Crypto Charts: Different Types & How to Read Crypto Charts?

Trading various cryptocurrencies have been in trend ever since the pandemic started as people want to make a quick buck. However, the price volatility and risk factor involved can cause you to lose your money. As a result, many people have started learning about analyzing different price charts to understand the movements in crypto prices. But if you are a beginner who has no idea about what a crypto chart is, then we will be explaining in detail different crypto charts and various ways how you can read crypto charts. 

What are Crypto Price Charts?

As a beginner who has never traded or invested in the stock market before cryptocurrency trading, you may slightly lack an idea of what the price charts consist of in the investing world. Crypto Price Charts are very similar to the charts that are available for various stock and futures trading. Analyzing and trading price charts is known as Technical Analysis. There are four basic types of price charts seen in technical analysis:

How to Read Differnt Types of Crypto Charts

1. Line Chart

This is the most fundamental sort of crypto chart for price research. It’s also the easiest to understand. A line represents the chart’s price, and the height of the line varies depending on the price at a given time point.

Linear or logarithmic scales can be used in a line chart. The pricing axis is divided into equal sizes in the linear scale chart. With the logarithmic scale chart, on the other hand, the price is scaled up or down based on the percentage change.

For instance, if two price increases are similar in% change but differ in absolute amount, the graph depicts both changes with the same vertical shift.

Tradesanta.com provided the line chart.

Tradesanta.com provided the logarithmic chart.

The volume indicator, which shows the total number of cryptocurrency coins traded for that period, is usually shown at the bottom of the chart. Volume is an excellent indicator of the future direction in which the crypto price asset will travel. For example, if the price of a crypto asset rises with the largest volume, it indicates that traders are actively transacting in that crypto asset. The price of the crypto asset may rise in this circumstance. When the volume exchanged is lower and the price falls, however, fewer people are selling or buying cryptocurrencies.

Linear charts are more useful for observing the asset’s price fluctuations over time. Log charts show the trend of an asset’s price fluctuation over time.

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2. Bar Chart

As comparison to the line chart, bar crypto charts are a more prevalent type of chart for examining pricing. Little bars that indicate the price action on the chart make up bar charts. Instead of only displaying closing prices, the bar chart shows four different price actions: open, high, low, and close. Aside from that, a black and white structure or a color structure consisting of red or green bars can be used to represent a bar chart.

Source: tradingview.com

3. Candlestick Chart

Because of its reliability, candlestick crypto charts are more extensively utilized than any other type of chart. A candle is quite similar to a bar formation, except that its body is shaped like a block with two wicks on the top and bottom. The candle chart, like the bar chart, offers four different price actions.

  • When the closing price is higher than the opening price, a green candle appears on the chart.
  • When the closing price is lower than the beginning price, the candle is red.

Source: coindesk.com

The candlestick has a few parts that must be understood in order to determine the values it represents:

  • The opening price of the asset it represents at the start of the trading period is known as the open.
  • Close: The price of the asset it represents at the end of the trading period is known as the close.
  • The high represents the asset’s highest price throughout the trading period.
  • The Low is the asset’s lowest price during the trading period.

Source: tradingview.com

A green or red candlestick is employed depending on whether the price of the asset increased or decreased during the trading session. Because the overall price of the asset has decreased, the Close in a red candlestick is at the bottom and the Open is at the top.

Because candlesticks are often used in technical analysis, it’s crucial to study distinct patterns that can help you understand crypto’s price action. In cryptocurrency charts, there are two types of candlestick patterns:

3.1 Bullish Candlestick Patterns:

Bullish candles form a large body in an upward trend, highlighting the investors’ optimism. The greater the candle’s body, the more likely the stock will rise in value. For example, Hammer, Morning Star, and so on.

3.2 Bearish Candlestick Patterns:

By forming a large body in a downward trend, bearish candles highlight investors’ pessimism. The larger the body of the candle, the greater the risk of the stock falling. For example, Hanging Man, Evening Star, and so on.

On a more advanced level, numerous types of reversal candles and patterns can be used to identify distinct price actions on the crypto charts.

A candlestick’s normal duration is one, two, four, or twelve hours.

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4. Heikin Ashi

Heikin Ashi employs average price movement to construct its candlesticks, which is comparable to the candlestick chart. It has a higher dependability factor than a candlestick chart and a smooth pattern that indicates an clearly identifiable uptrend or decline.

Source: tradingview.com

Main Points to Remember when you Read the Crypto Charts

The three fundamental approaches for reading crypto price charts can help you as a newbie grasp the market action and analyze the fluctuations. The three steps to reading a crypto price chart are as follows:

1. Selecting a Time Frame

The majority of crypto traders use candlestick charts to assess price action, so it’s no surprise that you’ll favor them the bulk of the time. Nevertheless, beyond the crypto charts, there are many time frames that may be used to comprehend price action over a short or long period of time. The time frame you choose is determined by your trading strategy, which will vary from person to person. The following are the various types of traders who use various time frames:

  • Intraday Trader: As an intraday trader, you should always choose a lower time frame to better understand the price action that occurs throughout the day. Intraday traders often use a 5-minute to 15-minute time window to understand price action and execute deals.
  • Short-term Trader: If you’re a short-term trader who wants to open a position today and sell it in a week’s time, you can use a daily chart or a weekly chart to see how the price has changed over the week.
  • Long-term Investor: If you’re looking to buy and hold for the long term, a weekly or monthly chart will provide you a better understanding of price changes over time.

But, as a long-term investor, it is preferable to examine the crypto price behavior over a longer time frame.

2. Price & Volume

Several technical indicators can be utilized to confirm price action on each price chart. In technical analysis, volume is a common indicator that is used to comprehend the most fundamental kind of price activity. The volume will show how much price action is happening on the chart in a given time frame. On the crypto charts, there are two types of volume bars:

  • Green Bar: A green volume bar suggests that there is a high demand for the crypto token on the market despite the short supply.
  • Red Bar: A red volume bar shows that there is a large supply of the crypto token in the market with little demand.

Also, depending on the price action, a larger volume bar signals increased demand or decreased supply. When the price is highly volatile, the volume will fluctuate more.

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Final Note – How to Read Crypto Charts

Understanding different charts and pattern formations that can be used for price action analysis might be overwhelming for a newbie. If you aim to trade crypto tokens, however, learning how to read and understand crypto charts can greatly assist you in your trading adventure. The information shown above is the most basic technique to begin using price movement analysis to trade bitcoin. Understanding crypto charts will be highly possible and helpful in your long-term success if you learn and practice.

FAQ’s – Crypto Charts

Is Heikin Ashi reliable over Candlestick charts?

Although underappreciated, Heikin Ashi is a dependable type of chart that few traders utilize to assess price activity.

Are there any books on Technical Analysis?

There are numerous technical analysis books available. The most famous is John J. Murphy’s Technical Analysis of Financial Markets, which is considered the father of technical analysis.

Which platform is the best for crypto charts?

TradingView and Coinigy are the most popular platforms among modern traders.

Why does a crypto price keep rising?

If there is more demand for a particular crypto token on the market, its price will rise.

Which are the best chart indicators that one can use?

To analyze the price action alongside candlestick patterns, you can use chart indicators like Chaikin Money Flow, Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI), Ichimoku cloud, and Fibonacci Retracement.

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