How To Read Cryptocurrency Price Charts?

To call yourself a seasoned trader, the first step is to learn how to analyze cryptocurrency price charts. These charts are your only way to make a decision about holding, exchanging or selling off your digital assets.  

We know it’s not the simplest task like reading the MRP from a price tag. Cryptocurrency price charts, or any asset price chart for that matter, don’t simply inform you about the price of the asset. These charts are factual, historical and objective documentation of these assets. They help us learn all about assets. It all depends on your analytic skills in reading price charts.   

At the beginners’ level, it is a current price tag for assets. On the other hand, once you get into the habit of checking and reading crypto price charts and that’s the first and last thing you do before signing off, with time, you hone the skills for looking into an asset’s past, present and future and determine its overall demeanour just by looking at the price chart.  

Who wouldn’t want that skill?  

Hence, we are here. We will help you skip the first step in reading cryptocurrency price charts, that is, worrying about the million mind-numbing nitty-gritty of a price chart. In this guide, we’ll help you learn them in a more simplistic manner so that you can start with your price chart analysis part ASAP and join the league of seasoned traders.  

Types Of Crypto Price Charts  

A cryptocurrency chart graphically represents the price movements of a particular digital asset over time. These representations are made in several ways with the candlestick patterns being the most popular.   

1. Line Patterns  

Source  

The line pattern in a crypto chart is for beginners. It looks like any other price chart with a line plotted between two closing prices of a cryptocurrency over a period of time.

Hence, these charts are helpful for you to get an overall understanding of a crypto asset, its generic long-term trends and stark price fluctuations. These charts lack the details that can actually help you determine the crypto’s market- bullish or bearish, its future trends or other important aspects.  

Hence, these charts are simply used to spot support or resistance levels in the market, telling you just the entry or exit points of trade.  

2. Bar Charts  

Source  

A bar chart or the OHLC (Open, High, Low, Close) chart is what you need for a thorough technical analysis of a cryptocurrency. These charts define some key aspects of a cryptocurrency, as suggested by its acronym-  

O- Open price that marks the first price at the very beginning of the asset’s trade  

H- High price is the highest valuation reached by the token in that given period  

L- Low price is the lowest valuation where the token dropped in that time  

C- Close price marks the last transaction’s price before the market closes for that particular day   

Therefore, a bar chart is all about learning the price actions of a cryptocurrency during a period. This structure of the bar, however, does not stand alone. It is combined with other analytical measure points of the market to give rise to a fully addressing cryptocurrency prices chart.  

3. Candlestick Patterns  

Source  

As we stated before, this is the most important aspect of a cryptocurrency prices chart. The candlestick patterns don’t just provide a simplistic objective overview of the asset. It goes deeper to explore market sentiments that ultimately help you get a futuristic overview and give you the power to foresee the future of an asset.  

Now, when discussing bar charts, we have already illustrated the structure of a bar or a candle and the way it goes in a crypto price chart. Now candle patterns are a combination of these bars that form different patterns to portray different price trends in a given period. The image above shows some of the most popular candlestick patterns.   

One-Candle Patterns  

Source  

These patterns consist of one candlestick that helps you see the potential for reversals in the market scenario. The image above portrays the different patterns.

If you take a close look at these market indicators, you will find an upper shadow, a lower shadow and an umbrella. Longer upper shadows indicate a bearish signal while a longer lower shadow means the market has bullish trends.

The umbrellas in these patterns indicate the buying and selling actions around a cryptocurrency.   

Two-Candle Patterns  

Source  

These patterns reveal continuation in trends more than they portray reversals. In the case of the two-candle patterns, higher volume during the formation of the second candle increases the probability of a reversal. On the other hand, if the second candle is engulfing the first one, it means the signal is strong.   

Three-Candle Patterns  

With these patterns, you must look at three consecutive candlesticks to understand the present market trends and what is to come. The speciality of these patterns lies in their level of assurance. Three-candle patterns have a high record of helping traders avoid false signals and providing a clearer view within a wider scope.  

Key Components Of Crypto Price Charts  

Source  

Now that we have covered the important graph patterns, we will discuss some of the major components of a cryptocurrency prices chart.  

Price Axis And Volume Indicators  

The vertical axis of a crypto price chart indicates the current price of a cryptocurrency at a given period while the volume indicator reflects the trading activity of the crypto during that given time. Together, these indicators provide you with a holistic view of what’s in the past and what’s yet to come.   

Trading Pair  

Trading pairs are one of the most basic components on a crypto price chart that we often tend to overlook. Crypto is virtual and hence its value isn’t real. Therefore, it is important to perceive the value of a cryptocurrency through differentiation. Hence comes the trading pair concept. This is a component that combines two different cryptocurrencies or makes a crypto-fiat pair to determine the true value of a trade.  

24H Vol  

This is an indicator that reflects the amount of cryptocurrency traded over the period of 24hr, consequently, pointing out the liquidity of the particular asset on a daily basis. Comparing a set of 24H vol gives you clear insights into a crypto’s behaviour and how it might change in the future.  

How To Read Cryptocurrency Price Charts?  

Reading a cryptocurrency chart is all about technique, tactics and knowing what’s what. The two basic elements you need to understand here are the indicators and the overlays. We have already talked about most of the important indicators in the sections above and now let’s find out a bit about overlays.  

As the name suggests, overlays are like filters that you can apply on cryptocurrency charts when you look them up online. These overlays help you look at the chart from different angles such as moving averages, Bollinger bands, Ichioka cloud and channel lines.

Each of these filters highlights a particular market trend indicator or condition that helps you look at different aspects of a cryptocurrency during the same time period.

This market being the hot seat of price volatility, both indicators and overlays help you map the entry and exit points of an asset more clearly.  

Therefore, indicators being the written information on your crypto price chart are more vocal about the market trends and position. On the other hand, overlays need analysis.

It doesn’t put the information right out there but needs you to look at the whole market scenario from a different vantage point.  

Closure  

I’ve often come across exasperation from crypto critics about the price charts. According to many, “it’s too complicated for its own good”. However, I’ve always begged to differ. I do not believe it’s the price chart that overwhelms people, but it is cryptocurrency itself.  

Crypto being the kind of volatility cannot have a stable price chart for even 24 hours. The change is constant, and one has to be aware of these changes at every moment.

Therefore, my best advice to all crypto enthusiasts and traders is that you must follow prediction articles first and then move on to price charts when you’re aware of the basic nature of this digital asset.

You can find crypto price prediction news on our channel on a regular basis and following these trends helps you hone your market knowledge and gives you a predictive outlook for cryptocurrency.