryptocurrency exchanges like; binance and trading pairs on tradingview.com.
The Japanese candlestick is a display of market interactions between the buyers (bulls) and the sellers (bears) for any particular crypto's price. One can tell that they are called candlesticks because they are similar to candles. The Japanese candlestick charts were set by a rice trader in Japan in the 1700s. It is one of the most widely accepted and used charts in the financial markets. Crypto traders use these candlestick charts to get ideas about future price movements or directions. Candlesticks are usually made up of four parts, and they are open price, highest price, lowest price, and close(final) price.

Users can view price charts on an exchange in different time frames like 15M, 30M, 1H, 4H, 1D, etc to view the interaction between the buyers and sellers better, and to make a better trading decision in the market.



(b) In your own words, explain why the Japanese Candlestick chart is the most used in the financial market.


I think the Japanese Candlestick is the most used In the financial market because it displays more detailed price action information and it is not hard to use and commiserate with compared to others. Japanese candlestick chart is very specific in capturing price movements within a particular period in the market. Crypto traders use the candlestick charts with other technical tools like the Relative Strength Index (RSI) and Moving Average (MA) among others to make standard analyses and decisions in the market as seen in the screenshot below.


StochasticMA.png
Candlestick chart with the Stochastic RSI and MA - ETH/USDT chart || Screenshot from tradingview.com

Candlestick charts display and show the price direction or movement of an asset in the market. This includes asset price openings and closings. Also, it shows an increase or decrease in the price of an asset within a particular time frame so that crypto traders can get ideas about future price directions or movements to be able to make proper trading decisions.

Japanese candlestick chart mostly consists of two color candles, the red and green candles. Here the red color shows a negative price movement and the green color shows a positive price movement. Most traders use red and green colors, sometimes blue or white instead of green and black instead of red are used also. This separation of colors makes it helpful and easier to read and analyze the market.



(c) Describe a bullish and bearish candle. Also, explain its anatomy. (Original screenshot required)



BothCandles.jpg
Image description of Bullish and Bearish candles || Source

  • Bullish Candle
    The bullish candle is colored green and sometimes white, and it signifies an increase in the price of an asset in the market. The analysis of Bullish candles signifies an increase in the price of a trade asset over some time. This increase is also proportional to the successional increase in the graph. If a market trend is in a bearish trend, the formation of a bullish candle shows that the buyers are gaining momentum and the movement of the market is about to reverse.


    BullishCandles.png
    Example of Bullish candles - ETH/USDT chart || Screenshot from tradingview.com

    The screenshot above shows the bullish candles and how they caused a reversal in the trend and direction of the asset's price.

  • Bearish Candle
    The analysis of a bearish candle is the opposite of the formation of a bullish candle. Bearish Candlestick is colored red or sometimes black, and it shows or indicates a decrease in the price of an asset in the market.
    The top of a bearish candle signifies the open/high price of an asset and the bottom signifies the close/low price of an asset. If a market trend is in a bullish trend, the formation of a bearish candle shows that the sellers are gaining momentum and strength which means the movement of the market is about to reverse to a downward trend or movement.


    BearishCandles.png
    Example of Bearish candles - ETH/USDT chart || Screenshot from tradingview.com

    The screenshot above shows the bearish candles and how they caused a reversal in the trend and direction of the asset's price. Their formation shows that the sellers are in control of the market at that period.



Conclusion

I want to say a very big thank you to professor @reminiscence01 for this great and impactful lecture on Candlestick Patterns. After going through the lesson, I now know more about Candlestick Patterns, their functions, structures, and how they form as well as how to use them with technical analysis.

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