Kudos to you if you have managed to purchase and own some Cryptos. You obviously have a strong interest in changing the way you view money, saving, earning, and spending.
Likely too you have been to various exchange sites with Charts, numbers, strange looking images, and numbers. Do not let these odd-looking characters frighten you off!
Stay with me and maybe we can at least gain a working knowledge in how to read them.
Please understand this blog is not designed to guide or teach anyone to make buy and sell decisions. It is just an attempt to describe what you see on almost every exchange site where you go to trade your cryptos. Becoming successful as a trader and focusing on what you earn as your main income takes a LOT of comprehensive study and practice. This includes watching market behavior, chart patterns, indicators, trading strategies, and even risk management. Do not get lulled into believing trading is something that you can get into without a lot of demanding focus. Generally, it takes a year or more of learning and practice, and even then, it should NEVER be seen as a “get rich quick” scheme. You should note that the vast majority of traders actually lose money, and unsophisticated traders are unfortunately likely to lose ALL their money.
Of course, the better armed with the understanding, the better off you are in anything; trading is no exception by far! So, let us start with a basic understanding of some factors in the charts. Gaining some basic understanding of the charts, candlesticks, etc., will help you make informed decisions for long-term strategies and investments and decide on your entry and exit points.
When studying a chart, you will notice they are viewable in various time frames. You can choose to see data displayed daily, weekly, monthly, or even displayed in very recent blocks of time, such as one hour, 30 minutes, or even 5-minute reports. Should you wish, you may adjust the candlestick to increase or decrease the time gaps.
Let us focus on 2 basic components in the chart: the candlestick and volume.
How To Read Candlestick Charts
The “candlestick” typifies what prices a coin or crypto is traded for at a certain time frame. Looking like a vertical rectangle (the widest part of the candle) with another two thin lines adjoined that reach up and down. You can tell by the length of each candlestick the opening market price, the high, low, and closing price of the crypto. The vertical rectangle is known as the “real body” and describes the trading activities between opening and closing prices. In other words, should the opening price be higher than the closing price for that crypto, you will see that represented at the top of the “real body” and the closing price represented at the bottom. You will generally see a “red” candlestick. . A green candlestick would mean, therefore, that the price of the crypto went up in the interval of time, and the opening price was lower than the price at the close.
The two thin lines that run verticle from the candlestick’s real body represent the highs and lows of the prices for a particular time interval. They are called upper and lower shadows or wicks. The vertical lines that stick out from the real body reflect the high and low prices for the time period. They are known as upper and lower shadows or wicks.
You could see candles take various shapes over a certain interval of time-based on specific price changes. These candles’ shapes take on many imaginable shapes from thin bodies, large bodies, short wicks, long wicks, and even NO wicks, depending on prices. Some specific candlestick formations are thought to have symbolic properties for indicating the given timeline’s price action. Notwithstanding, we should look at a full range of these candlesticks to understand the broader scope of a coin’s price so we can begin to discover patterns. Such symbologies could provide possible insight into market sentiment and facilitate investors’ making wiser enter and exit trade decisions.
Support, Resistance, and Trend lines
Now that you have a basic understanding of the candlestick symbol’s structure and how various patterns can create expectations and probabilities of which direction the price may be going, let’s step on to some basic concepts and understandings of chart interpretations. Some terms you may hear used in price analysis discussions are support, resistance, and trend lines.
Start to mentally visualize that support functions as a floor and resistance as a ceiling in a room. Now think of a ball as the price bouncing up and down: it will bounce off when it hits the floor or ceiling. The support and resistance “lines” have an equal effect on the price of a cryptocurrency. Generally, those support and resistance lines can be easily recognized on a chart. A trend line shows you the direction of where the price has been going thus far, and they are specific forms of support and resistance. Therefore, it can show either an uptrend (when the price bounces off in an upward trend) or a downtrend (when the price bounces off the trend line in a downward trend).
How Volume Works
Trading Volume is determined by how many cryptos were exchanged in a given time. This could give another view of the price action that you get from looking at candlesticks. Roughly is can give a hint of the enthusiasm buyers and sellers are displaying in the market. Price changes with similarly high volume could indicate a more reliable signal of the price activity. Increasing or decreasing volumes, partnering with various other chart patterns could also indicate a future price movement. However, keep in mind that crypto markets (especially in the lower-ranked cryptos) tend to experience lower trade volumes. Hence, it is easier for whales (big players) to manipulate price movements. This is because it takes less money to change the price. Also, keep in mind that BOT trading and particular trading models (no fee trades or paying traders for making trades) could distort the reality.
Volume bars are typically located beneath the candlesticks and share the same colors: red shows that the price has decreased in the previous time period. Green indicates that the price has increased in the previous time period.
This article was written with the sole intention of education, without any guarantee that every bit of information is completely accurate or up-to-date. Please use this information as a part of your own research. Nothing I write in any of my blogs is intended as investment advice or an indication to buy/sell/hold anything. Cryptocurrencies are inherently risky, so you should never invest more than you can afford to lose.