Understanding Candlestick Basics
Bullish Candlesticks (Signaling Potential Price Rises)
Bullish candlesticks indicate buying pressure and are categorized by their实体 (real body) size and shadow length:
Small Bullish Candle
- Price range: 0.6%–1.5%
- Suggests mild buyer interest, but the trend remains uncertain.
Medium Bullish Candle
- Price range: 1.6%–3.5%
- Signals stronger buyer dominance, often preceding upward trends.
Large Bullish Candle
- Price range: >3.6%
- Reflects aggressive buying, with buyers controlling the session from open to close.
Bullish Doji (Cross Star)
- Near-equal open/close prices with tiny实体.
- Indicates market indecision; interpret with context (e.g., support/resistance levels).
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Bearish Candlesticks (Signaling Potential Price Drops)
Bearish candlesticks highlight selling pressure:
Small Bearish Candle
- Shows minor selling activity; trend reversal potential is low.
Medium Bearish Candle
- Price range: 1.6%–3.5%
- Sellers gain momentum, often leading to downtrends.
Large Bearish Candle
- Price range: >3.6%
- Strong sell-off; sellers dominate the entire trading session.
Bearish Doji
- Similar to Bullish Doji but closes slightly below the opening price.
- Suggests exhaustion in a downtrend if appearing after prolonged declines.
Key Insight: Longer lower shadows indicate buyer support, while longer upper shadows signal seller resistance.
Critical Candlestick Patterns
Bearish Reversal Patterns
Evening Star
- Structure: Bullish candle → Doji → Bearish candle.
- The bearish candle must close below the midpoint of the first bullish candle.
Dark Cloud Cover
- A bearish candle engulfs 50%+ of the prior bullish candle’s body.
Shooting Star
- Small实体 with upper shadow ≥2x实体 length; warns of potential tops.
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Bullish Reversal Patterns
Morning Star
- Structure: Bearish candle → Doji → Bullish candle.
- Confirmed when the bullish candle closes above the first candle’s midpoint.
Three White Soldiers
- Consecutive bullish candles with higher closes; signals strong uptrends.
Double Bottom (W-Pattern)
- Two distinct lows with a peak in between; breakout above the neckline confirms reversal.
Advanced Technical Indicators
Bollinger Bands®
Components:
- Upper Band: Resistance level.
- Middle Band (20-period SMA): Trend baseline.
- Lower Band: Support level.
Trading Signals:
- Buy when price touches the lower band; sell near the upper band.
- Band squeezes indicate low volatility, often preceding breakouts.
MACD (Moving Average Convergence Divergence)
Key Signals:
- Golden Cross (Bullish): DIF crosses above DEA.
- Death Cross (Bearish): DIF crosses below DEA.
- Divergence: Price and MACD trends oppose (e.g., price rises while MACD falls → potential reversal).
FAQs: Candlestick Trading Simplified
1. How reliable are candlestick patterns alone?
While powerful, combine them with volume analysis and indicators (e.g., RSI, MACD) for higher accuracy.
2. What’s the best timeframe for candlestick analysis?
Daily or 4-hour charts suit swing traders; scalpers use 15-minute/1-hour charts.
3. Can candlesticks predict exact price targets?
No—they indicate probable direction. Always use stop-loss orders to manage risk.
4. How do I avoid false signals?
Wait for pattern confirmation (e.g., a close beyond a key level) and check alignment with broader trends.
5. What’s the most common mistake beginners make?
Overtrading single patterns without considering market context (e.g., news, support/resistance).
Pro Tip: Master 3–5 high-probability patterns (e.g., Morning Star, Dark Cloud Cover) before expanding your toolkit. Consistency beats complexity in crypto trading!