Price Action and Candlesticks

Price Action and Candlestick Patterns

Understanding price action and candlestick patterns are critical to your success as a trader. If you don’t understand what the market is telling you, it will only be a matter of time before you get REKT.

Candles are not just bars on a chart. If you know how to read what a candle is telling you, then you will be a long way ahead. A single candle can tell you a great deal of information for a set period of time when you know how to read them. Candles alone are not a strategy but are one element that can add a great deal when combined with other factors.

When it comes to trading, you don’t need to know all the fancy names for the candles patterns. You Do Not Need to know what a shooting star or an inverted hammer is; they are just names. It is far more important to understand what the candle and price action is telling you; forget the names.

Let’s have a look at some Price Action and Candlestick Patterns.

What is a Candlestick

A candle that closes higher than it opens is a buyers candle. These candles are Green by default as opposed to a Red sellers candle.

As you can see in the diagram, there are a few parts to the candle. Candles are the most commonly used on trading charts because they can tell you a lot of info at a glance.

It tells you where it opened, the low, the high and where it closed over a set duration of time.


For a Seller Candlestick, it is just the opposite. It really is that simple. Now there are loads of books and courses on candlesticks, but you don’t need them most are rubbish anyway.

Trading is not like school, where the more you learn, the better off you were. You don’t need to know it all to be a successful trader. You just need what matters.

There are three candles that matter, Don’t over complicate things. You want to keep your trading as simple as possible. More knowledge or more indicators Don’t mean better results.

Ultimately you need to know who is in control the buyers or the sellers.

Three Types of Candles

You just need to know what the candles are telling you, and names mean Nothing. All you need to know is who won the candle, the buyers or the sellers. But there is a Red candle in the “Buyers In Charge” Yes, because it is bullish and the buyers are in control.

The indecisive candles mean exactly that, neither the buyers nor sellers are in control, the market is indecisive. We are not concerned with these candles. We want to trade with the trend. We need to read the candles to determine what price action is telling us. You need to understand what you are seeing. That is all, and names DO NOT matter.

The time duration of the candle is irrelevant. You just need to know who is in control. What story is the candle telling you? Where is the momentum? Is it bullish or bearish?


 


Just because a candle is Green does not mean it is bullish. Likewise, a Red candle can be bullish. Have a look at the examples below.

Once you understand how to read candles & price action, it can be a potent tool in your trading kit.

Big vs Small – Because Size Does Matter

The cradle strategy that I use requires there to be a small candle for entry. So how do you determine the size? Simple, just compare it to the other candles on the chart. Don’t overcomplicate it. If it looks big, it is big. If it looks small, it is small.

I want to enter my trade on a small candle with the trend, so it still has room to move up. I don’t want to enter a trade on a big candle because it could have exhausted its run if it has already moved a long way. You just need to compare the candle to the previous 20 candles. It will be obvious, and there will be BIG, small & average size candles. We only want to enter a trade on a small candle.

Candle Patterns

As I have mentioned, I personally DO NOT use candle patterns. The way I trade, I don’t need them. Understanding price action is the key, not fancy names for candle patterns. Is the buyer or seller in control, and is it a small candle that is all I need to know?

 

There are ALL sorts of names for candle patterns like ==> Doji, Spinning Top, Hammer, Inverted Hammer, Dragonfly Doji, Bullish Engulfing, Piercing Line, Morning Star, Morning Doji Star, Three White Soldiers, Shooting Star, Hanging Man, Gravestone Doji, Bearish Engulfing, Dark Cloud Cover, Evening Star, Evening Doji Star, Three Black Crows.

If you want to learn what they are, go for it, but I couldn’t care less what they are called, and I DO NOT use them.

Final thoughts

Price action and candlestick patterns go hand in hand. However, you do not need to know the candlestick patterns. You just need to read the candle to know who is in control. Trading crypto can be simple if you keep it simple. There is NO need to overcomplicate things.

I can honestly say the understanding price action is critical. Understanding candlestick patterns is not. The way I trade is straightforward and not complicated at all. If you would like to see the basic techniques I use, you can start for free. Just click this link ==> Free Crypto Trading Course

I have been trading for over 20 years, and I have learnt a lot of technical analysis. I use to use candle patterns when I traded FX. Over the years, I have learnt and used all sorts of technical analysis.

I thought the more I learned, the better I could trade, how wrong was I. What I found is the more technical analysis I added to my strategy, the more reasons I had not to take a trade.

I went back to basics and became profitable again. The strategy I use now is checklist based is 100% mechanical, and it works very well. You can check it out for free from the link above or just click on the banners.

Price action and candlestick patterns are used in trading all the time, but all that really matters is understanding Price Action. I will repeat it names DO NOT matter. Understanding who is in control and reading price action is key to creating Wealth with Crypto.

Be the Best you can Be

DeFi Dave

4 thoughts on “Price Action and Candlestick Patterns”

  1. Using candlestick patterns to forecast pricing action is pretty cool and i’ve never heard of it before.  I’d definitely like to learn more, though, because I don’t quite understand it yet.  Also, where do you find these graphs/candlestick patterns, in order to know how to act?  Is there a place on the crypto site you can find them?

    1. Hi, Molly. 

      As I said in the post, you DO NOT need to learn all the patterns. A good place to start for free is the course I offer ===> Free Crypto Trading Course. It covers all the basics and will give you an excellent grounding in the crypto space. There is a video on candles.

      DeFi Dave

  2. Thanks for this information on candlestick patterns. I am a very small-scale investor and just been dabbling with it for about the past couple of years, but I have had an excellent return on my investments so I am happy. With the candlesticks, I had a question, when I open up the candlestick map to 3 months, a year, 5 years, etc, does each candlestick represent a trading day? If not, how much time does each candlestick represent? Any help would be appreciated.

    1. You can set your chart to whatever timeframe & Span that you want. What I mean is you set the candle first to whatever timeframe you want. 1min, 15 min, 1 hr, 4 hr, 8 hr  1day. Then you can compress or expand your chart to show candles over whatever period you want.

      I hope that makes sense. This post may help you also https://2dsirecrypto.com/crypt

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