If you are about to start trading with cryptocurrencies, there are some essential skills you must learn to become a successful trader, and don’t lose your money. First of all, you need to learn how to read different cryptocurrency charts – technical analysis – but don’t be afraid, we are here to explain it to you in plain English. In this article we will cover the basics, but we won’t go into deep details. If you are a beginner trader, this short article will be enough to set you off on your trading journey.
To enter the market at the right time, you need to understand what does the chart says. With the help of different cryptocurrency charts, you can have a great trading idea when the enter the market and when to leave it. If you make the wrong choice, your money is at stake. If you exit too early, or you exit too late you can also leave money on the table. Using crypto charts in combination with technical analysis, you can balance that out.
Reading the line chart is one the simplest thing in trading. If you look at any line chart of any coin, you can see that the value of the coin is going up or it is going down. On line charts you can adjust the time frames to 24h, 1 week, 1 month, 3 months, 1 year etc. The lines can show the price of the coin, the market cap, 24h trading volume etc.
You just have to select the one you are interested in and you can see a clear picture that the value of your selected coin is going up or going down. If you want to see what happened in one specific day in one specific hour, you can zoom into the chart manually.
A candlestick chart could look a bit frightening at first, but it is just a little bit harder to read than the line chart. Professional traders use candlestick charts, rather than line charts because it gives you more specific details than the line chart.
The bars represent the buyers – also known as bulls – and the sellers – also known as bears. The bulls and the bears are in a constant “battle” with each other. The green candle means that the price has increased so the bulls won the battle. If the candle is red, that means that the price has decreased so the bears won the battle.
The main part of the candle is called ‘the body’, and it has an opening and a closing price as you see on the image above. The height of the body tells us how strongly the battle was won, how much trading activity occurred in the selected time period. The opening price is the first trade between the buyer and the seller, and the closing price is set by the last trade occurred in that time period.
You might be wondering what is that thin line above and below the body. It is called the wick and it indicates the highest and the lowest price in that time period. Here is an example to understand it better.
Let’s say that the opening price of a coin was $100. In a 1-hour time frame, the price went up to $112, then it dropped to $98 and went up again to $108. Finally it closed on that price. In this case we have a green candle because the opening price was $100, and the closing price was $108. The bulls won this battle.The wick on the top of the body marks that the peak price in that period was $112. Below the body the wick goes down to $98 because that was the lowest price in that hour.
Understanding and reading charts is a crucial part of cryptocurrency trading. If you have a deep knowledge in technical analysis, you can make great deals and earn a lot of money even on the short term. In this article we just covered the basics, but we suggest you to dive into technical analysis deeply before you start day trading with cryptos.