Candlesticks Pattern in Cryptocurrency

 
Candlesticks Pattern

The Japanese Candlesticks pattern allows traders of various assets, such as commodities, equities, goods, or currencies, to see price action and market sentiments at a glance.

Technical analysis traders (TA) prefer the Japanese Candlesticks pattern over the lines chart for spotting reversals, continuations, and trends because it provides a more thorough visual picture of the market. These candlesticks have a thick body and wicks, and they display the market's opening and closing times, as well as its highs and lows. They are represented by the colors red (bearish) and green (bullish).

One of the good things about the hints we discover in candlesticks is that they are readily seen and understandable by the traders. For the trade, it is both apparent and understandable.

Types of candlesticks pattern

Let's look at the Hammer candlestick pattern. 

What is a Hammer candlestick pattern?

A Hammer is a Bullish Reversal Candlestick that forms after a decrease in the price of a commodity.

How can a Hammer be recognized?

A Hammer candlestick can be recognized with:

• There are few to no upper wicks. 
• The bottom wick requires at least double the body's size. The lower wick represents the moment when the sellers are in charge, while the body represents how the buyers are taking control of the market.

To get the perfect hammer candlestick that will offer you a higher percentage of confirmation, measure the length of the bottom wick to the size of the body. For example, if the bottom wick is twice the size of the body and the top wick is little, we may state that 100 percent confirmation is guaranteed; nevertheless, additional criteria must be reviewed to confirm this.

Furthermore, the confirmation is 50-60% if the bottom wick is the same or almost the same size as the body. When the candle's body is little, we may claim our confirmation is 80-90 percent. The price has reached the range's 14th percentile.

Before this indication appears, the commodity must be in a clear downtrend. The image below demonstrates this.

For example, in this 8H TF of BTC, we can see that BTC was in a downtrend before a hammer candlestick was formed, which then reversed it to an uptrend; also note that before the hammer was formed, three bearish candlesticks were formed, and after the hammer was formed, an arm was formed, and it continued in an uptrend. 

After the Hammer is formed, buying should continue (uptrend) (i.e there should be an arm to swing it and show the price is going to continue in an uptrend before it is considered as a buy signal). Although the color of the body is unimportant, a green body is preferred over a red body. Hammers are more effective after two or more red (bearish) candlesticks, and they usually appear at the bottom of a downtrend, signifying a bullish turnaround.