Thursday, June 23, 2022

How To Read Charts Crypto

Shooting Star Candle Pattern

How to Read Cryptocurrency Charts (Crypto Charts for Beginners)

A shooting star candle pattern is essentially a candle with a long upper wick, and short candle body with little to no lower wick. It appears at the peak of an upward movement before price action turns down.

This type of candle represents a strong push by buyers that is met with strong resistance leaving a long wick behind in the wake.

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    Triple & Double Tops And Bottoms

    Triple or double top and bottom chart patterns are exactly what they sound like when prices ricochet off the same resistance or support level two or three times consecutively.

    Both triple and double patterns are reversal setups and typically signal prices are about to head in the opposite direction. A double top, for instance, is when a crypto asset is in an uptrend and prices meet a strong resistance area. During the first visit, prices bounce off it and break lower temporarily before quickly rising back up. Upon the second visit to the same resistance level, prices are forced down much stronger than before and a new downtrend begins.

    If prices break above the resistance or below the support at any point, the pattern is considered negated and a price continuation will likely occur instead of a reversal.

    BTC/USD chart via Tradingview

    While double tops and bottoms are far more common than triple patterns, its often the case that triple patterns deliver stronger reversals.

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    Bullish And Bearish Engulfing

    How to Read Crypto Charts  Beginners Guide

    The bullish engulfing candle pattern is a combination of a red and green candlestick where the first candle is red . After closing the red candle, a green candle appears, engulfing the body of the previous candle, and it closes above the last candles high. On the other hand, the bearish engulfing candle is the opposite of the bullish body engulfing. Here, a green candle should appear first, and a red candle should engulf the body of the first candle.

    Did you know?

    Engulfing pattern indicates the price direction changes from bullish to bearish or bearish to bullish as soon as the candle closes above or below the previous candles closing price.

    In the image above, we can see how an engulfing candlestick pattern forms in the market.

    We can see that the engulfing pattern at a strong support level works as a vital price reversal zone in the following price chart:

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    How To Trade With The Trend

    Using the above information as your weapon, you can now begin to look at larger-scale trends. This is best defined by the wicks on the end of our candlesticks. When looking at a price graph, you will be able to note the lowest candlestick wick in that period. This shows the lowest point during that period at which the coin was traded. Lets call that Point A.

    Now look at the days since that date. As long as the low point, the bottom of the bottom wick, on a given day is higher than Point A, the market is on an upward trend. Youll often need to look at months or even years worth of data to see if there is an upward trend, as the market will naturally consolidate and fluctuate in waves in shorter periods . But in general, if those low wicks continue to be higher than Point A, youre on an upward trend.

    Naturally, the converse situation is a downward trend. If you have, over your long period view, a clear high point, which well call Point B, and the top of the top wick is consistently lower than Point B in the days that follow, you have a downward trend.

    Trading with the trend means youre buying on the up and selling on the down. This is the overall goal for those looking towards longer-term gains with their coin purchases.

    How To Read Crypto Depth Chart

    The most common type of crypto chart is the Japanese candlestick chart. Each candle we see on the coins chart against the pair shows price action over a specific time frame. Candles have whiskers on the top and bottom. This whisker represents the highest and lowest price seen during that time period. The box shows the difference between the opening price and the closing price. The box will be green if the price of the cryptocurrency has risen within that time frame, and red if it has fallen.

    In order to predict how the price of the cryptocurrency will move in the market, you should analyze the candlesticks well.

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    How Do Candlestick Charts Work

    The following data sets or price points are required to create each candlestick:

    OpenHighLowCloseOHLC values.The distance between the open and close price points is called the bodywhile the distance between the body and the high and low points is called the wick or shadow

    Candlestick charts give an advantage over bar charts as they are more visual. Additionally, bar charts make it difficult to visualize which direction the price moved, which candlestick charts help with.

    Time Frames For Reading Crypto Charts

    Top 10 Tips to Read a Crypto Chart! | Crypto Charts for Beginners

    Bitcoin trading analysis is broken down into intervals called timeframes. These timeframes vary from seconds to minutes, to hours, days, weeks, and months. The most common timeframes traders often watch to gauge the current trend and market activity are the 15-minute, hourly, 4-hour, 6-hour, and daily charts. Higher timeframes are more dominant in their signals, so weekly, monthly, and even yearly timeframes should also be considered for each coin, token, or crypto asset.

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    A Complete Guide: How To Read Candlestick Charts In Crypto Trading

    Did you know it is possible to predict the market by reading the candlestick chart?

    Of course, the global financial market can be very unpredictable, including crypto. But it is possible to understand how the market works when technical and fundamental analysis, asset management techniques are used correctly.

    And of the most powerful technical tools is the candlestick chart.

    This guide will reveal the ins and outs of candlestick patterns and some useful trading tips that will steer you in the right direction.

    Lets dive right in!

    CHAPTER 1

    Moving Average Convergence Divergence

    MACD stands for the Moving Average Convergence Divergence and is often considered a lagging indicator. The MACD uses two moving averages that converge and diverge to signal when an asset is overbought and oversold. The two lines also represent momentum, and when they cross over or under, it can be a signal that the trend has changed.

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    What Is Technical Analysis

    Technical” refers to analyzing the past trading activity and price variations of an asset, which according to technical analysts, might be useful predictors of future price movements of an asset. It can be used for any asset with historical trading data, which means stocks, futures, commodities, currencies and cryptocurrencies.

    Technical analysis was first introduced by Charles Dow, the founder and editor of the Wall Street Journal and the co-founder of Dow Jones & Company. Dow was partly responsible for the creation of the first stock index, which was the Dow Jones Transportation Index .

    Dows ideas were written over a series of editorials published in the Wall Street Journal, and after he passed away, were compiled to create what is now known as the Dow theory. Technical analysis, its worth noting, has since evolved through years of research to include the patterns and signals we know now.

    The validity of technical analysis depends on whether the market has priced in all known information about a given asset, implying that the asset is fairly valued based on that information. Traders using technical analysis who employ market psychology believe that history will eventually repeat itself.

    As technical analysts look to identify bullish and bearish price movements to help traders make more informed decisions.

    Cryptocurrency Market Cap: The Most Important Chart In Crypto

    How To Read Crypto Charts On Binance For Beginners

    The cryptocurrency market cap is an aggregate view of the entire digital asset space across all cryptocurrency trading platforms and the assets they offer. Aside from charting Bitcoin itself, it is the king of cryptocurrency technical analysis charts as it is a snapshot of the health of the entire cryptocurrency market.

    Bitcoin takes up the lions share of the market size, with Ethereum right behind it. The top ten cryptocurrencies by market cap are some of the most respected and valuable cryptocurrencies, but the list is always changing.

    According to nothing more than a major resistance line, the total crypto market cap appears to be repeating the previous cycles move. Based on the measure rule, the total crypto market should rise by a similar height and trajectory. If thats the case, the total crypto market cap will be worth trillions of dollars, with Bitcoin nearing $10 trillion alone in the next five years.

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    Types Of Crypto Charts

    There is a wide range of crypto charts that are available for traders. Cryptocurrency market trends can as well be analyzed in different ways. With the nature of candlesticks, crypto candlesticks charts offer you much-needed information. These charts usually show time on the horizontal axis and private data on the vertical axis. The candlesticks usually show whether the price movement is positive or negative and to what degree.

    Also, these candlesticks are made of body and wicks where each body represents the opening and closing prices while the top wick shows how high the price of cryptocurrency got during a certain time frame. They have two colors red and green for different representations. So, a simple structure of candlestick can offer you the much-needed information. The candlestick that has no body nor long wicks will mean that both the buyers and sellers have no control of the market.

    Theres Much To Gain And Much To Lose In The Volatile Cryptocurrency Market And If You Want To Make The Right Decisions You Need To Understand How To Do Technical Analysis

    If youre new to the cryptocurrency market and the trading market in general, then you can easily get overwhelmed by the way information is presented. Many exchanges and websites will provide detailed graphs alongside their price charts and price predictions, analyzing the way the market is behaving. While our glossary can help you wade through the technical jargon, its worth diving a little deeper into what these graphs are showing so you can monitor the rise and fall of your cryptocurrencies more accurately.

    Disclaimer:

    What’s in this guide

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    Bullish And Bearish Pennant

    Description: A small converging symmetrical triangle . It forms typically following a sharp advance / decline , followed by a brief triangular shaped consolidation in price , before the previous uptrend / downtrend resumes. The period of consolidation should have lower volume and the breakouts should occur on higher volume. If there isnt a flagpole , then its a triangle and not a Pennant. Also, Pennants is a short-term pattern, unlike a triangle.

    Example: BEAM emerging Pennant

    Trade: Traders look for a breakout above the Pennant resistance / support line to take advantage of the renewed momentum.

    How To Read Charts In Crypto Trading

    How To BEST Read Cryptocurrency Charts

    Success of any trading heavily depends on the analysis you do. It is a cornerstone of getting results consistently rather than on a luck basis. The key tools traders use in the analysis are of course different charts and graphs that for the most part represent the dynamics of either price or volume defined parameters. With this article we want to cover the most common cryptocurrency charts you will see on exchanges and tools crypto traders use in their work.

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    B The Patterns Of Charts

    One of the most important skills in successful trading is knowing how to read the cryptocurrency price chart patterns. There are 3 main types of these patterns:

    • Continuation pattern. Shows the tendency to continue the current price trend.
    • Reversal pattern. Signals that the current price direction is going to reverse.
    • Neutral pattern. Price formations where the further direction remains unknown.

    When The Macd Line And Signal Line Cross

    When the MACD line is above the Signal line, traders can expect an upcoming bullish trend to occur. On the contrary, when the MACD line is below the Signal line, you may want to start preparing for a potential downtrend in the short-term future. The histogram adds another visual element to interpreting current and possible future line movements.

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    Resistance And Support Levels

    You can easily read live cryptocurrency candlestick charts using resistance and support levels. This can be easily identified by the use of trendlines. Trendlines are those lines that are usually drawn on charts through a connection of prices. Support levels usually show price points where cryptocurrencies are expected to come to halt whereas resistance levels show price points where there is concentrated selling interest. You can identify these levels using trendlines since it makes it easier to identify crypto chart patterns.

    Inverse Head And Shoulders

    How to Read Crypto Charts  Beginners Guide

    Description: Three successive peaks: middle is the lowest and the two outside higher and relatively equal in height. It forms after a downtrend and often signals upcoming trend reversal .

    Trade: Wait for pattern to complete and price to break out to move above the neckline. The most common entry point is when a breakout occurs the neckline is broken and a BUY trade is taken.

    Example: COTI emerging of a Inverse Head and Shoulders

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    Price Rising From Support

    When the price bounces off a support level and goes up, the three participants react like this:

    • The traders who are going long are really happy with the state of the market. They may also try to add even more to their position if the price drops doing to the same support level.
    • The traders who are going short may second-guess their position and try to buy in more to breakeven as the price reaches the support level again.

    The traders who didnt enter the market previously may want to wait for the price to get back down to the support level to enter the market.

    So, this support line becomes a great level where all the three kinds of traders can buy in.

    Limitations Of Candlestick Charts

    • Although Candlestick charts show buyers and sellers activity in the price, it does not show the volume information
    • Candlestick charts dont take into account the fundamentals, but only the price reaction to the market fundamentals
    • Candlestick patterns at a random place on the price chart often provide false directions.
    • The chart can lead to analysis paralysis.

    Did you know?

    Analysis paralysis refers to a situation in which an individual or group has difficulties moving forward with a decision due to overanalyzing the data or overthinking a problem.

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    Chapter 4 Popular Candlestick Patterns

    Theres no denying that candlestick patterns plays a significant role in technical trading. A candlestick pattern is especially useful for traders to determine the possible price movement and market trends based on the past patterns.

    Of course, there is also a variety of candlestick patterns that signal bullish and bearish movements. But, what are the best candlesticks?

    Heres what you need to know:

    Trendline Trading Strategy In Detail

    How to read crypto charts (4/5)

    Since trend lines are a more exact tool compared to support and resistance, they are providing the opportunity to create a more accurate trendline trading strategy. This strategy can be applied not only to cryptocurrencies but also to stock market trend lines.

    We have already learned how to draw trend lines technical analysis charts. Now, how can we get into trading with trend lines only?

    A brief overview:

    There are two types of trends, an upward trend, and a downward trend. If the market goes sideways, it is in a range.

    Upward trend definition:

    When a market successfully makes higher highs and higher lows.

    Downward trend definition:

    When a market successfully makes lower lows and lower highs.

    When or if the price breaks out of an uptrend or downtrend, it will most likely make an aggressive move.

    When the price breaks out of a downtrend, its bullish.

    When the price breaks out of an uptrend, its bearish.

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