The crypto sphere is a system where constant attention is an inevitable factor. The crypto market is a constantly changing one and investors and traders need to pay extra attention to get profits and gainings. There are multiple ways available right now to conduct a proper analysis of the crypto market and coin price. The cryptocurrency chart is one of the most effective tools in the system that can be used to conduct a proper analysis of the crypto market.

Reading cryptocurrency charts can be an effective and time-saving process in the system. The crypto chart will be a graphical representation of price movements, patterns, and indicators that help to understand and analyze the current market trends. Understanding the basics of it is an unavoidable one in your cryptocurrency journey. The traders need to know how to use it effectively as well.

What are Cryptocurrency Charts?

The cryptocurrency chart is an important tool in the cryptocurrency ecosystem. It is a tool that is designed as an aid for traders and investors to know all the possible market trends and market performance of any cryptocurrency projects or coins. The cryptocurrency chart can be defined as the visual representation of a cryptocurrency’s market performance and price movements. It is a tool that helps investors to know the ever-changing patterns and trends in the cryptocurrency arena. With the help of this tool, traders can make appropriate decisions and investment strategies accordingly.

Different types of cryptocurrency charts are available in the system. These are all different and have some unique qualities that differ one from another. The following are the major types of cryptocurrencies: line charts, bar charts, candlestick charts, Heikin-Ashi charts, and Renko charts. Let us take a closer look at these types of charts and how they help traders and investors for proper functioning.

1. Line Charts: It is the most simplest and traditional chart type used in cryptocurrency trading. This type of chart is used to analyze the general trends and the long-term price fluctuations of a particular project. The limitation of this chart is, that it will be incapable of carrying a lot of information, or it can only carry general information. The name of the months or years will be on the X-axis and the price variation will be on the Y-axis.

2. Bar Charts: This is much more comprehensive than line charts. Bar charts can provide price variations according to specific periods. In this chart, every bar represents the respective time period. The top of the bar will be the indicator of a higher price and the bottom of the bar will be the lowest price in that specific time. There will be a small horizontal line on the left and right side which indicates the opening price and closing price respectively.

3. Candlestick Charts: This is one of the most common and popular cryptocurrency charts in the system. This chart has the same information as bar charts, but the specialty of candlestick charts is that it is constructed in a simple format and it is easier to understand and analyze. In this type, every candlestick has certain meanings. Each represents the opening price, closing price, lower price, and higher price respectively.

4. Heikin-Ashi Charts: It is a chart that uses color-coded candles to indicate the price variation and market trend of a particular project. It has green candles and red candles to show the information. Here, green candles indicate an uptrend and red candles represent a downtrend. Traders can easily interpret the market performance using red and green candles.

5. Renko Charts: Renko Charts are a type of chart that uses the price movements of a particular coin to identify market trends in the crypto market. In this chart, the information is represented in the form of bricks. These bricks represent the price movements of coins. In this chart, upward movements are represented in either white or green, and downward is represented in either black or red.

How to read a cryptocurrency chart?

In this section, we discuss how to read and analyze a cryptocurrency chart effectively. Consider this section as a comprehensive guide that equips you with adequate information regarding the cryptocurrency chart and its effective evaluation and analysis.

• Step 1: Choose The Appropriate Cryptocurrency Chart: Choosing the right cryptocurrency chart is the primary step in this process. Look for the price details in the chart and confirm whether your way of analysis can cope with the chart’s system.

• Step 2: Decide The Time Or Duration: Determining the apt timeframe is the next step that needs to be followed. Select a proper timeframe according to your trading plans and strategy. You can use shorter timeframes like minutes and hours. Longer timeframes may include days, weeks, and months. Choose the right timeframe by properly analyzing the volatility and risk tolerance of the currency.

• Step 3: Select The Type Of Cryptocurrency Chart: Identifying and selecting the right type of cryptocurrency chart is the next step. Candlestick charts are the most commonly used ones, and you can select whichever chart you want according to your preference.

• Step 4: Evaluate The General Direction Of The Trend: Evaluate and study the general trend direction from the chart. This can be evaluated using the price movements. Look for the patterns that show upward and downward trends. You can use the trendlines to determine the direction of the trend.

• Step 5: Identify Support Levels And Resistance Levels: Support levels and resistance levels are the determining factors of potential price reversal. These two factors can help individuals and they can set gain targets and manage the potential risks.

• Step 6: Use Overlay Relevant Technical Indicators: Proper use of overlay technical indicators is beneficial while analyzing the cryptocurrency chart. There are many indicators present in crypto charts. Moving averages, stochastic oscillators, Bollinger Bands, relative strength index, and the Moving Average Convergence/Divergence (MACD) are the common indicators. You can confirm the trends by evaluating or studying these indicators.

• Step 7: Emphasize Trading Volume: Trading volume is a big factor in reading the cryptocurrency chart. The validity of the price action can be determined by analyzing trading volume. High trading volume with a price increase indicates a strong purchase interest, and high trading volume with a low price spike means strong exit pressure.

These are the basic steps that need to be followed for a proper reading and analysis of cryptocurrency charts. You can conduct a proper study of cryptocurrency charts if you stick to these above-mentioned steps and processes.

The Bottom Line

A cryptocurrency chart is a tool that is capable enough to give an idea of market trends. Investors and traders can plan their strategies based on the cryptocurrency chart. All the users can improve their cryptocurrency journey if they are capable enough to properly decode the crypto charts.

This article is a comprehensive guide that equips all readers or potential investors with much-needed information on cryptocurrency charts and how to read and analyze them effectively.