How to read candlestick charts crypto? Well, charts are the basis of technical analysis when trading on a stock exchange. They are necessary to visually assess trends in quotes, as well as to predict price movements, and analyze which positions are stronger — supply or demand. Just read about how to read candlestick charts crypto tips and tricks guide in our article.
Possibilities of charts and their combinations are widely used during trading by both professional investors and newbies. Naturally, among the tools available there are many that are effective only for traders with extensive experience. However, there are basic types that can disclose information about an asset without unnecessary complications. Let’s learn how to read crypto candlestick charts!
How to Read Crypto Candlestick Charts: Main Types of Charts
Before answering the question ‘How to read candlestick charts cryptocurrencies?’ let’s learn the key types of charts! One of the most popular visual aids on a stock market is a price movement chart. There are several types of it.
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- Line charts. The simplest image of price movement, but at the same time it reflects only one component, which isn’t enough for making decisions.
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- Bars. Sometimes they are also called bar charts. An informative visual option, which contains the main indicators of interest — the minimum and maximum price levels for a selected period of time, closing and opening prices.
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- Japanese candles. A popular tool that reflects the same parameters as bars, but their visualization is more convenient.
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- Tic tac toe chart. These are columns of price changes, with a zero — a fall in a level by a given number of points, a cross — an increase by a similar value. The direction of a quote movement and a size of a rise are clearly traced, but there is no time reference.
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- Histograms. They aren’t used separately, but supplement other charts, showing a volume of trades made. The higher the line height, the more active the asset turnover on the market.
Today, it’s really important to know how to read candlestick charts crypto tips and tricks guide. The skill of reading charts is a foundation required for successful trading.
How to Read Candlestick Charts Cryptocurrencies?
In technical analysis, the most popular are line charts, bars, and candlestick charts. Let’s consider each of them in more detail.
Line Charts
So, how to read candlestick charts crypto — line charts? This type of chart is the simplest one. A line is drawn along the time and price axes, which reflects a value of quotes that closes a trading period. It’s used to track a general trend — assets are growing or falling in price, but it’s impossible to make a decision without studying additional information. The optimal timeframes are from one day to a quarter.
Bar Charts
What about a bar chart? How to read crypto candlestick charts? Bars are rather popular with traders. They are much more informative than line charts — you can observe not only a closing price but also an opening price, the maximum, and minimum for a trading period.
Each bar represents fluctuations in quotes for a selected timeframe. It can be five minutes, one hour, one day. At the end of the next period, a new line is formed. Also, bar indicators show a direction of price movement — if the left is higher than the right, there is a decrease, if on the contrary — an increase.
Such charts also help you understand the general trend and predict price reversals. For example, in anticipation of economic or political news, the range of price fluctuations decreases — the bars become shorter, the market freezes.
Japanese Candlesticks
Most exchange traders use Japanese candlestick charts. It is time-tested — for the first time, traders began to use candlestick charts when selling rice back in the 17th century. For three hundred years, fans have appeared all over the world, and their number is only growing.
The chart consists of rectangles with tails — a body of a candle and its shadow. Each individual element represents fluctuations in quotes over a certain period of time. A timeframe is set by a user in settings. As in the case of bars, a new candlestick is formed at the beginning of a new interval.
Depending on the level of fluctuations, the body of the candle and its shadows can be different. Each model has its own name, for example, ‘hammer’, ‘gravestone’, ‘morning star’, and carries a certain signal about the market situation.
How to read candlestick charts cryptocurrencies? What other interesting facts do you know? Just share your knowledge in the comments!
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