As a beginner, you'll need to learn how to read crypto charts before you start trading. We know that understanding technical analysis and all the jargon that comes with it can be overwhelming for novices. However, we hope that by reading this article, you’ll learn the fundamentals of cryptocurrency charts and how to use the basic cryptocurrency analysis tools in order to succeed in this industry.
If you’d like to learn more about crypto investing in general or follow real-time or delayed data, we recommend browsing through our website, where you can get acquainted with our stock screener, earning expectations, most recommended stocks, insider trades, and much more.
What Are Crypto Candlestick Charts and Why Use Them?
Crypto charts are a set of lines and candlestick patterns that represent a cryptocurrency's historical price performance. They can assist you in predicting future developments and market conditions, allowing you to make more informed investment decisions.
The main reasons why you should learn to read and interpret them are:
- they help you recognize business trends quickly and understand the current condition of the market at a glance
- they’re used by experts in their research and
- they form the basis of technical analysis (TA).
Each candle is made up of colored rectangles (Real Body) with a pointy line (Wick) whose color is determined by the market's direction. The candle will be green (or white) if the closing price is higher than the opening price, indicating a bullish candlestick. The candle will be red (or black) if the closing price is lower than the opening price, indicating a bearish candlestick. The candle would have a horizontal line instead of a rectangle body if the opening and closing prices are the same.
The crypto candlestick charts enable you to choose the right time frame for the crypto price information you want to see. You can select a default time frame of 5 minutes, 15 minutes, 1 hour, 4 hours, regular, weekly, or monthly, or adjust whatever time frame suits your needs.
The volume bar will be shown as the second item on the standard cryptocurrency chart. This feature demonstrates the amount of trading volume that took place during the chosen time frame. The greater the purchase and sale pressure, the longer the volume bar is. A green volume bar indicates growing interest and purchasing pressure in the coin. A red volume bar, on the other hand, indicates a drop in interest in the coin and decreased selling pressure.
Cryptocurrency Analysis Tools
Although these candlestick price formations are an excellent way to forecast market movements in the future, charting tools can be very helpful for establishing your technical strategy for trading.
Cryptocurrency analysis tools offer statistical analysis of an asset's price and volume fluctuations over time in order to assist traders in detecting price trends. They help traders in determining how the market operates, offering a solid foundation for making informed trading decisions.
Although reading cryptocurrency charts may appear complex, it is only a matter of examining demand and supply in the desired market. There are various cryptocurrency analysis tools on the market for charting, portfolio management, multiple exchange trading, managing exchange accounts, and altcoin charting depending, so the next step is to carefully look at the different options you have and conduct research on what matches your needs best.
If you are comfortable with looking at regular stock charts then it would be worth checking out Bitcoin Investment Trust’s chart (OTC: GBTC). It’s a traditional OTC but it’s assets consist of cryptocurrencies, it’s a good middle point between the traditional market and the crypto market. They are also leading the way with bringing Bitcoin to institutions.
However, for the purpose of this article, we picked the following tools as some of the best in terms of feature, ease of use, and exchange integration.
TradingView is a cloud-based charting and social networking platform appropriate for traders of all levels. The platform includes all of the features of a premium desktop charting suite, as well as the speed and versatility of charting on the go.
It was initially designed to be used for stock scanning and charting. However, in order to meet the growing demand for digital currencies, the charting platform has grown to provide data from a variety of cryptocurrency exchanges.
Another great tool is the Chaikin Money Flow indicator. This is the strongest volume indicator that outperforms the classical volume indicator and should be above the zero line in the course of a rally, while through sell-offs, it should be under zero.
Crypto Fear and Greed Index
The crypto fear and greed index measures investor emotions of fear and greed on a daily, weekly, monthly, and yearly basis by collecting data and compiling it into a score and a valuation that is plotted on a graph for you. Extreme fear is indicated by a sentiment reading of less than 20 and indicates that investors are concerned about the cryptocurrency markets. The cryptocurrency price is usually falling, signaling a potential bullish reversal.
A market sentiment reading above 80, on the other hand, indicates that investors are getting too greedy. This is very significant because many people believe that the crypto market is driven by emotions.
To summarize, cryptocurrency trading can be quite profitable if done correctly. It's also important to note that even the most successful traders make mistakes while attempting to time or forecast the market. Therefore, you shouldn’t depend solely on these metrics and charting methods. Instead, you should use them as a reference to help you make better trading decisions.