How to Read Cryptocurrency Charts and Decode the Trends They Show
Cryptocurrency charts are simply a series of simple candlesticks and lines plotted on a chart to display a short price history. They are very popularly used for technical analysis, predicting future price movement and trendlines. While the whole process can be quite profitable, many people simply jump into the market without adequate knowledge and soon end up with massive losses which they may only recover from. The main reason for this is lack of training and information in this area.
There are two types of Cryptocurrency charts, the bar chart and the time frame chart. Both can be highly useful for both long term and short term Cryptocurrency trading. The bar chart, as the name suggests, traces price movements over a specified period of time using price bars. Most people familiar with market dynamics will be immediately familiar with the “AAP” or “Aura Amplitude Technique”. This form of measurement is typically used in the stock market, but can also be applied to the Cryptocurrency market.
Many people think they know how to read cryptosurroundings charts but often get frustrated when they cannot correctly interpret the data they see. The first thing to do before trying to understand any charts is to familiarise yourself with basic price action patterns. If you take your time to learn this then you will soon begin to understand how to read cryptographic charts and begin to build your own understanding of how markets operate. You will soon understand why some things are bullish and why other things are bearish, this will give you greater confidence in learning how to read cryptosurroundings charts.
Short term price movements can often be predicted by looking at market cap fluctuations, this is where most beginners and experienced traders alike will make the mistake of thinking that market cap is all they should be looking at. Market cap is only one indicator of value, it does not show traders which way a market is trending. Some traders make the mistake of only looking at the volume of trading on the exchanges, this can be a great tool for learning how to read cryptosurroundings charts but do not let it be your only indicator of value. Volume only tells you of interest, but candlestick charts, which show the open and high levels for each trade, are much more reliable in showing you what a particular market is really doing.
One of the best ways to learn how to read cryptosurroundings charts is to go out and find some of the popular currencies being traded. In the case of Litecoin there are several good options. Look for the top performing ones in your favourite search engine, as well as looking at their trading history and daily performance in relation to other top-performing assets. Do not just look at the price alone, take note of the type of asset being traded, do you think the price per coin has a use by being a leading indicator of its value? Once you understand how to interpret a particular cryptosurrounding chart correctly, it is possible to pick out the top-performing currencies and understand how they may perform over time.
Different timeframes are used in Cryptocurrency Charts by traders, be careful to look at each time frame individually and not to rely purely on one indicator for a trend. In general, the bigger the timeframe, the more likely that it is that price movement will be random, meaning the outcome will not depend entirely on one indicator. If you see a strong price movement at a smaller time frame, it doesn’t mean it is going to keep moving in a single direction, sometimes price move randomly in one direction for a period of time, then move back to its original state.
The RSI chart, or relative strength index chart, is the simplest of the three different charts most traders are familiar with. This type of chart uses the MACD, or Moving Average Convergence Divergence, to show the direction of the market price. Traders who read cryptosurrounding charts like this are looking for a high price in a volatile market, with a drop off near the higher line. Because this type of chart is typically simple, you can get an idea of what kind of trends could occur in the future by studying the relative strength index of the price.
When looking at real body charts, it is important to pay attention to the time frame used, and to attempt to make sense of the market by looking at the trends it is following. By considering market psychology, you can often predict where the market is heading in the future. If the time frame shows consistent movement, and the candle stick charts also show clear direction and points to a strong trend, you may have found a potential buy signal. You should not rely solely on trend predictions, though, as many of them are not based on psychological principles and have no basis in reality.