If you’ve looked into trading cryptocurrency, you’ve probably seen lots and lots of charts. While it may not seem so glamorous to look at squiggly lines all day, learning to properly interpret the data displayed by cryptocurrency charts is critical to your success.
Many see charts as simply a way to relay cryptocurrency prices, but there is so much more to it. You need to know what you’re looking at before you can act based on them.
People who have experience in the stock market or forex trading will see lots of similarities in these charts, and many of the techniques and trends are the same. But many who are joining a
crypto trading platform these days do not have previous experience in other markets.
For this reason, we thought we would break down some of the basics and some of the key differences when reading trading charts for crypto.
Most importantly, you’re going to want to know exactly what type of chart you are looking at. Each one gives a different type of view and exposes different information and trends.
Line chart
The simplest form of a trading chart is the line chart. This is a simple plot of the price (or market cap) over time. Zooming becomes critical here, because you can often tweak the zoom in or out to support a certain conclusion. Zooming is your friend here because it can help you properly identify trendlines.
Trendlines have to do with the overall slope of a given chart line. While there may be daily or weekly volatility (many peaks and valleys,) the overall trend line shows the longer term direction that a price is heading.
But zooming in and out can change the trendline drastically, and give you a false sense of things. For instance, a week view might show a sharp downward trend, but zooming out to a year might show a steady upward trend. Make sure you using zooming properly when using a line chart, as it’s critical to successfully reading this type of chart.
Learn to visualize trendlines, and make sure that you are always checking those trendlines against current events and news about the market. There might be a long-term upward trend, but a newsworthy event triggers a long-term slide. Neither the chart alone nor the news alone gives you enough information.
Candlestick chart
This type of chart takes things a step further, and instead of simply plotting the price versus the timeline, it looks at the performance over a given set period of time. The most popular is the daily candlestick chart.
Instead of a simple line, each day is given a bar where the thick part of the bar represents the opening and closing price, and the thin lines above and below it represent the daily high/low. This goes for whatever other time periods the candlestick chart uses (hour, minute, week, etc.).
Each segment of the graph is color-coded, green if the price went up on a given day and red if it dropped. For green bars, the top of the bar is the closing price and the bottom is the opening price. For red bars, it’s vice-versa.
While trendlines can still be gleaned from this type of chart, more often a support or resistance line or band is used to predict future behavior. The difficult part of trading successfully is often learning how to predict this support/resistance level.
The support level is a price where you believe it’s low enough that it will cause entry into the marketplace or for people to buy it. There might be a round number that you see as a mental barrier, or some known value correlation. On the resistance side, it’s a high price where you believe the benefit of selling outweighs the benefit of holding.
Drawing a support and resistance line across a candlestick chart can help you predict where things might go next, although doing this successfully is very difficult and not a beginner skill. Even the most successful and experienced traders don’t always get it right.
Read More About "Chart signals to look for", "Trading volume and market cap", "Cryptocurrency differences" HERE 
Topic: How to read trading charts for crypto (Read 1417 times)
