When Munehia Homma first created candlestick charts in the 1700s, he had no idea it’d change the way we look at assets, like cryptocurrencies decades later.

To him, candlestick charting was meant for the rice trade.

He’d record the opening day’s price of rice, the low and the close.

And over time, he’d begin to see price patterns in his recordings, mapping out repetitive signals in the price bars. He’d soon give them names, like spinning tops, dojis, and hanging man – candlestick names we still use to this day. The discovery of such patterns helped him predict future direction of rice prices, giving him a significant advantage over other traders.

To this day, stock traders rely on them, as do cryptocurrency traders.

Mobile trading app Robinhood is adding candlestick features for Cryptocurrencies

All thanks to consistent Robinhood customer requests for the feature.

According to Coindesk, “Candlestick charts help investors better understand how prices move. They show the open, high, low, and close price during a given time frame, and how volatile the price has been, while a line chart only displays the close price. With this information, investors can also determine how volatile the price has been.”

The Doji Cross: One of the Most Popular Candlesticks

One of the most popular candlesticks is known as the doji cross, which looks like a “+” sign.  When found at top or bottom of trend, it can be a sign of indecision among bulls and bears. It can also be a sign of a potential pivot from a high or a low.

Since March 2018, each time a doji cross appeared at top or bottom of trend with Bitcoin, we saw a reversal not long after.  Of course, we never want to rely on a single indicator as a sign we should buy or sell.  We need to confirm our findings with Bollinger Bands (2,20), relative strength (RSI), MACD and even Williams’ %R for example.

 

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