How to Read Cryptocurrency Charts – A Beginner’s Guide

Developing the right skills on how to read cryptocurrency charts is an art. This new skill will help you not only to track the price of your favorite coin, but real cryptocurrency candlestick charts will tell you a lot about the trend of the market.

Our team at Trading Strategy Guide is a strong advocate of the use of charts and technical analysis. Cryptocurrency Candlestick Charts give you a more objective view of cryptocurrency prices than something a bit more subjective like using your intuition.

 

 

Market timing is a common problem faced by many new traders. If you want accurate entry and exit points, you need to use crypto charts. You may have a really great trading idea and believe that  Bitcoin  is about to go up, but if you choose the wrong spot, you will start losing money left and right.

If you exit too early or you exit too late, you can also leave money on the table. Using cryptocurrency charts in conjunction with technical analysis , you can balance that out.

In this crypto guide we will just cover some basic fundamentals of how to read crypto charts and the crypto analysis tools you need to succeed in this business. .

We will also outline our favorite cryptoanalytics tools and resources for trading Bitcoin and altcoins.

Crypto candlestick chart

There are a few different ways to view the chart, but our favorite cryptocurrency price chart is the candlestick chart.

 

Moving forward, we will show you how to navigate through cryptocurrency price charts.

Now, here are the key elements of the crypto candlestick chart:

Step #1 Choose a time

The crypto charts allow you to choose the timeframe you want the candle to cover. This implies that the crypto candle will show all the trades that took place within the selected timeframe.

For example, if your favorite cryptocurrency timeframe is the 5 minute chart, each candle would represent 5 minutes.

 

 

Obviously, the timeframes can be adjusted to be even more customizable or you can simply choose from the default timeframes (5 minutes, 15 minutes, 1 hour, 4 hours, daily, weekly) , Monthly).

Step #2 Episode

The second thing the standard crypto chart will show is volume. Volume will show you how much trading activity occurred in the selected timeframe. Learn more about  volume trading strategies  here.

 

 

The longer the volume bar, the more buying or selling pressure. A green volume bar will highlight increased interest in the coin and buying pressure. On the other hand, a red volume bar will highlight a decrease in interest in the coin and selling pressure.

Step #3 Bearish and Bullish Candles

Third, we need to distinguish that there are  two types of candles :

  • Bearish Candles
  • Bullish Candles

 

 

By default, bullish candles are represented by green candles, indicating that the price has risen within the selected timeframe. For example, if the closing price of a 5-minute candle is higher than the opening price, it is a bullish candle.

For bullish candlesticks, the lower part of the thick part represents the opening price while the upper part of the body represents the closing price. Candle wicks represent the highest and lowest prices for the selected time period.

*Note: The same rules apply in reverse for bearish candles.

The candles will have different shapes and forms. Candlestick price formations are a great way to predict future market trends. There are many candlestick combinations that can predict what will happen next and we call them chart patterns .

 

To differentiate the information you get from crypto candlestick charts, you need the right tools:

Cryptocurrency Analysis Tool

Now we are going to share four of the best crypto analysis tools to start trading Bitcoin and other currencies. This section is not only for crypto beginners but also for more experienced traders.

There are many technical tools out there, and you’ll probably want to use many of them in combination. We believe these trading tools will help you avoid sh*t coins and lose some of your money or simply make better deals overall. Learn about cryptocurrencies best to invest here .

TradingView #1 Cryptocurrency Analysis Tool

The best crypto analysis tool we like to use is the FREE TradingView charting software. This charting platform has many capabilities and hidden features that will keep your trading running smoothly.

 

This is just one tool it’s nice to have, but it shouldn’t be the last as there are other tools you can use at your disposal.

It’s easy to set up and use trading . It’s rich in resources, instruments you can follow and more importantly

Cryptocurrency Analysis Tool #2 Money Flow Indicator

Our second favorite cryptocurrency analytical tool is the Chaikin Money Flow indicator .

The Chaikin Cash Flow Index was developed by trading guru Marc Chaikin, who has been coached by the most successful institutional investors in the world.

The reason why Chaikin Money Flow is the best volume indicator and it is better than the classic volume indicator is because it measures the institutional cumulative distribution. So naturally, it shows when institutional traders are buying and selling.

 

 

Usually during a rally, the Chaikin volume indicator should be above the zero line. Conversely, on bearish selling, the Chaikin volume indicator should be below the zero line.

Cryptocurrency Analyst #3 Crypto Fear and Greed Index

The Crypto Fear and Greed Index is using a bunch of information, they bring it all together to give you a charted score and valuation.

When sentiment is showing a reading below 20, that is extreme fear. Usually, the price of a cryptocurrency falls and it signals the possibility of a bullish reversal. Conversely, a market sentiment reading above 80 indicates extreme greed. In this case, the cryptocurrency is bullish and the fear and greed indicator signals a possible bearish reversal. For more information read this guide on  Crypto Signals.

 

Basically, we use the fear and greed index as an opposing indicator. Market sentiment is a powerful thing that drives the markets, and when we have an extreme reading in market sentiment, that’s when we should look for a reversal. Also, read this guide on  Bots Trading Cotso .

Cryptocurrency Analysis Tool #4 Fibonacci Extensions

The Fibonacci Extension is an extremely useful tool that can be sued to spot countertrend opportunities as well as trade reversals. We want to focus on the 1.618 level or the golden ratio.

There are all kinds of rules, but basically, there are only two things we are looking for when using Fibonacci extensions. The first is a trend, the second is a correction that has three reference points. We use these pivot points to plot Fibonacci extensions and find possible reversals in the market. Read Fibonacci trading here.

 

The golden ratio can be found everywhere, it is also a “magic number” that we can use in our trading. One way or another, a lot of professional traders incorporate the golden ratio into their trades because the market reacts to this particular level with great precision.

Conclusion – Crypto Candlestick Chart

Reading cryptocurrency candlestick charts is a practical skill everyone needs if you want to excel in today’s challenging crypto market. While  cryptocurrency analysis tools can be a valuable weapon in your trading arsenal, you need to apply them correctly to gain any insights from them.

The crypto candlestick charts can help you have a better time in the market so you can use it as an adjunct to your research.

This guide only outlines the basic concepts in technical analysis. We recommend building your knowledge and using these tools to build a cryptocurrency strategy that suits your needs. Our TSG blog is rich in trading strategies that can help you achieve your financial goals, so make sure you check out our Best Bitcoin Trading Strategies .