How to understand crypto charts?
Crypto charts can be a little intimidating at first glance. All those lines and squiggles can look like gibberish. But with a little bit of understanding, you can start to see patterns and trends that can give you an edge in trading cryptocurrencies. In this article, we'll take a look at some of the most important things to understand about crypto charts.
How to understand crypto charts: The basics
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.
Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
How to understand crypto charts: The different types
Cryptocurrencies are a digital or virtual asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.
There are three main types of cryptocurrency charts:
1. Time-based charts show the price of a cryptocurrency over a specific period of time.
2. Volume-based charts show the total traded value of a cryptocurrency over a specific period of time.
3. Price-based charts show the price of a cryptocurrency relative to other cryptocurrencies.
How to understand crypto charts: Candlestick charts
Crypto charts are used to track the changes in the price of digital assets over time. They can be used to identify trends and information about the health of the market.
The candlestick chart is a type of chart that uses a series of bars to plot the price of an asset over time. The width of each bar represents the amount of change in price, and the color of the bar indicates the type of movement: green for up, red for down, and white for unchanged.
The candlestick chart is a popular way to analyze cryptocurrency prices because it is easy to understand and provides a visual representation of price movement.
How to understand crypto charts: Bar charts
A bar chart is a graphical representation of the price of an asset over time. The height of each bar corresponds to the price at that point in time. The width of each bar corresponds to the total number of shares traded at that point in time.
How to understand crypto charts: Line charts
Crypto charts can be used to visualize the price of a cryptocurrency over time. These charts are also known as line charts, and typically show the price of a cryptocurrency over a period of time as a line on a graph.
The Y-axis shows the value of the cryptocurrency over time, while the X-axis shows the time period. The blue line on the graph shows the price of the cryptocurrency over that time period, while the green, red, and yellow lines show how the price has changed relative to each other.
How to understand crypto charts: Technical indicators
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units.
Investors and traders use a variety of technical indicators to help them understand the health of the cryptocurrency markets. Some of the most popular technical indicators include the Bollinger Bands, the MACD, and the RSI.
How to understand crypto charts: Support and resistance
Crypto charts are a great way to understand the current price trend and to identify potential support and resistance levels.
A support level is a price point where buyers are likely to continue pushing the price up, while a resistance level is a price point where sellers are likely to continue pushing the price down.
If the price is trading near a support or resistance level, it is important to watch for signs that the level is about to be broken. This can include a sudden increase in volume or sharp movement in the price direction. If the support or resistance level is broken, it can lead to a rapid increase or decrease in the price of the cryptocurrency, respectively.
How to understand crypto charts: Moving averages
A moving average is a technical analysis tool that can be used to identify the trend of a security or commodity. Moving averages are calculated by adding the closing prices of a specified number of periods (e.g., 10 days) and dividing the total by the number of periods. The moving average is then plotted on a graph to show the trend over time.
When studying crypto charts, a moving average can be a valuable tool to help identify whether the price of a security or commodity is trending upwards or downwards. The moving average can also help identify when a security or commodity has reached a new price point or undergone a significant change in trend. By using a moving average, you can better understand the patterns and trends that are unfolding in the market.
How to understand crypto charts: Trendlines
Crypto charts can be extremely confusing if you don't understand how to read them. A trendline is a graphical representation of the price movement over time. It is a smooth line that indicates the direction of the price movement.
As you can see in the below chart, the price of Bitcoin has been moving upwards along a smooth trendline. This means that the price has been increasing over time.
If the trendline breaks (as it has in the past), this means that the price is no longer following the same direction and may be headed in a different direction.
It is important to remember that trendlines are just a graphical representation of the price movement and are not infallible. They can be broken, and therefore, should not be taken as gospel.
How to understand crypto charts: Fibonacci retracements
When looking at crypto charts, it's important to understand the concept of Fibonacci retracements.
Fibonacci retracements are technical analysis tools that use the Fibonacci sequence to predict future price movements.
The Fibonacci sequence is a mathematical sequence that starts with the number 0 and goes up to 1, 1, 2, 3, 5, 8, 13, and so on.
Each number in the sequence is the sum of the previous two numbers in the sequence. For example, the number 0 is the sum of 1 and 1, which is 2. The number 1 is the sum of 1 and 1.5, which is 2.6, and so on.
The Fibonacci retracement tool uses the Fibonacci sequence to predict future price movements.
When you see a crypto chart with a red line showing a Fibonacci retracement, that means that the current price is below the point of the previous swing high and below the point of the previous swing low.
When you see a crypto chart with a green line showing a Fibonacci retracement, that means that the current price is above the point of the previous swing high and above the point of the previous swing low.
How to understand crypto charts: Japanese candlesticks
Cryptocurrencies are a digital asset class that use cryptography to secure their transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.
Japanese candlesticks are used to visualize price action for cryptocurrencies. The body of the candlestick is the price over the previous 12 hours, and the width of the candlestick is the percentage change from the previous day's close.
How to understand crypto charts: Ichimoku Cloud
Crypto charts are used to display the performance of digital assets over time. The Ichimoku Cloud is a popular indicator used to measure the trend of an asset.
The Ichimoku Cloud is made up of five main indicators: the depth of the bar, the height of the bar, the trend, the volatility and the orderbook.
