Nowadays, cryptocurrencies are becoming popular everywhere around the globe. That is why more new investors are joining this market each day in the hope of earning huge profits. Sometimes beginners don’t know where to start from or what is the first step they should take while entering the crypto world. The most challenging step for beginner investors is to identify and analyze the market.
Market analysis may seem difficult to some people, and however, if you will learn some easy tips and tricks, it won’t be so challenging for you. But how can you analyze the crypto market? Well, the simple answer to this question is by reading its charts. This article will share how you can efficiently study these charts to become successful in trading cryptocurrencies.
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WHAT DO YOU MEAN BY CRYPTOCURRENCY CHARTS?
img source: coindesk.com
A simple tool used to represent all the relevant data related to the cryptocurrency, including the fluctuation in prices, is known as the crypto charts.
The data plotted on these charts are helpful for the investors to analyze this trading market and make the right decisions before investing a massive sum of money.
To build a bigger picture of whether your investment in crypto coins will bring good returns to you or not, it is essential to understand the predictions given in the cryptocurrency charts. Usually, when more people start buying a particular digital currency, its prices go up, and when more people begin selling a specific coin, its prices start going down.
HOW TO READ THESE TRADING CHARTS?
Whether a person is an experienced investor or some newbie in this field, the art of studying trading charts is a must for everyone. It represents every point a digital currency went through, making profits as well as losses. The chart mainly shows the parameters like the price, volume, and quality related to the digital coins. You will come across two popular charts given below:
1. The line chart:
img source: safecurrency.com
It is the most basic type of digital currency figure used to display any coin’s historical prices. If you are looking for something very straightforward to understand, then go for this one. The prices of the cryptocurrencies seem to increase if the line moves in the upwards direction, whereas the prices decrease when the line moves downward.
These figures are generally formed for the time periods like months and also for years. For instance, if you need to make some long-term predictions, yearly figures that present fluctuations in prices will be beneficial over the entire 12 months. Daytime traders mainly use it to understand the change in the price of any cryptocurrency at some particular point.
The market value of any digital coin takes only a few seconds to change or fluctuate. Therefore, a person who knows how to read these line graphs will predict the future of any currency. Line graphs are comparatively easier to learn and are user-friendly for beginner investors.
How many people are interested in selling or purchasing a digital coin is represented through volume parameters. Green colored lines show that more buyers and the red ones represent more people interested in selling the currencies.
2. Candle-stick chart:
img source: medium.com
Candle-stick graphs are more advanced versions to provide much valuable information to the users. It is a very famous tool amongst all the traders. They may seem intimidating when you look at them for the first time, but you will be able to understand them easily once you learn about them. It contains two axes: the x and y-axis. The X-axis shows the parameter of time, and the y-axis represents the prices of cryptocurrencies.
Some key elements are indicated in the candlestick graph, such as volume, time frame, Bearish candlesticks, and bullish candlesticks. Let us understand all of these parameters in brief:
- Selecting the time frame:
This parameter allows a person to select the time frame at which he wishes to see the fluctuations of any crypto coin. The figure will represent every transaction that took place in that time span. People can customize the time frame according to their needs. Some time frames are available on the graph by default: 5 minutes, 15 minutes, 1 hour, weekly, and monthly.
- Volume:
One of the most critical parameters of the candlestick charts is the volume. How do you define volume in these graphs? Usually, the volume element of these figures presents the number of transactions made with a particular digital coin.
When the bar showing the volume element is extended, either the buying pressure or the selling pressure is high. The green color indicates the increasing interest of the buyers in the digital coin, whereas the red color indicates the fall in interest or simple terms, which means that the selling pressure is high.
- bearish/ bullish candlesticks:
Out of the two colors, green candles are a symbol for bullish candlesticks, and red is for Bearish candlesticks. The bullish one shows that the prices of the crypto coins are increasing in the time frame selected. In contrast, the bearish candlesticks show that the costs of digital currencies are decreasing over time.
TO SUM UP
Due to the busy schedule, people have no time to invest in the learning skills required to analyze the cryptocurrency market. It is better to purchase some technical analyzing tools available on many websites on the internet. But if you don’t want to spend any money, then learning to read charts yourself is the best way to know what is happening in the trading world every day.
