Crypto Trading Essentials: What is a Candle in Trading?
How To Understand Candlestick Patterns? A candlestick chart is a way to show how the price of something (like a stock or crypto) moves over time. Each “candlestick” tells a story about the price during a certain time period.
Body: This is the thick part of the candlestick. It shows the opening price (where the price started) and the closing price (where it ended).
Wick (or Shadow): These are the thin lines above and below the body. They show the highest and lowest prices during that time.
Color: The color of the candlestick tells you if the price went up or down.
Green: The price closed higher than it opened (this is called “bullish,” which means the price went up).
Red: The price closed lower than it opened (this is called “bearish,” meaning the price went down).
What is a candlestick? Explanation of the candlestick in trading
Crypto Trading for Beginners: What are Candlestick Patterns?
How To Understand Candlestick Patterns? Let’s explain a few of the most common candlestick patterns in the crypto trading world.
Doji: Shows that buyers and sellers are undecided, meaning the market isn’t sure where to go next.
A Doji is like a day at the market when fruit prices don’t really change. 🍏🍌🍊
Imagine apple prices were $1.50 in the morning, then went up and down a little during the day, but by evening, they were still $1.50. This means buyers and sellers couldn’t decide if the price should go up or down—just like a Doji in trading, where the market is unsure about the next move! 📉📈
Hammer: Looks like a small body with a long lower wick and signals a possible price increase if seen after a downtrend.
Engulfing Pattern: A strong trend reversal sign where a larger candle completely covers (engulfs) the previous one—can be bullish (going up) or bearish (going down).
Morning Star / Evening Star: These patterns suggest a trend reversal—Morning Star means prices may go up, while Evening Star signals a possible drop.
Shooting Star: Looks like an upside-down hammer and suggests that prices might fall soon.
Understanding these patterns can assist a beginner trader in making more informed trading decisions!
Crypto Candlestick Patterns Overview for Beginners
Crypto Trading – How To Understand Support & Resistance?
Imagine a market where fruit prices go up and down every day.
Support Level → Like the Lowest Price of Apples 🍎📉
If apple prices keep dropping but always stop at $1 before going back up, buyers see $1 as a good deal and start buying. This stops the price from falling lower, just like a Support Level in trading!
Resistance Level → Like the Highest Price of Apples 🍎📈
If apple prices keep rising but never go above $3 because people think it’s too expensive and stop buying, the price can’t go higher and may fall. This is like a Resistance Level in trading!
Traders watch these price levels to guess when prices might change, helping them decide when to buy or sell!
How Can a Trader Be Sure About a Trend?
Crypto Trading with Support and Resistance
Helpful Indicators for Crypto Trading Beginners
Indicators are special tools that help traders see if prices might go up or down, just like how shoppers watch fruit prices before deciding to buy! Here are some helpful indicators:
Relative Strength Index (RSI): Works like a fuel gauge—it tells if a price has gone too high (overbought, may fall) or too low (oversold, may rise).
Moving Averages (MA): Acts like a roadmap, smoothing out price movements to show the overall trend.
MACD (Moving Average Convergence Divergence): Like a speedometer, it helps see the strength and direction of a trend.
Volume: Think of it as crowd noise—higher volume means more traders are active, confirming if a price move is strong or weak.
Crypto Trading Indicators: MACD
You can add these indicators the same way you would add a Moving Average on platforms like TradingView or the Crypticorn AI Prediction Dashboard Chart.
Simple Strategy for Beginners: Trend Following for Cryptocurrencies
Trend following is like watching fruit prices at a market. If apple prices keep going up every day, shoppers expect them to rise more, so they buy early before they get too expensive! 🍎📈
If banana prices keep falling, people might sell now in case the price gets lower. 🍌📉
In crypto trading, instead of fruit prices, traders follow price trends of things like Bitcoin (BTC) or Ethereum (ETH) to decide when to buy or sell!
Crypto Trend Following Example for Trading Beginners
What To Do Based On The Trend Following Strategy?
Uptrend → Buy when prices stay high 🍎📈
If apple prices stay above the usual price, it means they are going up! This is a good time to buy before they get even more expensive.
Downtrend → Sell when prices drop 🍌📉
If banana prices stay lower than usual, they might keep dropping. It’s better to sell early.
Sideways → Avoid buying when prices keep changing 🍊
If orange prices keep going up and down but don’t really change much, it’s hard to know what will happen next, so it’s better to wait!
Trend following strategies are also used by our AI trading agents.
Risk Management for Crypto Trading
What is Risk Management?
Risk management is about protecting money and avoiding big losses. For example, a careful fruit shopper buys apples for $10 but doesn’t want to lose too much if the price drops. They decide, “If apple prices fall to $9.90, I will sell them and take a small loss.” This way, they only lose a little instead of waiting and losing even more. In crypto trading, risk management helps traders set limits on how much they are willing to lose before selling, so they can avoid big losses and protect their investments. This is called a stop loss—it helps traders limit losses so they don’t lose too much if prices go against their trade.
What Are Other Ways Traders Can Stay Safe?
Take Profit Order
For example, a smart fruit seller buys apples for $1 each and plans to sell them when the price reaches $1.50 to make a profit. They set an automatic rule to sell the apples at $1.50, so they don’t miss their chance—this is like a Take-Profit Order in trading. 🍏💰
Position Sizing
Another careful fruit seller only buys a small number of apples instead of spending all their money on one type of fruit. This way, if prices drop, they don’t lose too much—this is like Position Sizing, where traders only risk a small part of their money on each trade.
Conclusion
These are the basics concepts of crypto trading. There are for sure many more concepts and it will take some time to understand more of these concepts. For our next blog posts we’ll show you how to use the prediction dashboard with these basic knowledge for crypto trading.
Authors: https://x.com/Bl0ckChainRonin and Mr.A; both seasoned traders
