Bitcoin (BTC)the cryptocurrency with the highest market capitalization, has a variable price, which makes it a risky investment as it cannot accurately predict what will happen to its value.
But this feature does not stop the thousands of users who bet on it in the Argentina considering it a way to dollarize their pesos and thus escape the insecurity that a weak local currency transmits.
And while you can’t accurately predict what will happen to its value in the future, There are tools that market specialists use to guess if it’s a good time to buy -or sell- the BTC.
The “candlestick chart” OR “Japanese candles”which is a type of chart widely used in stock market technical analysis and is also used with CRYPTOCURRENCIESIt is one of the most used and, if you know how to use it, it provides useful information to draw strategies. The first to use it were the Japanese to study the price of rice.
Candlestick charts are used to describe the price movements of a security, financial derivative or currency.
What data about the behavior of Bitcoin are contained in these charts
Specialists Álvaro Gandía and Camilo Rodríguez, in dialogue with iProfessionaldetailed how this popular method works within the segment of the CRYPTOCURRENCIES.
“The candle is the graphical representation of the price action of a pair, like Bitcoin against the dollar, for example, in a certain period of time”Gandia starts.
They are made up of two parts:
- The body: which defines the start price and the end price
- The wick: the lines above and below that specify the displacement of the value in that same period.
In this regard, Rodríguez adds that, in terms of the time periods represented, these can range from one hour to much longer cycles such as a year, for example.
“In this way, if two candles of 12 hours each are analyzed, this will be a summary of that day”, added to this medium.
The parts that make up a candlestick chart
How do you read these graphs?
The candles represented with the green color indicate prices ascendants. As for the opening value, it is located at the bottom of the object, while the closing value is at the top. For his part, hehe red candles indicate low prices.
The importance of this type of graph is that they can indicate much more than the fluctuation of prices in certain periods of time.
Experts study them to find patterns that allow them to get an idea about market sentiment and thus predict their next moves. For example, if the body occupies almost the entire surface of the candle and the wicks are very far out, you could be on the verge of a major bull market (green candles) or bear market (if they are red), the specialists detail.
Keywords to understand the cryptocurrency market
Words “medium” and “resistance” They are very common in the environment of cryptocurrency traders, but for those who are taking their first steps in this ecosystem and want to have more information on the behavior of the market, it is key that they master them.
These concepts influence the decision of specialists who day by day look for the best opportunities to buy a token at a cheap price and then sell it for a higher amount to obtain an economic difference.
“In general terms, child the floors (supports) and the ceilings (resistances) where demand and supply meet. Generally, they are meplaces where the price trend changesGandia explained.
The concepts of support and resistance allow us to detect limits where prices tend to bounce in the opposite direction
In this regard, Rodríguez added that “support is a point where there is a large amount of trapped sellers. This is an area where those users who sold at a price want to re-enter.” “Instead the resistance is the opposite of support. It is an area where there are many buyers trapped in the marketwho seek to exit when the price returns to that value”, added the expert.
“If we look at the weekly candlesticks, we can detect which is the area where the price interacts most frequently and thus we can define what the figures for these areas are,” added Gandia.
“By way of summary, usually looking to buy at support and sell at resistance”Rodriguez expanded.
For his part, Gandía linked that “the good merchants know identify (from experience) where are these liquidity zones (the one that contains most of the buy and sell orders) and in this way use it in your favor”.
Tips to avoid future headaches
Rodríguez suggested, for those who are taking their first steps in the world of analysis, start studying charts on a daily basis, then weekly and monthly.
“If they are going to hold, I always recommend that they see candles of months and/or years”, Gandia added.
But despite having all that information, decisions are always difficultbecause it is up to each one to determine -according to their instinct- when a support is weak and when the same happens with a resistance, to act at the ideal moment or to be patient until the opportunity arises and not miss out, for example, on the benefits of a rebound.