How to Read Crypto Charts
Written by  Daisie Team
Published on 7 min read

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"Buy low, sell high."

If you’re interested in cryptocurrencies, like Bitcoin and Ethereum, you’ve probably heard the saying above. But, there’s another popular saying: “If it were easy, everybody would be doing it.”

Crypto is known for wild fluctuations in price and high volatility, making some lucky people, who just happened to buy at the right time, rich, while others will be holding positions, waiting a long time for profit that may never come.

If you think that understanding charts is just for the financial sector, realize that if you’re an artist, musician, or writer looking to place your digital works on the blockchain as a Non-fungible token (NFT), you’ll want to understand how to track the value of your work and compare it to other NFTs in the marketplace.

The remedy? Become familiar with how to read crypto charts, so you can better anticipate the right time to buy and the right time to sell.

An Intro to Crypto Charts

The goal of using cryptocurrency charts for visualization is to reduce the likelihood that you will enter a position at a bad time, or at a bad price, and to increase the possibility of selling for the desired profit.

Everything you learn to use with crypto charts is about analyzing trends. The price is always going to be moving in one direction or another. The questions are: When will a trend develop, how long will it last, and when is the right time to buy or sell based on that data?

The standard layout for a crypto chart looks daunting at first, but once you break down the meaning for each item, you’ll become familiar with the data and appreciate how helpful it is.

Here is an example of a typical cryptocurrency chart:

  1. The current market pair chosen is Bitcoin (BTC), traded against a stablecoin called Tether, designated USDT, representing a US dollar. The current market price is 39,218.82 Tether dollars.
  2. In red, it shows that Bitcoin is down -1.32% from the beginning of a 24-hour cycle. The value of that trend is -528.47 USDT.
  3. From left to right, we have the actual US dollar value of Bitcoin, at $39,218.82, which means that a Tether dollar is maintaining the exact correct price as the US dollar it represents. This is called the “Fiat” price. As it sounds, the 24 Hour High is the highest the Bitcoin price has been in a 24-hour cycle, and the 24 Hour Low follows the same logic.
  4. This represents the length of time a candlestick indicator (6) lasts. You can change your view from 1 minute to as long as a day or a month. Whatever time duration you select is represented by a single candle.
  5. Indicators will provide a drop-down menu where you can add an overlay of numerous other visual cues, each designed to give you insight into what the market might do in the future.
  6. These are the all-important candlestick indicators, also called Japanese candles, or Doji candles. They measure the time selected (4) and provide a complex, real-time update of how the market is moving within that time frame.
  7. Vertically on the right, you see the price range of the currently selected cryptocurrency.
  8. Horizontally along the bottom, you see the time duration in view, with the year, month, date, hour, minute, and seconds.
  9. OHLC stands for Open, High, Low, Close. Anywhere you place your cursor over the chart, the OHLC will tell you the price Bitcoin opened and closed in that 24-hour period, along with its highest and lowest values at that specific time.

Candlesticks

Also called Japanese candles, or Doji candles, this indicator is almost universal and is at the center of reading charts for crypto. Unless you change color schemes, green will typically mean “up,” representing a rising price, and “red” will mean the price is heading down.

Candles represent the currently selected duration of time, and once that time runs out, a new candle is formed.

https://s3.cointelegraph.com/storage/uploads/view/2c275638673434691f8be408a5929cda.png

A green candle is heading higher in price from where the last candle ended, so studying the history of previous activity can give you a lot of information about where it may head later. The ‘wick,’ or thin part of a candle, develops when the volume of trades at that price is starting to run out, and often indicates a reversal is coming.

Volume

Pictured above, volume is usually displayed at the bottom of the chart, usually appearing as a bar graph, again colored in green when a period of time ends with more volume bought than sold, and red when a time frame ended selling more than what was bought.

You will find, circled in red, an example of a 1-hour volume bar, where more than 1,800 bitcoins were bought and sold, but at the end of the hour, more bitcoins were sold than purchased.

Volume is extremely telling of the story of what has happened in hours, weeks, and months, but is especially powerful when paired with Doji candle patterns.

Moving Averages

There are numerous different visual indicators that use moving averages, so we’re just going to briefly cover two of them: Stochastic RSI and MACD. The category of moving averages (MA) provides a line that is drawn that represents weeks worth of price movement. By overlapping several MA lines that represent different periods of time, you gain insight into where history says the price may be moving.

Stochastic Relative Strength Index (Stochastic RSI)

In the chart above, the purple range below the candles is the Stochastic RSI. There are two MA lines representing two different periods of weeks worth of past data. When both lines have reached an extremely low point, it is usually a sign that buying will start to dramatically increase. The top and bottom ranges of the purple section represent when a cryptocurrency is overbought and oversold, so when the MA crosses beyond that point, it is almost inevitable the trend will reverse, meaning if the price had been going up, it is probably heading back down, and vice versa.

Moving Average Convergence Divergence (MACD)

Pictured below the candles in the chart above is the MACD. You will see a positive and negative waveform that shows trends in the volume of activity, overlapped with two MA lines representing different, multiple weeks of price action.

The main activity you are looking for with MACD is when the two MA lines intersect. If they are crossing over one another at the top, you are likely to see the price drop, and the opposite is true if they cross at the bottom, the price is likely to start going up.

Putting It All Together

The real potential of reading crypto charts is unleashed when putting numerous visual indicators together. For instance, you may see that volume is increasing in a certain direction while your MA lines reach an extreme oversold range, but there are conflicting data from the MACD and Stochastic RSI. Every piece of information tells a story, and all of these data points are based on purely accurate, historical information. If they conflict, it means you should do more investigating before making a firm commitment to a position.

The same can be said that if you have multiple indicators running, and they are all pointing heavily towards the same activity, there is a very good chance it is the time to buy or sell.

Crypto Volatility

There is an ‘unofficial’ rule in cryptocurrency to expect the unexpected. With a volatile market filled with political controversy and interest from novice and seasoned professional traders alike, the illogical happens more often than not.

There is always a very high risk involved in trading, so not only do you want to do your research, but do not trade what you cannot afford to lose. Stick with trading cryptocurrencies that you believe in, so you don’t mind holding on to them for a while if you guess wrong.

Always Use a Strategy

When trading stocks or any asset, it is a good idea to have a plan. After all, it is real money going into your trade positions. Especially with crypto, people get wiped out very quickly if they just listen to the hype and don’t know how to watch historical data through charts.

Whether you want to make small, steady purchases and hold for a long time, or you are hoping to grab profits quickly, study what others have done, test things on paper for a while before putting real money in an account, and develop a strategy that you can stick with.

Enjoy Your Crypto Journey

Now that you have a starting point for trading cryptocurrencies using charts, you’re one step closer to joining a growing world of enthusiasts who are passionate about the technology and exciting potential for explosive profits.

You’ve now learned about:

  • Why crypto charts are used in trading
  • What the different sections of a crypto chart represent
  • Important indicators, including:
  • Candlesticks
  • Moving Averages
  • Stochastic RSI
  • Moving Average Convergence Divergence
  • Being careful with volatility
  • The importance of a strategy

Always remember to do your own research. Be cautious, but enjoy the journey that lies ahead. Learning to read charts and paying attention to changes taking place in the NFT world can help you focus on commercially competitive artwork, keeping your name and creations front and center.

You will find a few extra resources for continued reading about charts, and if you’re interested in learning more about crypto, check out Daisie’s growing list of industry-leading experts today.

To Learn More About Crypto Charts, Check These Out:

https://www.moneycontrol.com/msite/wazirx-cryptocontrol-articles/how-to-read-crypto-charts/

https://cointelegraph.com/trading-for-beginners/crypto-charts-101-how-to-read-cryptocurrency-charts

https://www.stilt.com/blog/2021/06/how-to-read-crypto-charts/