Directory

• Introduction

• How to use candlestick charts

• Bullish reversal patterns

  • Hammer

  • Inverted Hammer

  • Three White Soldiers

  • Bullish Harami

• Bearish reversal pattern

  • Hanging line

  • Shooting Star

  • Three Crows

  • Bearish Harami

  • Dark clouds cover

• Organize the form

  • Three methods of ascending

  • Three methods of decline

• Doji star

• Based on price K-line chart of the gap

• Summary

Introduction

K-line chart is a Commonly used price trend technical analysis tools. For centuries, traders and investors have used candlestick charts to determine market direction. This article will introduce some of the most typical K-line charts and explain them in detail with examples.

If you want to know how to interpret the K-line chart, please read the "Beginner's Guide to K-line Charts".

How to use K-line chart

Traders can use numerous candlestick charts to identify target areas within the chart. K-line charts can be used for day trading, swing trading, and long-term trading. Some K-line charts reflect the strength of buyers and sellers, while others may indicate reversal patterns, consolidation patterns, or pending market conditions.

It is worth noting that the K-line chart itself does not necessarily represent a buy or sell signal. Rather, they are a way of judging market structure while also indicating potential investment opportunities. Therefore, it is always wise to analyze K-line charts on a case-by-case basis, whether it is based on factors such as technical patterns on the chart or the overall market environment.

In short, like other market analysis tools, K-line charts are best used in conjunction with other market analysis techniques. These include the Wyckoff Method, the Elliott Wave Principle, and the Dow Theory. You can also include some technical analysis (TA) indicators such as trend lines, moving averages, relative strength index (RSI), stochastic RSI, Ichimoku, parabolic indicators, and exponential moving average (MACD).

Bullish reversal pattern

Hammer

Hammer is Refers to a candle with a long lower shadow at the bottom of a downtrend. The lower shadow is at least twice as long as the candle body.

The hammer shows that despite strong selling pressure, buyers are still pushing the price closer to the opening levels. Hammers are generally red or green, with green reflecting a stronger bullish trend.

Inverted hammer

Inverted hammer (or "inverted hammer") is similar to the hammer, but different The long shadow line is above the candle body. In the same way as the hammer, the upper shadow is at least twice as long as the candle body.

The inverted hammer usually appears at the bottom of a downtrend, indicating that the market may reverse upward. The upper shadow shows that the price is no longer falling further, even if sellers eventually pull it back to the opening level. Therefore, an inverted hammer indicates that market conditions may soon be controlled by buyers.

Three White Soldiers

Three White Soldiers are composed of three consecutive green candle lines. The opening prices are all above the previous candle line. Within the body of the candle, the closing price exceeds the high of the previous candle.

Ideally, the three white soldiers have a shorter lower shadow, indicating that buying pressure is continuing to drive the price higher. Based on the size of the candlestick and the length of the shadow line, you can determine whether the future trend will be a consolidation pattern or a pullback.

The bullish harami

The bullish harami is a longer red candlestick followed by a shorter one The length of the green candlestick should not exceed the body of the former.

Bullish harami tend to occur over a period of two days or more, indicating that the bearish trend is slowing down or is coming to an end.

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Bearish reversal pattern

Handle

The hanging neck line is equivalent to the bearish hammer pattern. It usually appears at the end of an uptrend, with a short body and a long lower shadow.

The lower shadow indicates that despite a massive sell-off, buyers ultimately took over and pushed the price higher. With this in mind, a massive sell-off following an ongoing uptrend is a sign that the market could soon turn bearish.

Meteor line

Meteor line refers to a candle with a long upper shadow and a short or even zero lower shadow. line, the body of the candle is short and close to the lowest point. The shooting star is similar in shape to the inverted hammer, except that it usually forms at the end of an uptrend.

The shooting star shows that the market reaches a high point, but then sellers take over, causing the price to fall back. Some traders tend to judge the market based on the subsequent K-line pattern.

Three Crows

Three Crows are composed of three consecutive red candles. The opening prices are all above the previous candle. Within the body range, the closing price is lower than the previous candle's low.

Three crows are the bearish pattern equivalent to three white soldiers. Ideally, the Three Crows have a shorter upper shadow, indicating continued selling pressure driving the price lower. Based on the size of the candlestick and the length of the shadow line, you can determine whether the future trend is a consolidation pattern.

Bearish harami

A bearish harami is a longer green candlestick followed by a shorter one The length of the red candlestick is no longer than the former candlestick body.

Bearish harami tends to occur over a period of two days or more, usually at the end of an uptrend, and indicates buying pressure is decreasing.

Dark clouds Cover

A dark cloud cover is when the opening price of a red candlestick is higher than the closing price of the previous green candlestick , but the closing price was below the midpoint of that green candle.

This pattern is usually accompanied by high volume, indicating that the market has turned bearish. Traders may base their judgment on the subsequent third red candlestick.

Organize the form

Three rising methods

The three rising methods are common An uptrend means that the market continues to rise after three consecutive shorter red candle lines appear. Ideally, the length of these three candlesticks should be no longer than the body of the previous candlestick.

The symbol of the rising consolidation pattern is a green candle with a long body, indicating that the market is bullish again.

Three methods of descent

With On the contrary, the rising three methods indicate the continuation of the falling market.

Doji

A Doji pattern forms when the opening and closing prices are the same (or very close). Prices tend to fluctuate around the opening price, but eventually close at or near the opening price. The Doji, therefore, indicates an unresolved relationship between buyer and seller forces. However, the interpretation of the cross star largely needs to be analyzed based on the specific situation.

Doji can be divided into the following categories based on the position of the opening or closing line:

Tombstone Doji - Indicates a bearish reversal situation. The upper shadow of the candlestick is longer and the opening/closing price is closer to the lowest point.

Long Leg Doji- Represents an pending trend, the candle has upper and lower shadows, and the opening/closing prices are concentrated near the midpoint of the candle body.

Dragonfly Doji - Indicates a bullish or bearish trend (depending on the situation), a candle with a long shadow and an open/close close to the high.

According to the original definition of a doji, the opening price and closing price should be exactly the same. However, what if the opening price and closing price are not exactly the same, but very close? This condition is called "spindle line." However, the cryptocurrency market can be choppy at times, and pure doji patterns are quite rare. Spindles and Dojis are often used interchangeably.

K-line chart based on price gap

Many K-line charts involve price gaps. A price gap forms between two candlesticks when a financial asset opens higher or lower than its previous closing price. The cryptocurrency market supports 24-hour trading, and there is no K-line chart based on this type of price gap. Still, price gaps can occur in low-liquidity markets. However, the main reasons for price gaps are low liquidity and high bid-ask spreads, and thus may not be operable.

Summary

K-line chart is an essential tool for all traders. Even if it is not directly applied to trading strategies, you should be familiar with its principles.

In market analysis, K-line charts can undoubtedly play an important role, but it is worth noting that they are not based on scientific principles or law. However, the K-line chart does vividly reflect the buying and selling power that ultimately determines the market direction.