If you want to cash in on the cryptocurrency craze and put your Bitcoin to work for you, you’ll need to learn how to read crypto charts. You need to be able to execute solid technical analysis based on the Dow Theory if you want to make profitable crypto transactions. Then there are Japanese candlestick diagrams to consider. Do they hold any weight as well?
Below, you’ll find some primer text on the fundamentals of reading crypto charts and the associated jargon.
Table of Contents
The Dow Theory
The Dow Theory: what is it? And what cryptographic implications does it have? This theory is divided into six sections. This is useful for reading crypto charts.
There are three distinct types of market fluctuations
Expectations for the future primarily drive the trend. How does the value of an asset evolve over a longer time frame, like a year or more? Price fluctuations that occur every 10 days to three months are considered medium swings. Last but not least, tiny swings on thin trend lines reveal how security performs from one hour to the next.
The Market Goes Through Three Stages
In the accumulation phase, knowledgeable investors buy security before the market prices it. As the general public joins in, the market enters the absorption phase, and prices fluctuate rapidly. In the last stage, known as distribution, early investors start liquidating their holdings.
The Market Always Ignores the News
The market promptly adjusts its prices to account for any new data. Everything that people everywhere are thinking and feeling is considered.
Market averages must show consensus with one another
This indicates that if stocks related to solar energy are increasing in value, so should companies that produce solar panels. Dependent markets tend to move in tandem with one another.
The Volume Backs Up the Trends
When few market participants and prices fluctuate for seemingly no reason, it can be not easy to ascertain anyone’s true intentions. However, price fluctuations that occur frequently and in huge quantities are more telling of the asset’s health. A trend becomes more obvious when numerous people exhibit it simultaneously.
Fashion Lasts Until It Doesn’t
The answer to this is obvious. See, the big picture is the message. When there are fluctuations in the market, short-term, give the longer-term trend the benefit of the doubt identifying when one trend dies out and another begins is quite difficult. Always err on the side of the trend if possible.
The Points of Support and Resistance
Technical analysis relies heavily on support and resistance while reading crypto charts, which traders utilize to pinpoint crucial price support and resistance levels. Stocks and other financial instruments may move closer to or further away from these levels based on their historical performance in the market.
Chart patterns, moving averages, Fibonacci retracements, and pivot points are tools available to technical analysts for identifying support and resistance levels. These tiers are predicated on several market characteristics and regularities.
Top Charting Platforms for Cryptocurrency Investors
TradingView
TradingView is the most widely used charting and technical analysis platform among traders in all markets while reading crypto charts. In recent years, they have made significant strides toward integrating their tool set with major cryptocurrency exchanges. All users, free or paid, get access to their online charting tools.
New traders should be able to get by with just the free account and some basic books on technical analysis. Users with paid accounts have access to all the same features as free accounts, except for more than three technical indicators and overlays per chart.
Coinigy
The cryptocurrency market also features another widely used technical analysis tool, Coinigy. Traders can use the numerous other capabilities in this package to supplement the charting functionality that gives this instrument its name. Coinigy’s charting tool is based on TradingView but integrates with over 45 cryptocurrency exchanges through proprietary data feeds. Users can set up SMS text notifications on specific events, place trade orders across their exchanges, and use the same indicators available on TradingView.
CryptoWat.ch
Kraken also owns Cryptowat.ch, a sophisticated charting platform providing traders with real-time streaming data on price, volume, and order book from over 800 exchanges. Cryptowatch is an excellent addition to any trader’s toolkit, even though its dashboard may initially seem overwhelming.
Conclusion
Learning how to recognize price patterns is crucial when reading crypto charts. Technical analysts frequently look to established price patterns to extrapolate information about the future market direction. Triangles, wedges, flags, pennants, and head-and-shoulders are just a few examples of typical price patterns.
