Reading Crypto Charts

Top Rules To Read Crypto Charts

Both exchanges and brokers have crypto charts that detail the trends of various currencies. As a beginner, it is crucial to acquire the skill of reading the charts.

Reading Crypto Charts first entails learning two terms crucial terms:

  1. Bullish movement: this is the upward movement of the chart.
  2. Bearish movement: this is the downward movement.
  3. Bull: a buyer.
  4. Bear: a seller.

Buying cryptos results in a rise in the value while selling it results in a drop in the market price. The principles of understanding the charts rely on the prior study of the Dow theory.

The main components of this theory are as follows:

  1. The prices of the various currencies are arrived at by considering the present, past, and future details.
  2. The prices follow a trend that may be short- or long-term in nature.
  3. The analysis should focus on the price of an individual coin and not the underlying factors that contribute to changes.
  4. In the cryptocurrency business, the crucial factors that are taken into consideration while coming up with the price include regulation and persistent conditions.

Prior to investing money or trading one crypto with another crypto, a trader should check three main movements in the chart. The short-, mid- and long-term trends. The long-term trend (primary/major movement) may be bearish while the mid- and short-term trends are bullish. Also, the trend is dependent on the stages when the crypto was developed. These stages are detailed as follows:

Accumulation phase:

This is when the investors start buying or selling the digital currency based on their understanding of the market. In this period, the prices of the cryptos are relatively constant with marginal upward or downward movements.

Absorption stage:

The general public becomes aware of the investor’s strategy, and they follow the trend that has been set. The increased interest leads to an increase in the prices.

Distribution stage:

At this stage, speculation is at its optimum, and there is a limited supply of the currency. As a result, the investors start selling their assets, thereby resulting in a drop in the prices.

The distribution stage can, therefore, start at any time. Additionally, the high volatility when it comes to the market price of the various coins becomes an issue. In this regard, for crypto investors, there is a state of fear, uncertainty, and doubt (FUD) because anything can change at any time.

Reading Crypto charts represent the movement of the crypto in terms of market price fluctuations. Additional charts also provide an overview of some important figures. The most essential of this is the relative strength index (RSI) which compares the past and present prices of a crypto and therefore, shows the strength and speed of the movement of these prices. In an exchange such as Binance, the RSI chart is a line graph.

Top Rules  Reading Crypto Charts

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