Staring at a crypto chart for the first time can feel like learning a foreign language. When you open your trading app, you are hit with red and green candles, strange acronyms, zigzagging lines, and numbers flying everywhere. To be sincere, all these are enough to make anyone shut the app and walk away.
However, it gets to a point where you’re tired of just hoping that your coin will go up, and you simply want to understand what’s going on. If this sounds like you, then you are most welcome. In this article, I will explain how to read crypto charts so you no longer have to feel like an outsider in the world of crypto assets.
Follow closely.
KEY TAKEAWAYS:
- A crypto chart is a visual representation of a coin’s price over time.
- A candlestick chart looks like a series of red and green blocks or candles, and it is the standard in crypto trading.
- Key concepts to understand before using indicators include support and resistance, and trend.
- Reading crypto charts is a skill, and like any skill, you’ll get better with practice.
Why Learning to Read Crypto Charts Matters
When you understand how to read a chart, you stop depending on hype, influencers, or luck. Instead, you start to:
- Notice real patterns in price movements.
- See when others are panic selling or blindly FOMO-buying.
- Choose your moments wisely, whether you’re investing for the long term or trading short-term.
In other words, you stop guessing and start making smarter decisions.
What Is a Crypto Chart?
A crypto chart is simply a visual representation of a coin or token’s price over time. Think of it like a map of where a coin has been. It shows you how the price has moved in the past, and while no one can predict the future with 100% certainty, studying this map helps you guess where the price might go next. You’ll typically see charts that show price over time, trading volume, and technical indicators. One of the most popular types of such charts used is the candlestick chart.
How Does A Candlestick Chart Look?
This chart looks like a series of red and green blocks or candles, and it is the standard in crypto trading. Each candle represents a specific time period, which can be one minute, one hour, one day, one week, etc. For example, a 1-day chart means each candle represents one day of price movement.
Here’s what you need to know about each candle:
- A green candle means price went up during that time period.
- A red candle means price went down.
- The body of the candle shows the opening and closing price
- The wick (or shadow) represents the highest and lowest price reached during that period
To make this clearer, if you see:
- A tall green candle, the price surged upward quickly.
- A short red candle with long wicks, there was volatility, but price didn’t move much overall.
Read Also – Understanding the Psychology of Crypto Trading
Choosing Your Chart Timeframe
Charts can be zoomed in or out depending on the timeframe you select. Below is a summary of the best timeframe to monitor based on the kind of trader you are:
- 1-minute or 5-minute charts: For short-term, fast-paced traders
- 1-hour or 4-hour charts: Good for short-term analysis
- 1-day or 1-week charts: Best for long-term investors
So if you’re holding Bitcoin for months, don’t waste your time staring at 5-minute charts. Instead, zoom out and focus on the bigger picture.
Key Concepts to Understand Before Using Indicators
Before diving into technical indicators, let’s get grounded in two concepts that guide most of the action you’ll see on a chart:
- Support and resistance: Support is a price level where people tend to buy, stopping the price from falling lower. On the other hand, resistance is a level where people tend to sell, stopping the price from rising further. For example, if Bitcoin has bounced up from $25,000 multiple times, that’s strong support. If it keeps getting rejected at $31,000, that’s a resistance level.
- Trend: This refers to the general direction of the market. While an uptrend means higher highs and higher lows, a downtrend means lower highs and lower lows. Also, sideways or range-bound means no clear direction.
Basic Technical Indicators You Should Know
Indicators are tools traders use to analyze price, and a few of the common ones include:
- Moving averages (MA): A moving average shows you the average price over a certain number of days, and it can either be a simple moving average (SMA) or an
exponential moving average (EMA). When the price is above the MA, it is generally bullish. When below, it is bearish.
- Relative strength index (RSI): RSI measures how overbought or oversold a coin is on a scale from 0 to 100. If it is above 70, it is overbought and may drop soon. On the flipside, an RSI below 30 means it is oversold and may rise soon.
- Moving average convergence divergence (MACD): MACD looks at two EMAs. When the MACD line crosses above the signal line, it is bullish. When it crosses below, it is bearish.
How to Read a Crypto Chart Step-by-Step
Putting it all together, here’s how you’d read an Ethereum chart, for example, like a pro:
- Set your chart to the daily (1D) timeframe to have a broad view of the trend.
- Mark support and resistance levels by using horizontal lines to highlight where price has bounced or reversed before.
- Check the trading volume to see either strong or weak participation around price moves.
- Add a moving average to see how price reacts around it.
- Check the RSI to know whether Ethereum is overbought or undervalued.
- If you want to buy, zoom in to the 4-hour chart and wait for the price to dip slightly towards a support level.
- Then look for signs that it is bouncing back up, especially if volume increases, before you enter a trade.
Final Thoughts
Reading crypto charts is a skill, and like any skill, you’ll get better with practice. Over time, you will begin to sense the energy of the market and see things most people miss. So, don’t stop here. Watch charts every day, even if you’re not trading, because the more time you spend, the clearer they become.
References
- cointelegraph.com – How to read crypto charts – A beginner’s guide
- coinledger.io – How to Read Crypto Charts (Beginner’s Breakdown)
- osl.com – How to Read Crypto Charts: A Guide to Technical Analysis for Traders
