How To Read Cryptocurrency Charts?
Crypto Knowledge

How To Read Cryptocurrency Charts?

written by John Murphy | January 10, 2023

Cryptocurrency is here to stay and is experiencing an upward mushrooming of investment. As the crypto market umbrella widened, so did the intelligence. Crypto trading is not based on luck anymore. Many experts and economists have developed tools to study the past and design plans. Therefore, charts have emerged as a significant source of market study; however, it is a technical study, and thus many people need to learn how to read cryptocurrency charts.

Because a decision backed by market intel will produce better results than a wild guess, well-researched investments are becoming an increased trend in the market.

Cryptocurrency charts are proving to be the best source of market analysis. Thus, you will see numerous forms of charts on different platforms, including crypto exchanges; however, understanding them is the key to making any decision.

This guide will walk you through with technicalities of how to read cryptocurrency charts. So let us get started.

Cryptocurrency Charts

Reading cryptocurrency charts is essential for investors and exchanges to identify the best opportunities. They help to predict future price fluctuations of assets.

Technical analysis is the study of statistical trends gathered over a specified period to understand the demand and supply of the cryptocurrency. So, to become millionaire with crypto, you must know how to read graphs. 

The best crypto charts help you better understand the market; however, they have some caveats.

  • The Dow Theory

Since the crypto market somehow works on the same pattern as the traditional stock market, thus crypto investors must come across charts based on the famous Doe theory.

If we broadly open up this idea, it predicts the possible future price of a cryptocurrency based on past and present value. Usually, such trends are presented in the form of a graph.

As per Dow, price is the driving force of any market. The current price of any asset, including cryptocurrency, reflects all existing, past, and upcoming stock details. It means crypto investors should focus only on the coin’s price rather than checking every variable.

Here are six significant tenets of Dow theory:

  • The market has three movements – primary movement (minimum one year), secondary (ten days to three months), and minor movement (short swing).
  • The major market trend has three phases – the accumulation phase (knowledgeable investors start buying), the public participation phase (general public follows knowledge investors), and the distribution phase (knowledgeable investors begin to redistribute).
  • The cryptocurrency market makes new information available.
  • Stock market averages must confirm each other.
  • Trends can confirm through volume.
  • Trends exist until they have ended.
  • Crypto Charts Time Frames

One of the critical features in understanding crypto charts is learning the time frame of each one since market data is always based on a particular period.

Since each investor has their preferred investment cycle, selecting the right time fame is key to achieving desired results. For instance, a day trader will only require a single day’s trade data. Similarly, a spot trader may only need fifteen minutes of data to decide. 

  • Crypto Market Cap Graphs

The market cap provides information about the stability of a cryptocurrency. Only a stable cryptocurrency like Ethereum or Bitcoin will offer a sturdy market cap.

Market cap is the total circulating supply of a cryptocurrency multiply its price. The more consistent the market cap graph of crypto, the more stable it is. Thus you can design your next move accordingly.

  • Japanese Candlestick Charts

These types of charts shaped like box-and-whisker. Each candle shows the price movement of cryptocurrency during a specific time interval.

To better understand this chart, you must distinguish between the whisker and the box. For this reason, follow the below-mentioned tips.

  • The highest crypto price is shown as the top whisker (also known as a shadow) during the time interval.
  • The box (or body) shows the difference between cryptocurrency’s opening and closing prices during the time interval.
  • The bottom whisker (shadow) is the lowest price during the time interval.

In addition, these charts provide information about where the market turned. Furthermore, they predict the future movement of the market.

  • Relative Strength Index

Another essential chart is RSI, which depicts the speed and strength of a cryptocurrency’s market price. RSI is the comparison of the cost of crypto against its past performance.

Generally, an RSI graph ranges between 0 to 100 and is read as below.

  • If the RSI value of a coin reaches or crosses 70, it is overbought.
  • If RSI value approaches or slides under 30, it is undervalued.
  • Support and Resistance Graphs

Support and resistance frequently used terms among crypto analysts; these define a cryptocurrency’s upper and low price limits.

  • The Support is the price level of a cryptocurrency where it tends to stop falling. Although it is a pre-determined level, thus investors buy at the support level.
  • A resistance level is the price level after which it stops increasing. Traders usually sell at this point.
  • Market Emotions

After all, cryptocurrency prices are backed by human beings who have emotions. Therefore, studying price trends is like going through market emotions.

Usually, greed and optimism kick in when prices fall to the support level. In contrast, when prices reach resistant levels, fear and pessimism are dominant emotions.

Frequently Asked Questions

Is it essential to read cryptocurrency charts?

Cryptocurrency charts are one of the best ways to study market trends, and most expert investors use them to make investment decisions. Since they offer summarized data, thus making it is simple for users to plan their moves.

How to read crypto charts for day trading? 

Support and resistance are vital factors to understand before going for day trading.

Where can I get cryptocurrency charts?

Cryptocurrency charts are readily available online; you can get them from your broker or exchange.

Parting Thoughts

Knowing how to read cryptocurrency charts is a must-have skill if you plan to delve into cryptocurrency experience. Over the past decade, and with increased market value, cryptocurrency experts have developed mathematical tools to test the market situation. At the same time, the best form of this set of information is the cryptocurrency charts.

Furthermore, even if you are looking for a short-term stint with cryptos, you still need to study and understand these charts. Because only then can you make profits.

Crypto charts are part of the technical study of the market, and being able to read these graphs is an added advantage. So, spare time and go through each one of them to ensure you return home with profits because only then cryptocurrency will make the world a better place.

Please leave what charts you prefer using while analyzing the cryptocurrency market.