Understanding Crypto Charts: Candlesticks Explained
Thanks to all of you who responded to Victoria's recent crypto quiz blog: "6 Quick Questions On How YOU Feel About Crypto". If you haven't already done it, feel free to! Of the information gathered, it became increasingly clear crypto trading charts need to be a point of emphasis for us as many investors find them difficult to understand. I thought I'd go through a basic analysis of crypto charts in the hopes it will help you feel more comfortable with your investment decisions.
For those of you that have no idea what I'm talking about... Have you seen any cryptocurrency charts that look like a bunch of red and green candlesticks? That's what we'll be looking at in this post.
TradingView: Crypto Candlesticks Explained
Candlestick charts describe price movements by combining four pieces of information. The open and close prices are indicated by the top and bottom of the fat part of the candlestick (usually depicted as a red or green rectangle). The high and low prices are indicated by the narrow line above and below this part. When a candle is green, it's showing that the closing price was higher than the previous candle. Conversely, a red candle indicates the closing price was lower. The main reason for using candlestick charts is to make it easy to visually identify crypto market trends over a specific time frame.
Now, to try these charts out head over to www.tradingview.com. We love TradingView! It's a beneficial free platform for analysing cryptocurrency prices, along with currencies, stocks, indices, futures, bonds, and CFD's. It really covers all bases. Select 'Chart' as circled in the screenshot below.
You will be greeted with a chart that shows a steep inclination followed by a long-winded recession. Yip, you guessed it! This is the BTC/USD chart. I have labelled various functions of the graph in the screenshot below with descriptions following.
Use this section to alternate between desired charts. Start by searching for the desired coin ticker (e.g. BTC, ETH, XRP) and then the desired trading pair (e.g. BTCUSD, ETHUSD, or XRPBTC). Trading pairs such as ETHBTC show Ethereums price fluctuations comparative to Bitcoins.
This shows the size of each individual bar, or candle, on the graph. For a more macro perspective of the market, I recommend using daily bars (D), that is, one bar equating to 1-day. For a closer analysis of the market, I suggest using the 4-hour (4h) or 1-hour (1h) bars.
This function allows users to compare two charts. For example, I could select the ETH/USD chart and compare the historic Bitcoin price with the historic Ethereum price.
Indicators are tools used for further analysis of the market. We won't get into any specifics today, but I will write up another blog that covers useful indicators later this year. Don’t let this stop you. Feel free to play around with the various indicators. If you are serious about technical analysis and want to understand indicators better, I suggest visiting The Chart Guys on YouTube.
The alert function allows you to set notifications when a particular coin crosses a certain price. For example, I could set an alert that emails me when Bitcoin passes $100,000.00 (here's hoping). Note: The SMS alert is only available with the paid subscription.
Selecting ‘more’ will show a technical analysis summary. It will surmise the momentum of the market, which can vary from 'strong sell' to 'strong buy.' A strong sell indicates the market is bearish, whereas a strong buy shows bullish sentiment.
There are a number of tools in the left sidebar used to draw and alter the chart for a more in-depth analysis of the market. We won't go over any of these tools in this blog but have a play around in your own time. It's lots of fun!
This section shows relevant current events and articles related to the chart you are viewing.
There you have it. The basics of navigating a cryptocurrency price chart. If you found this blog useful, let us know in the comment section, and we will continue to do posts of a similar style. Otherwise, I’ll see you next time. Happy analysing!
Disclaimer: The above references an opinion and is for informational purposes only. Do not take this as personalised financial or investment advice. The opinions expressed by the author do not represent the opinion of BitPrime.
Images courtesy of TradingView unless stated otherwise.
Last updated: 24/09/2018