The Ultimate Guide On How To Read Cryptocurrency Technical Analysis Charts

Javeria  |  Apr 11, 2020

So, now you are finally getting to cryptocurrency technical analysis charts after you’ve learned the basics about how to trade in cryptocurrency. Well, whether you’ve been into the crypto industry for a while now or just getting started, the art of reading crypto charts might seem daunting to you. We agree it is a little bit complicated, but if you’ll start from scratch and give it some time, you are going to rock it. In this article, we are going to ease your pain by providing you simple illustration of how to read crypto charts. Read the article till end to learn the basics of chart reading.

How Can the Cryptocurrency Technical Analysis Chart Help You?

 

Chart reading helps you in the technical analysis of various crypto coins. It is not only limited to tracking the price movements of currencies but also depicts the market trends in different manners. There are plenty of ways to do technical analysis of cryptocurrencies, among which candlestick chart is the most famous. It provides you with a more accurate view of price movements and market trends as well.

One of the major benefits of cryptocurrency chart is that it helps you depicts the entry and exit points for your trading. If you have done some research about crypto trading before, you must be aware of the fact that you need to decide entry and exit points to be successful. These points can help you succeed in your crypto trading; however, if you enter or exit at the wrong time, you could suffer a significant loss. After reading this article, you will be able to read cryptocurrency technical analysis charts and do some basic technical analysis. So, let’s get started with the fundamentals of crypto trading charts.

CandleSticks Charts

 

Candlesticks Chart

 

Candlestick charts are considered as the best charts for crypto and the favourite tool of investors because it displays and let them depict important information about the coin. Unlike other cryptocurrency technical analysis charts, this chart represents not only price changes but also the movement of the currency, open and close price and the bullish and bearish market as well. This is the reason CandleSticks Charts earned significant value among seasonal traders and investors over other types of charts.

To know how to read CandleSticks Chart, you must learn about the essential elements first. As you can see from the chart, each candle has three parts, one its upper tail, second the body of the candle and then the lower tail. The upper shadow of the candle shows the highest price traded of the cryptocurrency and the lower shadow displays the lowest price.

However, there are some candles in the chart who have no upper or lower tail. Well, it is because the opening and closing price of the coin is almost as same as the highest and lowest price.

Basics of candlestick

 

Furthermore, you will see that the candles are either coloured in green or red. The colour of the candle represents the bearish and bullish trend. So if the closing price of the cryptocurrency were highest than its opening price, it would be coloured in green (bullish). And if it is red, it indicates that the closing price was less than the opening price. In green (bullish) candles, the opening price is represented on the lower end of the candle’s body, and the closing price is on the upper end of the candle’s body. Alternatively, in bearish (red) candles, the upper end of the candle’s body represents its opening price and the lower end its closing price.

Now that you know about how to check the market trends (bearish or bullish), opening and closing price, highest and lowest trades of the cryptocurrency, let’s move on to the time frame and volume.

Time Frame

 

CandleSticks charts also allow you to check the price movement of a particle coin by customizing its time frame. For example, if you want to check out the price movement of the currency in the last few minutes, you can customize the chart to 5 or 10 minutes. You can adjust the time from anywhere between minutes to hours, weeks, and months.

Volume

Secondly, you can also check the number of trades through CandleSticks chart. If the bar is green, it represents the increased interest in the asset. However, if the bar is red, it displays a drop of interest in the coin.

RSI (Relative Strength Index)

 

Relative Strength Index is used to determine the strength of the asset by its performance. It compares all the losses and gains of the coin to asses whether it was overbought or oversold. The tool is useful in determining the entry and exit levels for trading. RSI is calculated between 0 to 100 in which if the coin crosses 70, it is considered overbought, and if it stays under 30, it means the asset is oversold.

RSI, if used with other crypto tools, can provide essential data about the asset. Most investors use it in combination with Moving averages and Bollinger Bands.

Conclusion

Reading cryptocurrency technical analysis charts is a necessary tool one would need while trading or investing in cryptocurrency. However, it should be applied correctly to obtain meaningful information from them.

Hopefully, these charts and tools would help you in technical analysis of cryptocurrency and market trends. As said above, there are other plenty of tools and indicators available that you can use along with charts to get the information you need. However, any of these tools should not be used individually and must on combined with other indicators to get accurate information.

As a beginner, you should use the above mentioned key elements, i.e. time selection, volume and RSI to get a rough crypto chart analysis. As you’ll move forward with your technical analysis and learn more with time, you’ll start getting accurate.

Before you begin with technical analysis and move on to crypto chart reading, make sure you are clear with your basic concepts above Bitcoin and cryptocurrencies. If not, you can read our guides about Bitcoins, and altcoins to gain knowledge.

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