How To Analyze Cryptocurrency Charts Correctly

Reading cryptocurrency charts is an essential skill for a trader. It contains all the information that needs to be considered to exchange ETH USDT or other pairs successfully. The ability to read and understand charts is called technical analysis. With it, you can understand the position of the market, trading volumes, and the dynamics of the value of assets.

Separate parts of cryptocurrency charts

You see a graph as soon as you go to the exchange that buys cryptocurrency. For example, WhiteBIT automatically shows a pair with a dollar. But users can set any currency.

The graph shows the central values. This:

• currency pair;
• actual value indicator (this is the price of currencies at the time you are viewing the chart);
• highest and lowest cost;
• number of tokens sold per day;
• period (the user himself can set the required time to assess the dynamics of the exchange rate);
• cost chart (visual indication of price movements).

You can set the color values yourself to make it easier to understand them. A chart is an excellent tool for cryptocurrency analysis. But it is essential to read it.

Fundamentals of Cryptocurrency Chart Analysis: Dow Theory

The Dow Theory is the basics every trader should know. It was he who created the base that helps to manage assets and invest in cryptocurrency effectively.

According to this theory, the market reflects everything. Dow believed that the cryptocurrency prices chart reflects the natural position of the tokens. That is, users see the situation in real time as it is.

Also, the Dow theory states that the market moves in three directions:

• main trend;
• secondary trend;
• tertiary trend.

The primary trend lasts from several months to several years. The market may rise or fall. Secondary — correlation of the primary trend. These are often pullbacks in a market that develops in positive dynamics (bull market). Tertiary trend — minor market movements over a short period.

Every trend has trends. The accumulation phase is the beginning of the movement in cryptocurrency price charts. It is at this stage that investors understand how best to allocate assets.

Once the investors have decided, the public participation phase begins. Users begin to buy cryptocurrencies actively, revitalizing the market and setting it in motion. There is also a panic phase. Investors are actively investing money until the rate has reached its peak.

Features of Reading Cryptocurrency Charts

Candles are the leading chart indicator. Even though it may look confusing, it's easy to figure it out. The candle consists of the body (thick) and the tail (thin). Color coding also plays a role:

• green — rising value (bull market);
• red — declines (bear market).

Each candle represents a specific period. The difference in the parts of the candle allows you to understand the activity of cryptocurrency trading. The candle sizes and the chart they make enable investors to gauge the state of the virtual asset market.

The Bull Hammer pattern looks like a checkmark. It appears with a sharp drop in the value of assets. He says that the number of buyers in the market is increasing. That is, sellers can increase the cost due to such an increase in demand.

An inverted Bull Hammer indicates that the cryptocurrency's price has risen since entering the market. If this pattern comes after the fall of the course, then there is a high probability that it will grow again and possibly stabilize.

Head and Shoulders is a pattern seen if you open the cryptocurrency chart more. It looks like three triangles. If the picture's left part is green, you can expect an increase in value. The red color indicates a fall in the cryptocurrency rate.

Summing up

The cryptocurrency rate chart is what will help you in successful trading. Proper analysis will help you decide which asset is worth investing in and when to withdraw funds. But do not rely only on technical analysis. Logical thinking, news, and information from an up-to-date source will help you get a more detailed picture of the market situation.