How To Read Cryptocurrency – Have you ever looked at a stock chart and wondered whether to buy or sell? Learn how to read charts to make informed decisions in this article.
Reading symbols on a chart is one of the most important skills in trading. The ability to evaluate price movements and recognize patterns in charts is essential to performing what is called technical analysis in finance.
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Don’t be afraid of this term. Technical analysis uses market-based data such as trading volume, chart patterns, and other technical market indicators to inform the trader of the best options available to trade an asset.
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Forex exchanges usually display a constantly updated price chart for each particular trading pair. Often the trading pair consists of the user’s preferred currency paired with the US dollar. But users can also pair with other currencies or currencies.
The information in the table above shows the basic data that serves as the basis for many indicators that a market participant can use to trade currencies. For example, a chart from the exchange shows the trading pair BTC/USDT (Bitcoin/Tether, the US dollar stablecoin) with seven key data points:
But perhaps the most important part of this chart is the group of candles that make up the price chart.
Candlesticks are the main price indicator on most price charts. Each candle shows the price action over a unit of time (eg 30 minutes) as shown in the chart above.
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The candle consists of two main bars: the body (the thick part), which shows the opening and closing price of the asset; and the wick (the thinnest part), which shows the highest and lowest price.
On most charts, a green candle indicates an uptrend or upward price movement, while a red candle indicates a downward or bearish price movement.
Below is a macro view of the candles: Note the reversal trend of the price rising and falling bars:
Based on the price and volume data that the market generates daily, technical analysts have developed several chart indicators to help them estimate the potential future price of the assets they trade.
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Some of these indicators are basic candlestick pattern assessments, while others are more complex trends and parameters based on recent price movements.
Candlestick patterns are usually grouped into bullish and bearish patterns. A bullish pattern usually indicates a positive future movement in the price of the asset, which may prompt the trader to buy in anticipation of an increase in value. Otherwise, a bearish pattern will occur, which may cause some traders to sell ahead of the potential price move.
Of course, other traders may “buy the dip” and decide to make countercyclical moves when prices are falling if they expect a subsequent rise. Trading is ultimately a personal decision.
A shooting star candle is a bearish pattern that usually appears at the end of an uptrend. This candle has a short body near the bottom and a long wick that extends upwards. This shows that the asset’s price has slightly declined towards the end of the trading session, even after hitting higher prices along the way, which explains its red color.
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Analysts see this as a sign of resistance to further price increases and a sell-off is imminent. In other words, many traders decided to sell, expecting prices to fall.
The Inverted Hammer candle is similar to the Shooting Star candle, but is bearish instead, as indicated by its green color. In this case, the candle shows that the price has risen slightly towards the end of the trading period, having reached higher prices along the way.
According to some analysts, seeing these candles after a price drop is a good sign that the price may rise again, as it usually indicates that there is a lot of buying demand at that time.
By zooming out on individual candles to view overall charts, users can spot even more patterns. One of these structures is called “head and shoulders”, characterized by three peaks or valleys appearing side by side. In this pattern, the second peak or valley looks like a “head” that overshadows its neighbors on either side (“shoulders”) and gives the pattern its name.
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A bullish head and shoulders pattern colored in green on the left side of the chart could mean that the price is about to rise.
Meanwhile, a bearish head and shoulders pattern, such as the red pattern on the right, can precede a downtrend in price.
Like “head and shoulders,” users can also see “reeds” as chart patterns that include a broad view. Lows can be plotted on a chart by drawing a line connecting the lows of the price movement over time with another line for the highs of the price. When these two lines approach each other from left to right, it is called a curve.
The upper curve, as shown at right, includes two downward-sloping lines that form a triangle that points roughly downward. This pattern may indicate that the up and down movement of the price stabilizes near the bottom, the asset may soon move in a positive direction.
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Meanwhile, a bearish chart shows two lines with upward slopes and near convergence at the highest point. This may lead to additional price increases and sales.
As with many things in the market, it is important for market participants to do their own research on several topics, including indicators and trading strategies. This article is by no means specific advice, just an informative guide to the basics of trading. There is no indicator, technique or method that can predict the direction of the market. This is especially true for candlestick and chart patterns.
As an important part of technical analysis, chart reading should serve as an introduction to better understanding the market by learning more about techniques and market factors. Reading candlesticks and charts should not be the sole basis for a participant’s market predictions.
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All examples in this article are for informational purposes only. You should not construe such information or other material as legal, tax, investment, financial or other advice. Nothing contained herein constitutes an invitation, recommendation, endorsement or offer to invest in, purchase or sell any digital asset. Returns from purchases and sales of digital assets may be subject to taxation, including capital gains tax and/or income tax, in your jurisdiction or a jurisdiction in which you reside for tax purposes. Any product descriptions or specifications are for illustrative purposes only and do not constitute an endorsement, invitation or solicitation.
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Please note that the availability of products and services in the program is subject to jurisdictional restrictions. may not offer certain products, features and/or services of the Program due to potential or actual regulatory restrictions. Often people hold Bitcoin as a long-term investment or trade. A depth chart is a tool for understanding the supply and demand of Bitcoin at any given moment for a range of prices. This is a visual representation of the order book, which contains pending orders to buy or sell assets at various price levels. For those looking to trade, knowing how to read an in-depth Bitcoin chart is an important part of understanding the market.
To read a deep chart, it is important to understand its components. While depth charts can vary from exchange to exchange, a standard Bitcoin depth chart has several key components:
Most cryptocurrency exchanges offer in-depth charts where users can hover over any point on the bid or ask line and see how many people are buying.