The technical know-hows of reading cryptocurrency, in general, and Bitcoin specifically is an essential asset if one wants to engage in crypto trading. This guide will give you a detailed set of authentic information to help one make an informed decision to understand cryptocurrency charts and signals so that people indulge judiciously. By the end of this article, the ones interested will come out knowledgeable and confident on how to read cryptocurrency or Bitcoin charts in much detail.
While investing in Bitcoin involves a number of risks, understanding the price charts becomes important. This is the prime motivator of this article and while the process can be taxing, this guide will try to unravel all the technicalities step-by-step so that the investors do not feel discouraged to be adventurous with your financial endeavours.
The thrills, owing to the volatile nature of your assets, can be unbecoming if there is a lack of proper research or overlooking certain aspects that need undivided attention. This would help them invest in times most favourable for their asset growth. To enter into bitcoin trading, click here to get real-time Bitcoin trading signals and suggestions about what and when to invest.
So how do you read the bitcoin charts? Here is how.
What Is A Cryptochart?
Crypto chart is a price action versus time graph or price action arranged chronologically. The time frame can range from seconds to minutes, days to weeks and so on. Crypto charts signify the who, when and where the trading has taken place.
What Is The Dow Theory?
Developed by Charles H. Bow in 1932, the stock market is a dependable system for all business conditions. When these business conditions become favourable for a potential bull market, there is a high possibility that the individual stockholders can simultaneously benefit because of the overall sentiment of the market.
The Three Types Of Movement Of The Market
The primary movement (1°) entails a trend that can be either short term or long term in terms of number of years. It is unidirectional in nature, that is, upwards or downwards. When the price action has an upwards action, it is said to have a Bullish pattern and the opposite is called a Bearish pattern.
The secondary movement expands over a comparatively lesser time duration than 1°. Regarded as “correction” or “consolidation”, it is stretched over a duration of a few weeks to upto three months…
The tertiary movement implies trends that are stretched over a period of a few days to weeks. Often denoted as “noise”, it is a result of variations in market speculation.
Three Phases Of Market Trends
The Accumulation phase is a phase during the bull market wherein investors who are knowledgeable come together to pour in their assets. The cryptocurrency price does not produce any noticeable hike because the investors are in minority.
The second phase is the Absorption phase wherein price increases, the market catches on to their desired investors and moves to a public participation. Distribution phase is the phase when the supply of assets are limited, because of which the investors start selling their holdings.
How Do Stock Markets Work?
Stock market deducts all news
Whenever new information is feeded into the market, it pulls in all the fears, hopes and expectations of the individual market participants. The price of the particular asset, in question, is vulnerable to price change to reflect the news. Various elements factor in to give such an indication.
Stock market averages must promise confirmation
Market trend reversal can be a result of diverging trends of views or performance. One has to understand the performance of the individual participants in the market. When one half of the participants is interested in investing, it should invite the other half too.
Volume determines trends
Whenever there is an upward trend, both the volume as well as price increase and vice versa.
Durability of trends determined by signals
Similar to Newton’s First Law of Motion, the Dow theory suggests that a specific trend does not change until there is an external force or signal influencing it.
In order to predict the future of price movements of a Bitcoin Pair in the future, a method called technical analysis is used. A technical analyst uses the help of time frames and various tools for the job.
Intra-day traders are traders who prefer a short time frame of a day when they open and close their positions. The preferred time frames are 15- or 5-minute ones. The long trader markets stay in their position for a much longer time frame and prefers hourly, daily or weekly time frames.
How To Read A Candlestick Chart?
The candlestick charts give you all the necessary information regarding crypto price for trading purposes. With these charts, one can estimate the entry and the exit points and also predict the future of price movements by performing technical analysis. There are a few features of a candlestick chart that one needs to keep in mind.
Time selection and volume will allow you to select a time frame and see how much cryptocurrency was moved or traded in the selected time frame. Another feature is, a green candle denotes bullish candle (increasing interest in a coin), whereas a red candle denotes bearish candle (decreasing interest in a coin).
Support level is an indication when the price ceases to decline whereas resistance level is an indication when the price ceases to increase. All traders take interest in buying when the price reaches below support level. The herd mentality takes over and the price increases exponentially. Market emotions such as fear sets in once the price hits the roof and one sees more traders are selling their assets.
A reserved approach for the newbies is the smart way to go. Now that you have learned the basics, you can put your skills to test and start growing their trading experiences. Putting faith in a purely mathematical system away from politics and human error and enjoying what this decentralised technology can do is definitely the way to go in the future.