How to Read the Crypto Chart?

Cryptocurrency Chart Patterns

Only a few chart patterns have stood the test of time. There is no "proven" chart pattern that works better than another, unlike less subjective analytical tools. Following are the Crypto Chart patterns available.

Price Channels 

Create a series of highs and lows by creating two ascending or descending parallel lines. Prices tend to bounce between these levels of support (lower) and resistance (higher). While most traders buy lower and sell higher, breakouts and breakdowns can be influential.

Ascending & Descending Triangle 

One horizontal line connects highs or lows, and a second sloped line connects rising highs or falling lows. In a right triangle, the price tends to break out or break down from the horizontal line in the direction of the sloped line.

Head & Shoulders 

The Head and Shoulders chart pattern is characterized by a temporary high or low, followed by a big move higher or lower, followed by an equal move higher or lower. It looks like a head with two shoulders that are either upside down (bullish) or right-side-up (bearish).

Triple & Double Top & Bottom 

It is called a triple or double top and bottom chart pattern when the market bounces off the same resistance or support level two or three times in a row. Bullish signals are considered double bottoms, while bearish signals are considered double tops. Double and triple patterns both indicate that prices are about to reverse directions.

Rising Wedge & Falling Wedge 

The slopes of the upper and lower lines of rising and falling wedges are the same (although they still converge). Rising and falling wedges are reversal patterns unlike ascending and descending triangles. Rising wedges are bearish while falling wedges are bullish.

Candlestick Chart

In cryptocurrency candlestick charts, time is shown on the horizontal axis, while private data is shown on the vertical axis. It's important to note that candlesticks show whether the price movement of a market was positive or negative, and to what degree.

Candlesticks consist of a body and wicks. The body of each candlestick represents the opening and closing prices, while the top wick represents how high or low the price of a cryptocurrency was during that period.

Candlesticks provide users with a great deal of information through their simple structure. Candlestick patterns, for example, can be used to identify potential trend reversals. The bullish and bearish candlestick patterns should be recognized by cryptocurrency traders.

Technical Analysis

Statistical analysis refers to the study of trends gathered over time to determine how supply and demand affect a particular asset's future price. Crypto Chart can help investors make informed decisions by letting them know when bullish and bearish movements will end.

Bulls, the buyers of an asset, push the price up through bullish movements. It is the downward price movement caused by sellers or the bears. By analyzing price trends and patterns on charts, traders can find trading opportunities. Although Crypto Chart helps monitor market movements, there are some caveats.

To better understand technical analysis, one must be aware of the Dow Theory. Here are some key ideas:

Dow Theory rests on six fundamental tenets:

Markets move in three directions

Market trends have three phases

Markets incorporate new information as soon as it becomes available

Any new news affects the price of the asset. Market participants' expectations, hopes, and fears are reflected in asset prices. Interest rate movements, earnings expectations, revenue projections, major elections, and product initiatives all affect the market price.

Stock market averages must agree

A rise in one company should increase the other if they are causally linked. If one company's performance improves while the other decreases, then it may be an indication that a market trend is about to reverse.

Volume confirms trends

With a price increase, stranded shares should increase during an uptrend. With a decrease in price, the volume should decrease during a downtrend.

A trend exists until it is proven that it has ended

Despite "market noise", the market remains on-trend. Finding definitive proof of a trend reversal is difficult.

Chart patterns used in technical analysis 

It takes some getting used to chart patterns before you can use them effectively in technical analysis. Here are some chart patterns that every trader should know to grasp.

When analyzing chart patterns using technical analysis, it is important to remember that they do not confirm a market's direction - they are simply a hint as to how the price of an asset may change.

There is a Crypto Chart pattern known as the head and shoulders pattern, where a large peak is accompanied by two smaller peaks. To predict a bullish-to-bearish reversal, traders look at head and shoulders patterns. The first and third peaks are typically smaller than the second, but they all fall back to the same level of support, or 'neckline'. After the third peak falls back to its level of support, it is likely to begin a bearish downtrend.

A double top pattern is also used by traders to identify trend reversals. A price peak is usually followed by a retracement back to support. After another climb up, it will reverse more permanently against the prevailing trend. It signifies the end of a downtrend and the beginning of an uptrend when it forms a double bottom.

Round-bottom pattern -

A trader will look to leverage this pattern by buying at the low point, halfway around the bottom, and then profiting from the continuation once the price breaks above a level of resistance.

In the cup and handle pattern, a period of bearish sentiment precedes a period of bullish sentiment, which shows that the overall trend is heading in a bullish direction. It resembles a rounding bottom chart pattern, and the handle resembles a wedge pattern 

Wedge- They occur when price movements tighten between sloping trend lines. The wedge can be rising or falling.

An upwardly slanted line of support and resistance constitutes a rising wedge. Here, the support line is steeper than the resistance line. The price of an asset generally declines when it breaks through the support level, which indicates a more permanent decline.

Two downwardly sloping levels form a falling wedge. Here, resistance is steeper than support. An asset's price will usually rise and breakthrough resistance when a falling wedge appears, as illustrated in the example below.

Similarly, a rising wedge indicates a bearish market while a falling wedge indicates a bullish market.

Flags or pennant patterns form after assets experience a period of upward movement followed by a period of consolidation. Typically, the trend begins with a significant increase before it enters a period of smaller ups and downs.

Conclusion

If you are considering trading cryptocurrencies, knowing how to read the crypto chart is essential. 

If you want to make good crypto trades, you need to be able to do technical analysis based on the Dow Theory. A sound technical analysis begins by understanding how to read crypto charts. 

You need to be able to read the Japanese candlestick charts to determine the support and resistance levels. Being able to read the market emotions in this way will give you the best chance of predicting the market trends.