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Academy Trading Ideas Article

Zero basic to learn analysis of Bitcoin | 2-Candlestick Line and its structure

2019.11.08 limin.zhang

There is a trend of rising and falling, reading the price language;

There is a signal to buy and sell, and bid farewell to feeling the deal.

In the last episode, we have introduced Candlestick Line and its structure. But why do we need to understand Candlestick Line?

In this video, we will talk about its evolution and meaning.

Let’s first look at how the Candlestick Line evolved in successive price changes.

This horizontal line shows the opening price and the closing price are the same. It is called a “4-price Doji”.  It often occurs at the market opening moment, or during a period with minimal trading volume, or when the price goes up and then finally goes back to where it started.

Price changes when the market becomes active, a small candle with a short entity is formed. The green part indicates the price goes up, and it is called a up candle; where the red part indicates the price goes down, it is called down candle.

When the market becomes more active, the Down candle and Up candle will be longer.

And when the transaction period becomes extremely active, the Down candle and Up candle will be even longer.

So how is the shadow formed?

Let’s go back to when the market just opened.

The price falls gradually.

And when the price falls to a certain price, a group of actively buying investors gradually appear in the market, pushing the price up step by step and forming a lower shadow line. And as shown in the figure, the entity becomes shorter with a lower shadow line, it is usually called the “hammer line”.

When the candle entity becomes a thin line, we call it the cross.

As the buying power becomes stronger and stronger, the price gradually rises, forming two bullish Up candles.

When the price rises to a certain height, a group of actively selling investors appear in the market. The price is slowly suppressed, forming a Hachure, as shown in the figure.

The candle entity on the right is small, with a Hachure, it is usually called the “reverse hammer line”.

When the selling volume gradually increases, the price continues to fall to the point that the final closing price was the same as the opening price. As shown in the figure, the K line on the left that looks like a cross, is called the “cross star line”, and the right picture is called the “Gravestone Doji” because it resembles a gravestone. It can also be called the “inverted T-line”.

We have learned a lot of candlesticks after going through their variations. How many kinds of K lines are there?

And how should these candlesticks be classified?

As shown, we arrange all kinds of candlesticks in an orderly manner. ️

 There is a total of 42 kinds by multiplying the rows and columns. We will first explain the meaning of the length of the candle entity.

The first row shows green Up candles with a short entity, implying that the bullish strength is weak.

The second row shows green Up candles with a longer entity, meaning that the bullish strength is strong.

The third row shows green Up candle with a very long entity, which means that the bullish strength has an absolute advantage.

In the fourth row, the bodies are in the form of thin lines. They are collectively called the “Doji lines”, meaning that the buying and selling power are fierce and evenly matched.

The fifth row shows the red Down candles with a short entity, implying the bearish strength is weak.

The sixth row shows the red Down candles with a longer entity, implying a stronger bearish strength.

In the seventh row shows the red Down candle with a very long entity, implying the bearish strength has an absolute advantage. Next, we are going to unveil the meaning of the length of the upper and lower shadow lines.

In the first column, there is no upper and lower shadow line on the K line. We usually call it the “bald head”, which means that the situation is one-sided. The positive line indicates bullish strength and the negative line indicates strong bulls.

The second column, only the lower shadow line, it looks like the candle has no long hair, so it is often called “bald”. It implies there is support from the buying side. The longer the lower shadow line, the stronger the support.

In the third column, the K line has only the Hachure which is usually called “barefoot”. It implies there is a resistance, the longer the upper shadow line, the stronger the resistance.

In the fourth column, the lengths of the upper and lower shadow lines are almost equal, meaning that the support and resistance are both equal.

In the fifth column, the lower shadow line is longer than the upper shadow line, meaning that the lower support is greater than the upper resistance.

In the sixth column, the upper shadow line is longer than the lower shadow line, meaning that the upper resistance is greater than the lower support.

Arranging the K lines of without arrays constitutes the price chart we often see. The screenshot is from the price chart of the BTC/USDT in the OKEx currency trading area.

Here comes the end of our section, we will share about observing the Chart regular arrangement and predicting the future price rise and fall in the next video.

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