Learn How to Read Crypto Price Charts
Any kind of interaction with digital assets presupposes at least a cursory analysis of their price development. Of course, you can use Google search or read news channels, but those who want to achieve proficiency in the sphere of cryptos should learn the language of cryptocurrency charts. This article will help you understand what the cryptocurrency price chart is and learn about its main types and indicators.
What is a crypto price chart?
The charts displaying the price of cryptos are one of the main elements of technical analysis and are crucial for traders. Such charts visually show all the necessary information about the development of the asset’s price over a certain period, the mood around this asset, and its prospects.
Since school, we have known that a graph is a drawing that shows numerical data with the help of lines and other graphic elements. A trading chart, in turn, is a graphical representation of market price movements consisting of 2 axes: a vertical axis showing price development and a horizontal axis showing time.
Based on chart data, traders analyze the development of cryptocurrency prices to calculate their next steps in trading. Charts are the basis of any trading activity.
The main crypto chart indicators
To master the tool, you need to understand its main indicators.
- Numerical indicators display an asset’s maximum and minimum price for a certain period. Besides, the opening indicator shows the asset’s price of the first deal, while the closing indicator shows the price of the last deal for a specific period.
- Ticker is the official name of an asset. For example, BTC is the ticker for Bitcoin.
- Trend line is a tool used by traders to determine the direction and magnitude of the trend for any asset.
- Trading volume is the total amount of cryptocurrency sold over a given period.
- The support line is an imaginary line that shows that the cryptocurrency will not fall below this line.
- The resistance line determines the maximum price that the asset can reach.
The types of crypto charts
The cryptocurrency industry is growing exponentially. The number of traders is growing as well, and so is the need for quality analysis tools. Varieties of trading charts migrated to the world of cryptocurrencies from the world of traditional finances. Let’s take a look at the three most popular types of charts:
- line charts;
- bar charts;
- candlestick charts.
A line chart is the simplest type of price chart that shows only the closing price of an asset for a certain period and does not display the asset development. The line chart connects a series of data points with a line and is used to monitor closing prices. The simplicity of a line chart is both its advantage and a disadvantage because the amount of information it gives is smaller if compared to other types of charts.
A line chart is perfect for novice traders who learn to trade. An in-depth technical analysis requires much more details and indicators that can be found within other chart types.
The Japanese candlesticks are the most informative type of crypto charts showing the development of an asset over a period of time. Thanks to the “candlestick,” you can see the opening and closing prices, as well as the maximum and minimum prices.
The candlestick consists of a body and shadows. The body shows the opening and the closing prices, while the shadows indicate the maximum and the minimum prices. There are 3 main types of candlesticks:
- the growing green candlestick indicates that the opening price was lower than the closing price;
- the decreasing red candlestick shows that the opening price was higher;
- doji is a candlestick with no body. It indicates that the opening and closing prices are the same or close to the same.
The size of the body indicates the number of sellers or buyers. The higher the green candle, the more buyers in the market. The lower the red candle, the more sellers. When the market is under the full control of sellers or buyers, trading against price movements can be dangerous.
The bar chart is very similar to the Japanese candlestick chart, as it also depicts the same indicators: the opening price, the maximum price, the minimum price, and the closing price.
The main difference between the bars and Japanese candlesticks is the visual representation of the price indicators: the opening price is depicted as a horizontal line on the left, and the closing price is represented as a horizontal line on the right. Despite the high popularity of Japanese candlesticks, many traders choose the bar charts because of the way they present the information.
Cryptocurrency charts are a useful tool worth mastering. We hope that now it will be much easier to deal with cryptocurrency price charts. Save the material to quickly find the necessary information and successfully apply the knowledge!