How to read crypto charts?

Develop the right skills on how to reading crypto charts is an art. This new skill will not only help you track the price of your favorite coin, but the crypto candlestick charts will also tell you a lot about the market trend.

Market timing is a common problem faced by many new traders. If you want to have accurate entry and exit points, you must use cryptocurrency charts.

You may have a very good trading idea and believe that Bitcoin is about to go up, but if you pick the wrong point, you will start losing money left and right.

If you are looking to become a fully-fledged crypto trader, these charts can be an incredibly powerful tool when used correctly. Knowledge is power. For many traders, charts are an integral part of their decision-making process.

In this cryptocurrency guide, we are going to cover some basics on how to read crypto charts and the cryptocurrency analysis tool you need to be successful in this business.

But the content of this article is for informational purposes only and does not constitute investment advice or any form of recommendation or invitation. Finance de Demain always advise you to get your own independent financial advice before investing or trading in cryptocurrency.

Let's go

What is a crypto chart?

Un crypto chart is simply a visual tool that displays relevant data in a way that helps you understand cryptocurrency price movements. The way the data is plotted can help you see trends in market movements.

It can also help identify trends as they form and give you an idea of ​​the overall market dynamics. Whether this momentum is bullish (people buy and the price goes up) or bearish (people sell and the price goes down).

The theory is that this can then be used to help predict where the market is going and what the price will be in the future so you know when to buy, when to sell and when to hold.

In technical analysis, we study the history of the price and we try to anticipate the next movements according to different criteria. These criteria are largely based on the price/volume relationship and the vast majority of indicators are designed around these two elements. We will therefore be led to look for patterns that tend to repeat themselves by observing the past.

Types of Crypto Charts

Charts are used in technical analysis because it is the best way to visualize historical data. By observing the past we will try to find opportunities for purchases or sales.

The line graph

The line chart is a simple representation of the price, its evolution is represented by a line that connects the closing prices of the sessions. The duration of the session depends on the unit of time (UT) you have chosen at the top of the graph.

Line charts are the most basic type of cryptographic chart. Line charts display historical price levels of an asset. Chart viewing times can be measured by how long you want to see, be it minutes, hours, days, weeks, months, or years.

If you are an experienced trader, you will probably want to focus on minutes and hours. If you are a Holder looking for a longer term investment, the month will be more appropriate.

It's also important to remember that line charts come in two different scales: linear and logarithmic. You can easily switch between these by toggling between them (upper right corner of the chart above, but this may vary).

In the line chart, the price scale is divided into equal parts. In the logarithmic chart, the crypto price is scaled based on percentage changes.

So if two price changes are different in absolute value but equal in percentage, they will both be represented by the same vertical shift on the logarithmic scale. Both charts have their uses.

With a line chart, you can better judge the speed of price changes, while log charts make it easier to identify trends.

The bar chart

We are on the same history but with a different representation of the price. This format allows you to provide more details on price variations within your time unit. One bar = one day, a week, or an hour depending on what you have chosen as UT.

• High: the highest price reached in the unit of time
• Low: the lowest price reached in the unit of time
• Open: the opening price of the time unit
• Close: the closing price of the time unit

When the closing price is higher than the opening price, it is considered to be a bullish bar (in green or white). When it is the opposite, it is considered to be a bearish bar (in red or black).

Moving Average Charts

Another important line that you are likely to come across when analyzing crypto charts is the moving average indicators. These lines are based on the average closing price of a coin over a specified period of time.

This indicator is useful for seeing patterns and helping determine trends and signals for entering and exiting positions.

For example, you would calculate a 50-day moving average by adding a coin's closing prices for each of the 50 trading days before that day and dividing by 50.

The candlestick chart

Candlestick charts can seem intimidating at first. But they are easy to understand once you learn to read them. On the axis of x, you will find the time and on the axis of y, you will find the price. So far so similar to line chart. The big difference is the candlesticks.

The candlestick chart is so called because each point on the chart resembles a candlestick. These are red (or pink) or green rectangles and a line extending from the top or bottom, like the wick of a candle. Candlestick size, wick and color provide you with a range of useful information.

The candlesticks provide the same information as the bar chart but in another form.

The rectangle represents the body of the candle, it is the difference between the opening and closing price. The vertical line (the shadow) represents the highest and lowest price of the session. Candles are an aid to vision, they are easy to interpret when you start.

What can I finally say...?

There are other graphical representations of the price, these four are the main ones. I strongly advise you to familiarize yourself with the latest, that said, each representation has its advantages and disadvantages.

For example, the line chart allows reading with less noise than the candle chart. It's up to you to find what suits you best according to your way of working and the situation ????

There you have it, the basics of cryptocurrency charts. If you have any further questions about different aspects of cryptocurrency, please leave us a comment. But how can you use these charts to predict future price movements?

How to use these charts to predict future price movements?

There are many technical tools and you will probably want to use several in combination. We believe these trading tools will help you avoid shitcoins and lose some of your money or just make better trades overall.

Here are some tools that help you use charts to predict future price movements.

???? Trading View

The best cryptocurrency analysis tool that we like to use is the FREE TradingView charting software. This charting platform has many hidden features and functionalities that will make your trading smooth.

It's just a nice tool to have, but it's not the end of the world as there are other tools you can use at your discretion. It is extremely easy to set up and use tradingview. It is rich in resources, in instruments that you can follow.

???? Cash flow indicator

Our second favorite cryptocurrency analysis tool is the Indicator Chaikin Money Flow. The Chaikin Money Flow indicator was developed by trading guru Marc Chaikin, who was coached by the most successful institutional investors in the world.

The reason why Chaikin Money Flow is the best volume indicator and is better than the classic volume indicator is that it measures institutional accumulation-distribution. So naturally this shows when institutional traders are buying and selling.

Typically on a rally, the Chaikin volume indicator should be above the zero line. Conversely, during heavy selloffs, Chaikin's volume indicator should be below the zero line.

???? Crypto Fear and Greed Index

The Crypto Fear and Greed Index uses a bunch of information. They put all this data together to come up with a score and rating which is plotted on a graph for you. When the sentiment shows a reading below 20, it is extreme fear.

Usually, the price of cryptocurrency is falling and this signals a possible bullish reversal. Conversely, a market sentiment above 80 indicates extreme greed.

In this case, the cryptocurrency is rising and the fear and greed index signals a possible bearish reversal. Learn more about the bull and bear market.

Basically, we use the Fear and Greed Index as a contrarian indicator. Market sentiment is a powerful thing that drives the market, and when we have an extreme reading of market sentiment, that's when we should be looking for a reversal.

???? Fibonacci expansion

The Fibonacci extension is an extremely useful tool that can be used to spot countertrend opportunities as well as reversal trades. We like to focus on the 1,618 level or the golden ratio.

There are all kinds of rules, but basically there are only two things we look for when using Fibonacci extension levels. The first thing is a trend, the second is a correction which has three reference points.

We use these tipping points to draw Fibonacci extension levels and find possible reversal points in the market.

The golden ratio can be found everywhere, it is also a “magic number” which we can also use in our trading. One way or another, many professional traders incorporate the golden ratio into their trading because the market reacts to this particular level with great precision.

En conclusion

Reading crypto candlestick charts is a practical skill that everyone needs to learn if you want to thrive in today's tough cryptocurrency market.

Although the cryptocurrency analysis tool can be a valuable weapon in your trading arsenal, you need to apply them correctly to gain insights from them.

Crypto candlestick charts can help you time the market better so you can use it as a complementary tool for your research.

This guide describes only the basic concepts of technical analysis. We recommend that you build your knowledge and use these tools to build your cryptocurrency strategy that suits your needs.

Thanks for the reading !

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