Blockchain and Cryptocurrency Beginner - The Psychology Behind the Formation of Bullish Engulfing and Doji Candlestick Patterns

Bullish engulfing Candlestick Pattern

The Bullish engulfing candlestick pattern is basically a type of candle stick pattern and one of the easiest price pattern to identify and understand. A Bullish engulfing Candlestick pattern is simply a candlestick that forms when the red candle which has a small body, is followed by a green candlestick which has a larger body which engulfs the body of the previous candlestick. The Bullish engulfing candlestick pattern is also known as a reversal pattern because it forms at the bottom of the downtrend and shows that the downtrend is coming to an end and is about to reverse to an uptrend.

The psychology behind the bullish engulfing candlestick pattern is that the price of a particular cryptocurrency pair opened on the high on the red candle, the sellers pushed the price all the way down and the price finally closes on the low of the day. The green candle which follows next, opened near the low of the previous red candle, shows that buyers came in and the buying force pushed the price all the way up, that the price engulfs the previous red candlestick.

Doji Candlestick Pattern

The Doji candlestick pattern is simply a candlestick that forms like a plus or cross shape. The doji candlestick occurs when the open and close of the candlestick of a particular cryptocurrency pair are at the same price level. The doji candlestick pattern doesn’t not represent any direction of the market as the opening price and close price are at the same level. The Doji candlestick pattern is also known as an indecision in the market because neither the buyers nor sellers have taken control. However, the Doji candlestick pattern can also represent that the momentum of the existing trend has slowed down before the market continues in its current trend direction or reverses.

The psychology behind the Doji candlestick pattern is that the price of the particular cryptocurrency pair opened and closed on the same level. This means that both the buying pressure and selling pressure in the market were on an equilibrium. Also, when the Doji candlestick appears at the bottom of a current trend either uptrend or downtrend, it can be an indication that the market is about to reverse from the current trend. For instance, if the market is in a downtrend and the Doji candlestick appears at the bottom of the downtrend, it can be an indication of a possible reversal.