Whether you want to become a full-fledged crypto trader or just make the occasional move when the moment is perfect, you’ll need to understand how to read cryptocurrency charts.
Most people follow their instincts when deciding whether to sell or acquire cryptocurrency, and they frequently get the timing wrong. Crypto charts are not a crystal ball, but they are the best we have, and understanding them can help you make better judgments by eliminating emotion and guesswork.
Crypto charts provide a data-driven perspective on the cryptocurrency market, allowing investors to make better (or at least more educated) trading decisions.
This article covers the fundamentals of how to study crypto charts; but, in order to trade cryptocurrencies successfully, you must apply that information consistently over time. You’ll need to conduct your own study on any digital asset and decide if it’s time to purchase the dip or exit while you still can.
How to Study Crypto Charts for Beginners
To the untrained eye, bitcoin trading charts appear intimidating, so let’s learn how to read them, specifically candlestick charts, which are the most common and complicated!
The features of the crypto charting program you’re using may differ slightly, but they’ll all have certain similarities. For starters, they’ll appear like this:
Each ‘candlestick’ (the vertical bars in red and green) represents a set of data relating to the price of a certain asset during a given time period. The colors indicate whether the price was trending up or down.
A red candlestick indicates that the cryptocurrency’s price closed lower than when it opened. Also referred to as falling or bearish candlesticks. In some other markets, these are black, not red.
The green candlestick indicates that the cryptocurrency’s price closed higher than it opened. Also referred to as rising or bullish candlesticks. In some other markets, these are white rather than green.
Each candlestick on the chart consists of four pieces of data:
- Open price
- High price
- Low price
- Close price
There is a lot of language around candlesticks, but here are the basics:
- Body: The gap between the open and close prices. It’s a thicker chunk of color.
- Wick: The distance between the body and the highest or lowest price. It’s the thinner color block. These are also referred to as shadows.
- Range: Range is the distance between high and low. This is the complete candlestick.
Let’s have a look at the many elements involved.
1. Length of the candlestick body
The body of a candlestick represents the difference between a cryptocurrency’s open and closing prices. The longer the body, the more pronounced the price change.
A short green body suggests a slight price increase, whereas a lengthy green body signifies a significant and rapid price increase. This could signal that investors are purchasing, as prices are rising, however dramatically.
A short red body suggests a minor price fall, whereas a lengthy red body signifies a more significant price drop. This could signal that investors are selling as prices are driven lower.
Patterns are also important. If the size of the candlestick bodies increases with time, the price trend accelerates. Similarly, if the size of the candlestick bodies decreases over time, the price trend may be slowing or ending. In the middle, price stability is indicated by candlestick bodies that remain roughly constant in size.
Of course, there are times when the market experiences a dramatic shift. If the size of candlestick bodies changes abruptly, such as from long green candlesticks to long red candlesticks, it indicates a market shift, which is usually caused by significant market forces. As an example, consider the collapse of FTX.
2. Length of the wicks
Wick length influences the volatility of a crypto asset in either direction. The pricing becomes more erratic as the wick length increases. The lower the wick, the more stable the price.
A long rising wick indicates that the price rose quickly that day before dropping back down, and a long falling wick indicates that the price fell quickly that day before rising again. Short wicks exhibit the same pattern, albeit in a less severe manner.
Volatility can occur in either direction, whether the price increases or decreases. It’s crucial to understand patterns or trends in wick length and what they can suggest.
For example, a long rising wick may signal an increase in buying/selling high and possibly a peak, whereas a long falling wick may indicate an increase in buying/selling low and possibly a bottom.
Meanwhile, short wicks indicate a healthier and more stable market. A candlestick with no or limited wick indicates that sellers and buyers have agreed on the current market price.
Top Crypto Chart Analysis Tool for Crypto Trading
1. TradingView
By aggregating prices from several exchanges, real-time cryptocurrency values can be viewed on a single website. One advantage of TradingView is its emphasis on community. The platform serves as a forum for users to share and discover cryptocurrency trading ideas, indicators, and automated trading techniques.
TradingView is one of the few all-in-one charting applications. Users may design strategies over many markets, construct automatic scripts using Pine, set up email and mobile price alerts, and easily screen assets for opportunities.
Furthermore, TradingView features one of the most comprehensive sets of technical cryptocurrency indicators, as well as a built-in set of common chart patterns that may be utilized to supplement a trading strategy.
The best thing is that traders may use TradingView to chart cryptocurrency on mobile and desktop devices for free on the basic plan. Users can, however, upgrade to a Pro, Pro+, or Premium membership to gain access to more services and larger restrictions.
2. MetaTrader 4
MetaTrader 4, one of the most prominent trading platforms, has been a favorite with professional and retail traders since 2005. In contrast to many web-based platforms, MetaTrader 4 is highly customisable and can be used to chart both cryptocurrency and traditional markets.
While the classic charting application may not appeal to novice crypto traders, don’t be misled by its simple design. MT4 should not be underestimated in its potential for cryptocurrency trading, as it is one of the best brokers to trade crypto using MT4.
It’s a sophisticated charting tool with a wide range of highly customizable capabilities, such as scripting, custom trade indicators, and multi-account access. MetaTrader 4 is an excellent charting interface for any trader willing to work through the high learning curve.
In addition to the capabilities listed above, MetaTrader 4 offers a variety of useful trading tools, including price alerts, the option to examine several charts, and algorithmic trading bots that may be used on cryptocurrency pairs.
Furthermore, MetaTrader allows users to trade on various platforms without manually logging in, making it an ideal tool for professional traders.
MT4, one of the world’s most popular trading terminals, integrates with over 750 brokers and cryptocurrency exchanges through its software. This includes popular cryptocurrency trading sites such as Binance, ByBit, and Bitmex. Furthermore, MetaTrader supports all major trading pairs, including altcoin-denominated products.
MetaTrader 4 is a downloaded application that runs on Windows, Mac OS, and Linux systems, which some traders may choose. Mobile traders can now download MetaTrader 4 via the Apple, Android, and Huawei app stores.
3. Insillico Terminal
Insillico Terminal, a relatively new addition to the charting tools industry, is a completely free cryptocurrency charting alternative that aims to provide regular traders with the same advanced capabilities as professional traders. The Insillico Terminal, which debuted in 2021, has attracted worldwide interest for its professional-grade tools. Insillico Terminal provides low-latency order execution, a configurable trading interface, and support for Binance, ByBit, WOOX, and BitMEX.
The key advantages of Insillico Terminal are its institutional-grade characteristics and technical indicators. Users can enter positions at the best potential pricing by using sophisticated order types such as scale, TWAP, and swarm orders. Furthermore, customers can use Insillico Terminal’s interactive charting to automatically input orders without having to type them.
Because Insillico Terminal is geared toward active traders, the charting tool requires users to connect to an exchange using a set of API credentials before they may view the markets. As a result, the range of instruments supported by Insillico will differ based on the associated platform.
Insillico Terminal is fully free, and the company generates revenue by producing and selling indications. However, while Insillico Terminal is available on desktop, mobile traders are unable to access it, making it unsuitable for on-the-go trading.
FAQs
How do you read crypto charts?
Each candlestick represents a unique time period and displays the open, close, high, and low values. The body of the candlestick is colored (usually green for up periods and red for down periods), making it clear whether the price closed higher or lower than it opened.
How do you predict cryptocurrency charts?
A long-term pattern of healthy growth is characterized by a large number of increases and a small number of decreases. It’s also vital to note that volume is increasing over time. If volume decreases during gains, the upward trend is likely to cease, and vice versa during downtrends.
Conclusion
Knowing how to study crypto charts is essential for any cryptocurrency trader. Reading cryptocurrency charts entails examining previous price movements and making an educated prediction as to where they might go next. Historical data can help you make important trade judgments.
Understanding how to study crypto charts allows you to determine the precise price of a cryptocurrency and decide whether to enter or depart the crypto market.
