How to Read Crypto Charts for Beginners
in Crypto Tutorials
One of the most useful skills a cryptocurrency investor can have is the ability to read crypto charts. The process is somewhat tricky to learn but once you master it you’ll be glad you did. Trends in the market are hard to follow and anticipate, but charts help us keep an eye on prices, spikes, dips, and more.
Whether you’re new to crypto or simply looking for a refresher, you’re in the right place. We’re going to go over why this technical skill in crypto chart analysis is so crucial. In short, staying objective and strategic with investments in crypto make all the difference. We all root for certain currencies, but charts help keep us level-headed and prepared to make proper choices rooted in the market’s trends and motion.
New and inexperienced traders can utilize crypto charts to master the next level of investment beyond learning what cryptocurrency is and how it works as a trade market. Leaving the table too early or jumping in too late happens from time to time. Cryptocurrency charts help to ensure you limit these missteps and take full advantage of the booming crypto market. Let’s get started with one of the most popular types of charts in the world of crypto.
How to Analyze Crypto Candlestick Charts
One of the most important things to know about cryptocurrency is the way prices fluctuate over time. That’s where candlestick charts come in and serve a crucial role in market analysis. Within a candlestick chart, you can manage different variables that help illuminate ways that specific currencies are booming and busting. Likewise, you can find and manage patterns that emerge in trade frequency which often results in a trend for price fluctuation.
A great place to start is control over the time selection you’re viewing in the chart. By choosing one month for example, you can watch long-term trends emerge as you’re given a clear view of price increases and decreases over time. The best part of a candlestick chart is that they’re incredibly easy to read. Simply spot periods of growth and decline with the colored bars and you’ll likely be able to see trends emerge.
Of course, time is only one element that impacts price. Another crucial thing to analyze is the volume of trades occurring. Studying this data can show how increases in trade volume impact price. As you watch time periods that are much shorter, such as one-day charts or even hour-to-hour charts, you’ll see there are some key connections between trade volume and crypto price.
Be sure to keep a careful eye on each candlestick’s high and low line as well. In each bar representing a period of growth or decline, you’ll be able to see where that period of trading hit its high or low depending on the run. It’s not only helpful to spot the record dips and peaks, but you can also keep an eye on whether cryptocurrencies tend to be bullish or bearish at various times of the week or month.
Analysis Tools to Use in Crypto Chart Analysis
Now that we know a bit about studying crypto charts, which are the best to keep an eye on? Firstly, the classic price indexes shouldn’t be ignored. Many of the cryptocurrencies that analysts are excited about in 2021 are not big surprises. Watching price indexes and studying the trends in fluctuation are always going to be our best resource for investing. Some of the more niche charts are helpful to facilitate further insight into the crypto market.
One great example is the use of a crypto fear and greed index. This index takes in various informational readings of crypto markets and collects them into an easy-to-read chart that offers two valuable insights. The first key offering in this chart is the ability to measure sentiment in the market about specific cryptocurrencies. When scores start to read below 20, that’s what analysts consider to be extreme fear. It’s worth noting that market contrarians who push against what they’re seeing in the data would see extreme fear as the perfect time to plunge more money into a cryptocurrency. For more conservative investors, anything above 80 is considered extreme greed, which is just as dangerous.
Another helpful analysis tool is the MACD indicator, which stands for Moving Average Convergence Divergence. With this tool, we can watch for two moving averages for a cryptocurrency and analyze for momentum near buy or sale lines that emerge through the data points. Like the fear and greed index, the MACD indicator helps us to eye trends around trade that dictate whether it’s time to push harder or pull back our position.
That brings us to the second key offering in these kinds of charts, which take a little bit of digging on the investor’s behalf. By using these sorts of charts alongside other candlestick charts and indexes, we can spot at what level different currencies hit fear and greed extremes as well as periodic averages. Doing so can help save us from groupthink when it comes to the most volatile moments for the crypto market.
Crypto Charts and Their Impact on Investors
It’s not a surprise that so many are a little cautious about using crypto charts. They can look intimidating, but time spent studying them is undoubtedly worth it. When it comes to investing in the cryptocurrency market, even top analysts can’t predict the future. The best resource investors have is the history of the market and the ability to identify trends.
These skills take time to learn but should be a priority for beginning and newer investors. Take time to get comfortable with crypto charts and you’ll be glad you did. If you’re serious about cryptocurrency investing, then having a better understanding of the way crypto prices move is a huge reward for the time put into studying these sorts of charts. Doing so makes you a smarter investor but it also shows that you’re willing to do the work for your investment strategy.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.