An easy way to describe cryptocurrency charts is to describe them as visual representations of the price of a cryptocurrency over time.
As you should know, trading cryptocurrency is beneficial if you have a good trading strategy and if you know how to use the right tools.
Cryptocurrency charts are one of these beneficial tools that cryptocurrency traders can integrate into their trading strategy.
This guide is compiled to help every cryptocurrency trader understand how to read cryptocurrency charts.
In this article, we will cover three (3) types of cryptocurrency charts and also cover other related technical analysis tools for analyzing cryptocurrency charts. After reading this article, you will be able to understand the basics of reading cryptocurrency charts and you would be able to make informed trading decisions that would help you achieve your trading goals.
Types of cryptocurrency charts
There are three (3) types of cryptocurrency charts. The type of chart you use is a matter of personal preference.
Some traders prefer the visual appeal of candlestick charts, while others prefer the simplicity of line charts. The best way to choose a chart is to experiment with different types and see which one works best for you.
Below is a detailed explanation of the three (3) different types of cryptocurrency charts; candlestick charts, line charts, and bar charts.
This chart is the most popular type of cryptocurrency chart. Candlestick charts show the opening, closing, highest, and lowest prices of a cryptocurrency over a set period. Traders often use candlestick charts to identify trends and patterns in the price of a cryptocurrency.
Line charts show the closing price of a cryptocurrency over a set period.
They help traders to see the overall trend of a cryptocurrency’s price. However, they are not able to show the highs and lows of the cryptocurrency price.
Bar charts show the opening, closing, highest, and lowest prices of a cryptocurrency over a set period. Bar charts are identical to candlestick charts. However, they do not have the same visual appeal.
Tips to effectively use crypto charts
Knowing the types of charts is not enough, you have to also know how to effectively read or use them, here are some tips on how to effectively use crypto charts:
Use multiple charts
Avoid relying on just one type of chart. It is very smart and good to use multiple charts this would help you to get a better and complete picture of the market.
Look for trends
Trends are the direction in which the price of a cryptocurrency is moving. Once you identify a trend on the chart, you can go ahead and make trading decisions especially if the trend confirms your biases.
Identify support and resistance levels
Support and resistance levels are areas where the price of a cryptocurrency is likely to find support or resistance. So to effectively read your charts identify the support and resistance levels.
Indicators are tools that can help you identify trends, several crypto trading indicators on IQcent are beneficial for your trades.
You can use indicators to identify trends, support and resistance levels, and other important information that would help you gain leverage in the market.
Cryptocurrency charts are valuable tools for cryptocurrency traders.
Traders who understand them and utilize them appropriately are in a better position than other traders who don’t understand or utilize cryptocurrency charts appropriately.
The ‘Oracle of Omaha’ Warren Buffett, CEO, Berkshire Hathaway Inc. once said,
“Risk comes from not knowing what you’re doing.”
Many people are afraid of cryptocurrency trading because of the sad tales they have heard from careless traders, mind you, you don’t need to be afraid, as Warren Buffett pronounced, as long as you understand helpful tools and have a good trading strategy you are good to go.
With the help of this guide, we believe that you now understand what cryptocurrency charts are, their importance, and how to read them. If you do, congratulations to you because you are guaranteed to be more successful than other cryptocurrency traders.
Frequently Asked Questions (FAQs)
What are cryptocurrency charts?
Cryptocurrency charts are simply defined as visual representations of the price of a cryptocurrency over time.
How many types of cryptocurrency charts exist?
There are various types of cryptocurrency charts. However, the most common types of cryptocurrency charts are candlestick charts, line charts, and bar charts.
How do I read cryptocurrency charts?
Note this, there is no one right way or defined way to read cryptocurrency charts.
Also, remember that charts can be misleading too. Simply because a chart shows a trend does not mean that the trend will persist.
A smart way to read charts is to use them to confirm biases. For instance, if you judge that a cryptocurrency is going to go up, you may be more likely to see patterns in the chart that support your belief. Another thing is that charts can be used to make predictions. However, always be cautious because predictions are not always accurate.