Cryptocurrency trading is a lucrative endeavour. Bitcoin has increased by over 227,000 percent in value in less than ten years. It shows no signs of slowing down, with new investors and traders flocking the market every day.
You need to be familiar with many different analytical charts like crypto candlesticks to make informed decisions about your trades.
The following article will discuss four of the most important charts you need to know to trade cryptocurrencies successfully.
1) Candlestick
You’re probably already familiar with candlestick charts. They are commonly used in the financial markets to show the opening, closing, high and low for a security over a given time frame. If you’ve been trading stocks or other securities for sometime, you’ve seen these before. But what about crypto?
Crypto candlesticks are also widely used by traders looking at cryptocurrency prices and volumes. And if you want to be able to spot patterns that indicate when buy or sell opportunities might present themselves, you must know how to read them properly.
Components of a candlestick chart are:
-The real body: This shows the open and close price for the given period. If the candlestick is green, the close is higher than the open. If it’s red, it means the opposite happened.
-The upper shadow: This line represents the highest point reached during that period.
-The lower shadow: This line shows the lowest point reached during that period.
-The wicks: These lines extend from the body to the upper and lower shadows.
2) Line
Line charts are the simplest type of chart used to plot an asset’s price action over time. These charts consist of a series of vertical lines representing the asset’s price at specific time intervals, with the distance between each line representing the change in price over that period.
Line charts are most helpful in spotting overall trends in an asset’s price action, as well as any periods of significant volatility. However, because they do not provide any information on an asset’s trading volume, they can be somewhat misleading in this regard.
3) Bar
If you want to get into the nitty-gritty of things and see all of the details, you will want to look at a bar chart. Bar charts show you the high, low, open, and close prices for each period that you are looking at.
It is probably the most detailed chart that you will come across, and it is the one that most people use when they are day trading.
You can also see the volume of each period on a bar chart, which can help see how much interest there is in a particular coin.
There are three main types of bar charts:
-OHLC bars (open, high, low, close)
-HLC bars (high, low, close)
-HL bars (high, low)
The most important thing to remember when looking at a bar chart is that the longer the bar’s body is, the more intense the buying or selling pressure is for that particular coin.
If you see a long green bar, that means that there was a lot of buying pressure and vice versa for a long red bar. Short bars show less intensity in buying or selling pressure.
4) Point and Figure
Point and figure charts are created by plotting a series of “X”s and “O”s on a graph. These X’s and O’s represent price movements. The X’s represent rising prices, while the O’s represent falling prices. Point and figure charts can be used to identify support and resistance levels and trends.
Point and figure charts are more complicated than other charts, but they can be handy for traders who know how to read them.
Conclusion
Whether you’re a beginner or an experienced trader, analytical charts are essential for making informed decisions when trading cryptocurrencies. By understanding how to read and utilize different charts, you can better assess market trends and make more informed trading decisions.
