To really make a profit from trading crypto, you’ll need to develop a certain skill set in advance. Learning to interpret cryptocurrency charts is one of the most important skills you can develop, as it offers insight into the patterns and price movements that lead to successful trading. In finance, this process is called “technical analysis.”
Using market indicators, you can analyze trading volumes, chart patterns, and other information to determine the best asset trading options. Not only will learning to read charts help you choose your best options, but it will also help you stay informed of price changes, as cryptocurrency exchanges are constantly updating. The more familiar you become with reading charts, the easier it will be to develop trading strategies that will improve your technical analysis.
If you’re interested in learning to read cryptocurrency charts, you’re in luck. Here, we present a beginner’s guide on the skills you’ll need to read cryptocurrency charts. To start interpreting patterns in each part of the crypto chart on platforms like Coin Watch, continue reading.
Learn about candlesticks and how they influence crypto chart prices.
First, let’s go over the basics. Before you can apply technical analysis to cryptocurrency charts, you need to identify and understand how Candlesticks function. A candlestick is the primary price indicator in most crypto price charts. Every candlestick stands in as a set price for a unit of time.
Candlesticks are made up of two bars, the body and the wick. The body is the thicker component that showcases the prices of an asset when it opens and closes. The wick is the thinner part that indicates the price points (the highest and the lowest).
Analyze movement patterns.
- To assess a crypto chart, recognize the movements that candlesticks showcase, which are typically “bullish” and “bearish.”
- Bullish patterns (in green) are indications of positive price movements for the future of a given asset.
- Bearish patterns (in red) show future signs of downward price movements.
- “Buying the dip” is a decision to purchase more when prices go down but indicate they’ll go back up.
By recognizing pattern indications, you can decide whether to buy for the possibility of a token’s value increasing or sell to make as much as you can before the price decreases.
Pay attention to candlestick patterns.
In addition to the movement indicators, you’ll want to learn common candlesticks patterns to make interpreting any crypto chart easier. Some patterns to keep in mind are:
- Shooting Star
- Inverted Hammer
- Head and Shoulders
Each pattern is named based on the visual displayed on the crypto chart to indicate trend predictions. You can view these patterns to anticipate where you see the prices going and what moves to take.
Get the most out of your trading experience.
Remember, crypto chart patterns show potentialities; they are not set in stone. As you adjust to reading charts, do additional research on key crypto terms like trading volume, trading pair, base currency, and quote currency to improve your technical analysis and get the most out of your asset trading experience.