How to Read Crypto Trading Charts Like A Pro

How To Read Crypto Trading Charts

Many people who get into trading cryptocurrencies have never even traded on a Forex exchange, or a stock exchange, so it can be a little confusing. Getting started can be a little overwhelming and there is an incredible amount of data, buzzwords, and charts to get to grips with before you get going.

Anyone who wants to start trading crypto has to start by doing a bit of studying. Doing research and understanding the game will always give you an edge over people who choose not to. It is essential to understand primarily because it is your hard-earned money that you will be putting in, and you do not want to simply throw your money hoping it will land well. Teaching yourself how to read crypto charts is essential for your journey into the crypto world.

Sell high, buy low is the holy grail of quotes when it comes to crypto or any other form of trading. It is ultimately how you can come up with a profit but understand when the market dips or is in a bear market will take some reading, and unfortunately experience. Mitigating losses is the key of this article. Here we will be explaining certain key definitions that beginners MUST know and also teaching you how to read crypto charts like a pro.

Line Charts

line chart

A line chart is the most basic chart that you will come across and it will remind many of us of those long, boring hours in maths lessons at secondary school. These look just like the charts you would painstakingly copy into your exercise books and they work by showing the simple progression of something, over time and represented by a line.

When it comes to cryptocurrencies, the line represents the performance of the coin over a specified amount of time and you can often find charts that have multiple lines, each tracking different aspects such as price and market share. These are linear graphs and they give a great idea of what the coin as done in terms of performance over time, making it simple and easy for you to ascertain whether it is a coin you would consider investing in.

Try to look at the performance of the coin over the last 12 months before zooming in to see how it has performed in the last three and six. You need to get a good indication of whether it is on an upward or downward trajectory, whether it is stable or volatile, and how it is performing in the short-term.

Candlestick Charts

candlestick chart

This is one of the most common charts you will see in a trading platform and one of the best ways to understand the ‘phase’ which you choose to see. If you want to read crypto charts, understanding candlestick charts is integral.

To start off with, usually, candlestick charts have the green color which indicates a positive phase, or red color which indicates a negative phase.

In whatever platform you choose, there will always be an option to choose to view the last five minutes, ten minutes, fifteen minutes, hour, 4 hours, day and more. Whenever you click on these the candlestick will show you the phase you choose. For example, if you pick to see the last 4 hours, one candlestick will be indicative of what happened every 4 hours. One candlestick = 4 hours. If you choose the one day phase, one candlestick will give you information of what happened in the day, what is still going on throughout the day and other past days.

Lastly, to understand how to read crypto charts, you need to know how to read a single candlestick.

Each candle consists of rectangles and a protruding line (called a Wick), and again, the color depends on the direction of the market. There are 4 points to read a candlestick:

  • If the closing price is higher than the opening price, the candle will be green and that would be a bullish signal
  • If the closing price is lower than the opening price, the candle will be read and that would mean a bearish signal
  • The lines extending out of the candlestick indicated the highest and lowest price reached during the timeframe of your choice
  • The top of the green rectangle is the market close and the bottom means the market open, meaning the price went up. The top of a red candle means market open whereas the bottom of the candle means market close, meaning the price went down.

Understanding these key points are important in order to read a crypto chart like a pro. If you spend some time reading the chart, you will get used to everything that’s happening, and you will start understanding slowly. Take your time, there is no rush, and you will understand. Once you get acquainted, you can move to understand another key concept which is market trends.

Trend Lines

trendline chart

Buying high and selling low is a problem that usually happens simply due to the fact that people do not understand market trends. Panic selling is also a problem. When professionals read crypto charts they understand what is happening, and through trends, they can forecast what may happen in the future.

It is impossible to cover most of the trends in this article, so doing your own research is important. In short, we can outline three primary market trends, short-, intermediate and long term trends. We can see these form every day. A lot of people try to identify these trends in order to gain a profit. Learning how to identify such trends are an investors first order of business. If you identify a trend, you will have strong hands, and you will be confident in your decision whatever upset that you might take.

Primary Market

The bull and bear markets are also known as primary markets. The length of these markets can last from 1 to 3 years so be cautious and away of what is happening.

Secular Trends

This can last for one to three decades; it holds many primary trends and can be easy to recognize.

Intermediate Trends

Inside each primary trend there is an intermediate trend. Sudden turnarounds and rallies make up the intermediate trends and they result in some kind of economic/ political action.

Support and Resistance Levels

support and resistance chart

This is one of the most popular techniques that is used in the technical analysis of cryptocurrencies and other stocks or currencies. It is based on a simple concept but it is notoriously difficult to master. It works by identifying price levels where the price reacted by either reversing or slowing down, and the price behaviour at these points can leave clues for analysts as to the future price behaviour of a coin.

There are lots of different ways that someone can identify these levels and apply them to cryptocurrency trading. Support and resistance levels can be important turning points, areas of congestion, or round numbers that a trader attaches some significance to. The higher the timeframe is, the more relevant the applicable level becomes.

Being able to identify important levels can take an awful lot of practice. These levels exist due to a particular influx of buyers or sellers at various points. The fact that these levels can change between support or resistance can be used to indicate the range of a particular market as well as trade reversals, breakouts, or bounces. Each one of these particular trades will have their own entry and exit rules and some trading sites offer a tool that helps traders to identify these levels on a chart.

Trading Volume

trading volume chart

When you hear the phrase ‘trading volume’ particularly when in relation to cryptocurrencies, it refers to the amount of a particular coin that is or was traded during a particular period of time.

In the context of say, Bitcoin, trading on a cryptocurrency exchange, the volume is reported as the number of coins that have changed hands during one particular given day.

The average volume of a coin over a much longer period of time can be worked out by taking the total amount that was traded during that period and then dividing by the length of the period. The resulting number will be a unit of measurement that will represent the average trading volume per unit of time, typically each trading day.

The Bull and The Bear

These terms are constantly being tossed around, and their meaning is quite simple. This is the first step into reading crypto charts.

Bear Market: A bear market is when there is a prolonged price decline. This means that the price has been dipping for a very long time.

Bull Market: Opposed to bear market, this is when the price has been consistently going up. Often on forums and other spaces of discussion, you will see someone write that he/she is feeling ‘bullish’ on this stock or crypto, this basically means that they are optimistic about what will happen to the price.

Understanding these key terms is essential in reading crypto charts because from this, you can start understanding candlesticks and other complex ideas.

Final Words

There are many trends that can help you read a crypto chart and any other trading chart, so buckle up and start reading. It will be beneficial to do so before you start looking up coins to invest in because besides having the backing and trust in the company, you will have the market on your side also! 

Remember to be vigilant because it is your money that you are trading.