Read a crypto symbolic chart is one of the most important skills when trading cryptocurrencies. The ability to gauge price action and recognize chart patterns is critical to what is known as technical analysis in finance.
Don’t be daunted by this term. The practical analysis uses market-driven information such as trading volumes, chart patterns, and other market-based technical indicators to inform traders of the best asset trading options.
In this article, we’ll start with the most basic skills someone can learn:
- The different fragments of a crypto token chart
- Japanese candlesticks, the most important part of the chart
- Common examples of Japanese candlesticks and crypto chart patterns
Advanced readers can also read our in-depth article on options transaction approaches.
The individual parts of a crypto symbolic chart
Cryptocurrency connections usually display a constantly updated price chart for a specific trading pair. Most of the time, the trading pair defaults to USD/the cryptocurrency you are viewing. But you can also set it for other coins or cryptos.
The information in this chart shows the key data points that are the basis for the many indicators you can use to trade cryptocurrencies. In the chart above for the BTC/USDT (Bitcoin/Tether, a stablecoin pegged to the US Dollar) trading pair on the Crypto.com conversation, you can see the following:
Trading Pair: This designates the base currency (BTC) and quotes currency (USDT) used in that particular market.
- Current Price – This part shows the current price of the base currency (BTC) being bought or sold in exchange for the quote currency (USDT). There are also indicators showing how much the price has increased compared to 24 hours ago. These numbers change rapidly depending on how active a particular market is.
- High/Low – These numbers show an asset’s highest and lowest prices during a 24-hour period.
- 24H Vol – This indicator shows how much of a given asset (BTC) has been traded in the last 24 hours. This volume is expressed in terms of the quote currency (USDT).
- Time Unit – You can select the time steps you want to reflect in a trading market. Steps can range from just a minute to a month.
- Price Chart – This chart visualizes the rise and fall in coin price over a while. You can set the period from 24 hours to months and years. In the cryptocurrency markets, the price movement of a single unit of time is usually represented by a candlestick. The variety of candlesticks on the chart would show an asset’s overall recent price action.
- Trading Volume – Below the main chart, which shows price action, is a smaller Trading Volume chart with individual bars showing the trading volume of an asset corresponding to the displayed candle. Longer bars designate higher trading volumes compared to other periods. Typically, a green bar indicates a price increase while a red candle indicates a price decrease, although you can customize this colour to suit your preferences.
But perhaps the most important fragment of this plan is the assembly of candleholders that make up the price chart.
Understanding Japanese candlesticks
Read a crypto A candlestick is the main price indicator on most cryptocurrency price charts. Each candlestick represents the price movement within a unit of time (e.g. 30 minutes), as shown in the diagram above.
A candlestick contains two main bars: the body (the thickest part), which shows an asset’s open and close prices
And the wick (the thinnest part), which shows the uppermost and lowest price points.
On most crypto charts, a green taper indicates upward movement or a price increase, while a red candle indicates a downward movement or price cut.
Read a crypto Here is a macro view of the candleholders – note the opposite flow of rising price bars versus falling bars:
Based on the daily price and volume information that the bazaar generates, technical analysts have developed various chart-based indicators to help them estimate the possible future worth of the possessions they have.
Some of these indicators are rudimentary pattern assessments of a mixture of candlesticks, while others are trend lines and more sophisticated metrics based on price action.
First, let’s look at some of the more basic patterns.
Basics: Common charts and Japanese candlestick patterns
Read a crypto Japanese candlestick patterns are generally classified into bullish and bearish shapes. A strong pattern often indicates future positive price movements for an asset
signals a trader to buy in anticipation that the token’s value will increase. The opposite happens in a bearish pattern, suggesting traders sell before the price falls and take losses.
(Of course, other traders may choose to trade counter-cyclically and buy more when prices fall when they anticipate a subsequent rise, so they buy the famous “dip”. After all, trading is a personal choice.)
Here are three examples of how candleholders and other chart designs use to anticipate price action. We will cover more instances in another article dedicated solely to candlesticks.
Shooting Star Chandelier
The Shooting Star Candleholder is a bearish pattern that usually appears at the end of an uptrend in prices. It indicates that the price has gone down slightly at the end of the trading period, even after hitting higher prices along the way, which explains its red colour. This candle holder has a short body near the bottom and a long wick that extends upwards.
Analysts are taking this as a sign of resistance to further gains, and a sell-off is imminent. In other words, many traders choose to sell before prices fall.
Reverse hammer candle holder
The inverted hammer candle looks like a shooting star but is more bullish than bearish.
Also, it indicated by its green colour. This time the candle shows that the price has increased slightly at the end of the trading period, having hit higher prices along the way.
According to analysts, seeing this candle following a downtrend in price is a good sign that the price is about to recover as it suggests a lot of buyer demand at this particular time. In other words, considering buying as an asset could trend up.
Head and shoulders on crypto charts
We call this arrangement “head and shoulders”, Read a crypto characterized by three peaks or valleys appearing side by side. In this pattern, the second top or valley looks like a “head” dwarfing its neighbors on either side or the “shoulders,” giving this pattern its nickname.
You can uncover even more patterns if you zoom out of individual candlesticks to review the entire crypto chart.
A bullish “head and bears” pattern, as seen on the left lateral of the chart, coloured green, may indicate that cryptocurrency prices are about to rise.
Meanwhile, a bearish head and accepts pattern, like the red shading at right, can precede a downtrend in price.