Mian Asad 
For traders attempting to make sense out of the bustling cryptocurrency envrionment, effectively reading crypto charts is an extremely valuable asset. In case you haven’t noticed by now, your skill as a trader, whether a newbie or an expert, can be accurately assessed based on how well you can read and interpret price charts. The following guide breaks down important aspects of crypto chart analysis which will, in turn, help you make better trades. With the right knowledge at hand, there won’t be any competition left to beat.
Step 1: Understanding the Basics of Crypto Charts
Every trader needs to be aware of the basic factors that influence a crypto chart before they attempt any advanced level of technical analysis. Here are some of the novice factors you should know:
Types of Crypto Charts
- Line Chart: Closing prices over a certain period represented using simple lines.
- Bar Chart: Open, high, low, close prices shown together in a bar.
- Candlestick Chart: Most popular and most visually appealing type of price action chart.
- Price Axis: Displays the asset’s price levels.
- Time Axis: Time period being analyzed.
- Volume Bars: Used to show the amount of trades for a time interval.
- Trend Lines: Determined by the direction in which the price is moving.
Step 2: Mastering Candlestick Patterns
Price action on charts is the representation of a variety of emotions. Here are some of the Bearish Candlestick Patterns moves that assist in market’s directional sentiment and prospective price action.
Bullish Candlestick Patterns
- Hammer: A candlestick can serve as a sign of a new uptrend coming from a fall.
- Bullish Engulfing: Indicates that a new stronger trend is out for business.
- The emergence of a new bullish candlestick pattern indicates an end to the bearish period.
- Shooting Star: Serves as a cautionary signal denoting a possible downtrend.
- Bearish Engulfing: The indication of heightened bearish momentum.
- Evening Star: Represents variation where the bull period ends and bears take control.
Step 3: Detection Process of Trends and Market Phases
Trends can be categorized into three types:
- Uptrend: Higher highs followed by higher lows.
- Downtrend: A succession of lower highs and lower lows.
- Sideways/Range bound: Minimal price movement during a particular phase.
- Using Moving Averages
- Simple Moving Average (SMA): Records price movement to smooth trends for easy identification.
- Exponential Moving Average (EMA): Recent prices are given extra importance for more accurate results.
Step 4: emphasizing on Technical Indicators
Technical indicators assist in establishing trends along with spotting points that require a reversal.
Key Indicators
- Relative Strength Index (RSI): Determines highly bought – over 70, and extremely sold – under 30.
- Moving Average Convergence Divergence (MACD): Helps in spotting the trend change with two moving averages.
- Bollinger Bands: Indicates volatility along with the level of breakout.
- Fibonacci Retracement: Helps in identifying possible levels of support and resistance.
Step 5: Identify different levels of Supports and Resistances
- Support: Buyers are willing to purchase at this price, causing a cessation in further downward movement.
- Resistance: Sellers are inclined to sell at this level, causing a cap on upward movement.
- Breakout Trading: enters into trades when price breaks through the resistance threshold or dips beneath the support limit.
Step 6: Understanding Chart Patterns
- Chart patterns are crucial to forecasting potential price changes.
- Reversal Patterns
- Head and Shoulders. This indicates a reversal of a trend.
- Double Top/Bottom. Shows a change in the direction of the prevailing trend.
Continuation Patterns
- Triangles (Ascending, Descending, Symmetrical). Suggest a continuation of the current trend.
- Flags and Pennants. This signals a consolidation for short term trend before breakout is witnessed.
Step 7: Augmenting Technical Analysis with Sentimental Analysis
- Follow news and social media for the general market sentiment.
- Focus on on-chain metrics like Bitcoin dominance and whale activity.
- Track trading volumes to verify trends and breakouts.
Step 8: Managing and Mitigating Risks
- Stop-Loss Orders. These mitigate the losses that one could incur from trading.
- Take Profit Orders. These orders guarantee profits at predetermined levels.
- Portfolio Diversification. Spreading the investments helps in reducing the risk.
In Summary
Getting better at reading a crypto price chart will take some time, but you can start improving your trading abilities with the use of right methods and resources. In addition to tools for analyzing charts and patterns, utilize risk management strategies to ensure yourself the best possible outcome.
