Candlestick patterns - Steemit Crypto Academy Season 5 - Homework Post for Task 10

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Hello everybody.

Welcome to this post. Hopefully, all of you will be good and enjoying your precious health with the grace and blessings of Almighty Allah. This post is actually the homework post for Task 10 of the Season 5 of Steemit Crypto Academy. The lecture post was nicely explained by dear professor @reminiscence01 and I will try my best to explore the task. So, let's start our task without any wastage of time.

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The professor has mentioned three different tasks in the post and asked to perform only one of them so I will explain task number 1. So, have a look.

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Question


(a)

Explain the Japanese candlestick chart? (Original screenshot required).



As we all know that the market of cryptocurrencies is so volatile that a newcomer cannot understand the flow of the market easily. To determine the flow of the cryptocurrency market, there are different kinds of analysis and one of them is the technical analysis. There are also a number of technical analysis tools like charts, candles, indicators, etc. So, in this section, we will discuss a chart pattern known as the Japanese Candlestick Chart. So, have a look.

Japanese Candlestick Chart

The widely used chart for the technical analysis in the market of cryptocurrencies, the market of stocks, and other financial markets are the Japanese Candlestick Chart. It is a technical analysis tool that represents the market trends in graphical form. These graphs are formed by the activities of the buyers and sellers in a particular market. The users of cryptocurrency can get help from these charts to make good trading decisions.

The Japanese Candlestick Chart, as referred to by the name was first time created in Japan in the 1700s. There was a rice trader in Japan named "Munehisa Homma" who was characterized as the supply and demand of rice in the market. During his job, he noticed that the price of rice increased or decreases by the activities of the sellers and buyers of the market. He succeeded in this idea and the concept of the candlestick was born.

The Japanese Candlestick Chart is composed of a number of graphical lines that show the price movement in the market. These lines are named candles and they are of two colors. These candles show that whether the price is in the control of the buyers or the sellers of the market.

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TradingView

An example of a Japanese Candlestick Chart is shown in the above screenshot. This chart consists of two colors of candles. The Green color represents the Bullish Candle while the Red candle indicates the Bearish Candle. I will describe both candles more deeply in the next sections. So, the Japanese Candlestick Chart helps the trader to understand the movement of price in the market through the movement of these candles.

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(b)

In your own words, explain why the Japanese Candlestick chart is the most used in the financial market.



As I have told before that the market of cryptocurrencies is so volatile that it is very difficult for newcomers to earn better profit without having a basic knowledge of the price analysis. So, technical analysis is very much important for a good trading experience. The Japanese Candlestick Chart helps the traders in this regard. So now we will discuss the reason for the top ranking of the Japanese Candlestick Chart among all the other technical analysis tools. So, have a look.

  • Details and Accuracy:-

The movement of the price which is shown by the Japanese Candlestick Chart is exactly true. This chart shows the real change in the price of the assets. The chart shows clear graphics of the current price movements and changes happening in the movements. Thus, the traders can easily understand the market behavior and situations accurately.

  • Easy to Understand:-

Unlike the other technical analysis tools, the Japanese Candlesticks are very easy to understand as the chart consists of candles of custom colors. The simplicity and attractive usage of the chart help the traders to use it.

  • Indicators:-

Indicators are also the technical analysis tools that are used to determine the current behavior and predict the upcoming behavior of the market. So, these indicators can be applied to the Japanese Candlestick Charts to indicate the market trends. In this way, traders can make better decisions.

  • Points of Trade:-

The trading elements of the candles like open, close, low, and high are useful for making better predictions of the price. Using these points, traders can make good trading decisions and mention their entry and exit points.

  • Timeframe:-

The Japanese Candlestick Chart can also be set to the required timeframe like 15min, 1h, 4h, 6h, 1d, etc. A 15min timeframe means that the candle will end after 15 minutes. So, in this way, the traders can analyze the market at different timeframes.

  • Supply and Demand Interactions:-

One of the most important factors of the Japanese Candlestick Chart is that it shows the forces of demand and supply in the market. The activities of the buyers and sellers are also shown by these charts.

  • Trading Psycology:-

With the help of the Japanese Candlestick Chart, a trader can determine whether the market is in the control of the buyers of the sellers. In this way, one can make quick and good decisions.


So, mentioned above are some factors behind the widespread use of the Japanese Candlestick Chart.

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(c)

Describe a bullish and a bearish candle. Also, explain its anatomy. (Original screenshot required)



The Japanese Candlestick could be of two types. One of them is the Bearish candle and the second one is the Bullish candle. So, have a look at them separately.

Bullish Candlestick

Bullish Candlestick is one that is formed in the chart when the price shows an uptrend. It is represented in a Green color candle and is of a length equivalent to the timeframe, we have set. The Bullish candle appears in the market when the market shows the bullish trend means that the buyers are in a strong position in the market and the price is going upward. An example of Bullish Candlestick is shown in the screenshot below.

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Bullish Candlestick

The above image shows Bullish Candlesticks which indicates that the price of the asset is increasing and the buyers are in strong positions.

Anatomy of Bullish Candlestick

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Image Taken From

The Bullish candlestick comprises four major components that are as follows.

  • Open:-

For the Bullish candle, the Open point is at the bottom of the candle. This indicates the opening price of the asset. Opening price means the price at which the market opens(according to the set timeframe).

  • Close:-

For the Bullish candle, the Close point is at the top of the candle. This indicated the closing price of the asset. Closing price means the price at which the market closes (according to the timeframe of the chart). For the Bullish candle, the Close point is always above the Open point.

  • High:-

This point indicates the highest price that the asset has touched in the particular timeframe. In the Bullish candle, a High point is present above the close point.

  • Low:-

This point indicates the lowest price that the asset has touched in the particular timeframe. In the Bullish candle, Low point is present below the open point.



Bearish Candlesticks

Bearish Candlestick is one that is formed in the chart when the price shows a downtrend. It is represented in a Red color candle and is of a length equivalent to the timeframe, we have set. The Bearish candle appears in the market when the market shows the bearish trend means that the sellers are in a strong position in the market and the price is going downward. An example of Bearish Candlestick is shown in the screenshot below.

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Bearish Candlesticks

The above image shows Bearish Candlesticks which indicates that the price of the asset is decreasing and the sellers are in strong positions.

Anatomy of Bearish Candlestick

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Image Taken From

The Bearish candlesticks consist of the following components.

  • Open:-

For the Bearish candle, the Open point is at the bottom of the candle. This indicates the opening price of the asset. Opening price means the price at which the market opens(according to the set timeframe).

  • Close:-

For the Bearish candle, the Close point is at the bottom of the candle. This indicated the closing price of the asset. Closing price means the price at which the market closes (according to the timeframe of the chart). For the Bearish candle, the Close point is always below the Open point.

  • High:-

This point indicates the highest price that the asset has touched in the particular timeframe. In the Bearish candle, a High point is present above the open point.

  • Low:-

This point indicates the lowest price that the asset has reached in the particular timeframe. In the Bearish candle, Low point is present below the close point.

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Conclusions


The Japanese Candlestick Chart was invented by a rice farmer named "Munehisa Homma" who lived in Japan. It was invented by him in the 18th century. The Japanese Candlestick Chart is widely used in cryptocurrency and other financial charts technical analysis. The Bullish candle is of Green color which shows an uptrend. The Bearish candle is of the red color shows a downtrend. There are four parts of a candle are High, Low, Close, Open. The Japanese Candlestick Chart is very much useful for the traders to mention their entry and exit positions and ensure their better profit.


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So, that's all about the Task 10 of the Steemit Crypto Academy. Hopefully, all of you will like this post.


Credits: @steemdoctor1 (Crypto Student)


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Hello @steemdoctor1,

Thank you for participating in the #10 Fixed course for Newcomers in the Steemit Crypto Academy.

Your grade on this assignment is as follows:

CriteriaGrade
Presentation/Use of Markdowns1.5/2
Compliance with topic1.5/2
Quality of Analysis1.5/2
Clarity of Language1.5/2
#club50501/1
Originality1/1
Total8/10

Homework task: 8/10

Feedback and Suggestions :
  • Your effort in this task is appreciated.
  • You have powered up 150 SP since last month according to #club5050 academy season 5 new rules.
  • You have done some research and answered the questions. You may include the sources of all screenshots and try to organize the answers a bit more.
  • Overall work is good.

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Thank to you dear professor.