How to Read Crypto Charts: A Beginner’s Guide to Trading and Market Sentiments | BinanX News

As cryptocurrencies gain greater acceptance globally, interest in cryptocurrency investing is steadily increasing. Understanding how to read crypto charts is crucial to making informed trading decisions. Like technical charts used in stocks and commodities, crypto charts provide valuable information about price movements, helping traders spot investment opportunities.

What are crypto charts?

Crypto charts are graphical representations of historical prices, trading volumes, and time intervals. These charts form patterns based on past price movements, which traders analyze to predict future trends and make strategic decisions. One of the most used types of crypto charts is the Japanese candlestick chart.

Japanese candlestick charts

A candlestick chart is frequently used by cryptocurrency traders to interpret market trends. In these graphs:

• Red Candles They indicate that the closing price is lower than the opening price during a specific time period, indicating a drop in price.

• green candles They indicate that the closing price is higher than the opening price, indicating an increase in price.

Traders use the shapes, colors and sizes of these candles to develop their trading strategies.

Bullish and bearish patterns

Reading crypto charts involves identifying various patterns, categorized into bullish and bearish reversal patterns.

• Bullish Reversal Patterns: For example, the hammer candle pattern suggests that an asset is approaching the bottom in a downtrend. This pattern features a short body (the head of the hammer) and a long wick (the handle), indicating strong buying pressure that ends the session on a higher note. Traders confirm this bullish trend by monitoring it for a few days and validating the reversal with an increase in trading volume.

• For example: bullish hammer pattern

• Bearish Reversal Patterns: The shooting star candlestick pattern is an example, which occurs at the height of a rally before retracing to the downside. This pattern consists of a candle with a long upper wick and a small body, indicating that initial buying pressure meets strong resistance, leading to a drop in price.

Popular patterns for technical analysis

• Head and shoulders: This pattern can appear at the peak or bottom of a trend. An inverted head and shoulders pattern, for example, indicates a possible reversal at the bottom of a downtrend. These patterns reflect the tug-of-war between buyers and sellers, in which one side ultimately prevails and pushes the price in a new direction.

• wedges: These patterns appear when a trend begins to stabilize, often resulting in a breakout. The market moves sideways, forming a wedge, before moving decisively in a firm direction.

Understanding Support and Resistance

Support and resistance levels are crucial in reading crypto charts.

• Support Levels: These are price levels below which an asset does not fall during a given period, indicating strong buying interest at that level.

• Resistance levels: These are price levels where an asset faces selling pressure, preventing it from rising further. Traders use these levels to make strategic decisions about entering or exiting positions.

Conclusion

Understanding how to read trading charts, especially crypto charts, is essential to making informed trading decisions. Recognizing patterns and analyzing market sentiments helps traders develop effective strategies. However, successful trading also requires an efficient platform. WazirX is one such platform that allows traders to spot these patterns and indicators effortlessly every day.