Learning how to navigate and read cryptocurrency charts is of utmost importance when users are starting off as traders. It usually takes them a while before they familiarize themselves with the crypto lingo and terminology. Cryptocurrency charts aren’t vastly different from other standard charts that you are used to seeing, however, there are some aspects in which they differ, especially when it comes to tool features.
Traders have to learn to navigate the stock screen and trades in real-time. Sometimes, data will be arriving at a breakneck pace, so taking some time to focus on chart reading will go a long way, especially when the numbers start piling up. So, are all crypto charts the same? Are they all created equal? Not necessarily. Let’s take a closer look.
Crypto Candlestick Charts and How To Use Them
Crypto charts can be navigated by following the movements that occur when a cryptocurrency changes its market value in relation to its price during a certain period of time. Charts can help predict in which direction a cryptocurrency will go, based on its history. There is no sure way of knowing, but it gives traders an insight into where the price has been and how it has developed. This way, even though they don’t tell us for sure what tomorrow will bring, traders can try to base their decisions on something tangible.
There is really no way around it: if you are serious about engaging in crypto trades then you’ll have to learn how crypto charts function. By learning how to navigate crypto charts, you will be able to recognize and act on market shifts and alterations, research the trajectory of any coin, and dive into the technical analysis (TA).
The Two Types of Candlesticks
Candles are indicated by rectangles, known as the real body, along with a point, known as the wick. The wick’s color depends on the market trend at the moment. The candle’s color is determined by the market’s direction. If the candle is green, then the current price is higher than what it used to be during the opening of the trade – which is categorized as a bullish candlestick. If the candle is colored red, then the current price, or closing price, is lower than the opening price. Red signals a bearish candlestick. Should both the opening and the closing prices remain the same, then the candle will appear as a horizontal line in the time selection.
Cryptocurrency candlesticks can be customized according to preference so that users can make them as wide or as narrow as they like when calculating their moves. The charts can display any timespan you’d like to see – be it the past 5 minutes, the previous month, or the currency’s trajectory in the whole of last year.
Volume bars indicate the amounts of trading volumes that have gone down during a certain period. The higher the number of trades and the more lucrative the deals, the longer the bar representation volume will be. Green volume bars represent a growing interest regarding a certain digital asset, while red volume bars represent a drop in interest regarding the cryptocurrency in question.
Cryptocurrency Analysis Tools
Candlestick prices are used as tools to navigate how the market is going to move so that traders can settle for a certain approach or trading strategy.
Analysis tools, on the other hand, provide an analysis of a given data set. When prices and volumes are on the move, the user can take advantage of such tools to read the market and decide whether now is a good time to pull the trigger by making an informed decision.
At first glance, you might feel like they’re asking you to fly the Millennium Falcon because most crypto chats do appear intimidating. It’s easy to get lost in the endless parameters, analysis tools, charts, and portfolios, especially when you’re trading through multiple exchanges at the same time and switching between various accounts. However, most crypto trading platforms will offer the option for chart customization, so make sure to set up a chart that suits you and to remove all the unnecessary parameters that would otherwise distract you. Don’t worry, you can always bring them back should you need to in the future.
If you happen to be a new trader, you might be asking yourself which of these parameters to keep and which ones to hide. This is where chart trading tools come in handy. We’ll give you a head-start with our favorite – TradingView.
TradingView is essentially a social media platform where traders from all over the world gather to take a look at the raging ball of fire that is cryptocurrency. TradingView is available as a desktop chart or as a mobile app for those that make quick moves and like to keep their business hub in their pocket.
The platform began its journey as a stock scanning chart, but it soon expanded to accommodate the seemingly infinite number of digital currencies. TradingView offers users insight into multiple cryptocurrency exchanges, so that they can compare and analyze in great detail.
The Crypto Fear and Greed Index
There is also the Fear and Greed Index. This is a very interesting metric that displays how invested traders have been in a trade by charting their fear and greed. It has an overview that informs traders which emotion is dominating the market at any given time and provides a database of archived charts that can be set to display specified days, weeks, months, and even years. The platform collects, stores, and integrates data from a myriad of sources and then draws conclusions from trader actions and reactions.
The extreme fear metric shows how concerned investors are in regards to a certain digital asset. This usually intensifies when the currency in question will start dropping in value in a short time span. Should many currencies start dropping in value, users will notice that the graph line on the platform will rise above a value of 80. A steady climb is an indication that the market is driven by greed.
The Fear and Greed Index has found its legs because the market is driven by emotions. Although it seems like a nebulous metric at first, it definitely has its place when navigating the latest market developments that unravel on an hourly basis.
Knowledgeable crypto traders will always have the upper hand, no matter the circumstances. Luckily, it looks like there will be more and more opportunities for traders to try out new approaches and become well-informed traders with some time and practice. It all comes down to who wants to put the work in. As a trader, you don’t have to know absolutely everything under the crypto sun in order to make a profit. However, knowing how to read a chart or two might be the difference between having a long career as a crypto trader and losing all your assets to the point of throwing in the towel.
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