A Comprehensive Guide on How To Read Crypto Charts

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In 2021, 16% of Americans said they had traded or invested in Bitcoin. As crypto becomes more popular, that number will grow. 

However, you’ll need to learn how to read crypto charts to be a successful crypto investor.

Crypto charts can be confusing, but if you’re armed with the right knowledge, learning how to read crypto charts doesn’t have to be intimidating.  Keep reading to learn a few different analysis strategies to help you understand how to read a crypto chart. 

Start By Learning About Support and Resistance Levels 

Support and resistance levels are one of the most basic technical analysis strategies for reading crypto charts. The support refers to a bottom in prices, and resistance refers to the top that crypto can reach.

Prices will typically reverse at these points, and if they don’t, there’s likely a new trend. So, for example, if you notice that your prices breakout beneath the support, they could decline even more. 

On the other hand, if the prices breakout over the resistance, there could be more possible increases. There are also pivot points that average the high, low, and closing prices from the last trading session. 

Using this analysis, you can more exactly calculate support and resistance levels so that you know how high or low crypto prices may fluctuate. If you’re serious about reading crypto charts, you should also learn as much as possible about these pivot points.

Time Frames Are Important When Learning How To Read Crypto Charts

The time frames are also important when looking at crypto prices. For example, if you want to open and close your trade in one day, you’ll look at short-period charts. 

However, if you desire a long-term investment strategy, you’ll want to find a long-period chart. There are also fifteen-minute charts. 

Each candle represents fifteen minutes where you’re looking to manage a tradeoff between a stop-loss exit and a target. There are also hourly charts. 

Hourly charts are one of the most commonly used time-frame charts for day traders. This chart is a low tick chart, giving you a plot price for every second.

There are also four-hour charts. Most crypto markets are open for about eight hours a day, so they’ll be updated twice a day. A daily chart can also display all the data points and highlight the price at every point in the day. 

When Learning How to Read Crypto Charts The Dow Theory Can Help

The Dow Theory can also help you invest in cryptocurrency from a higher level.by focusing on market trends and how they behave. 

The Dow Theory will give you signals to follow to identify if the primary market is healthy or not, giving you insights on how to make trading decisions. 

The Dow Theory says that the market considers everything when pricing assets. Therefore, the prices reflect all the details of the asset, and the market analyst can focus on the price of a coin overall, rather than just one variable that might affect the currency.

The crypto market can be very similar to the stock market, and by using this tried and tested analysis, you could have more insights into the crypto market. 

Understanding Technical Analysis And How to Apply It

Technical analysis is also key to being a profitable crypto investor as it will help you identify patterns in the line or candlestick charts. You can then use these patterns to predict future behavior in the stock market and profit from it. 

To create trend lines that either trough or peak you will have to use different technical indicators. In going this route, you’ll also be able to see the resistance and support to better help you understand the market and figure out what strategy you want to  move forward with in the future.

Some technical indicators will help you include volume, momentum, volatility, and more. You should find these indicators at the bottom of a chart, clearly labeled.

Moving Averages Will Help You On Your Crypto Investing Journey

Moving averages help you plot a line on a chart that will determine the trend of different prices over a certain period. Averages will measure the trends.

Investors can use these moving averages on a chart for any time frame. However, many people like the moving averages because they have more than just data. 

You can use these with almost any other moving average. For example, many investors think that a “death cross” is a bearish signal, but the “golden cross” is a bullish signal. 

A golden cross happens when the short-term moving average rises above a long-term moving average. This average will often include a fifty-day MA moving above a 200-day MA. 

If you have a death cross, the trend is reversed. The short-term moving average will fall beneath the long-term moving average. These trends can help you determine whether these trends are promising for your cryptocurrency investment. 

What About Bitcoin Dominance?

You’ll also be able to learn about Bitcoin dominance. This number is typically a percentage of the amount of the crypto market dominated by Bitcoin. Since Bitcoin is one of the most popular coins on the market, the number will likely be high. 

If you’re an investor, the higher that value rises, the more bullish Bitcoin is. Unfortunately, that means it’s bearish for other types of coins. However, this could be the opposite as well.

Suppose investors notice that Bitcoin starts to decline. In that case, this is a bearish signal for that coin and bullish for other currencies on the market. 

how to read crypto charts

Learn More About How To Read Crypto Charts

These are only a few things to know about how to read crypto charts, but there is much more to learn.

We know that learning how to invest in crypto can be stressful and overwhelming at first, but we’re here to help you out.

Check out our crypto educational content if you’re looking for more tips on becoming a successful crypto investor.  

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Jennifer Lawrence, the effervescent Creative Director of New Bytes, brings a fresh and innovative perspective to the crypto-focused publication. Hailing from the vibrant city of Austin, Texas, Jenny's intrigue in the intersection of design, technology, and finance was sparked during her time studying at the Rhode Island School of Design (RISD).

Jenny's commitment to clarity through design, her comprehensive understanding of the crypto universe, and her passion for making information aesthetically accessible contribute immensely to Cryptosphere's appeal and its engagement with a broad audience.