28 February 2020
To many people who belong to non-commerce fields, reading a chart can be as good as trying to learn physics! And in the field of cryptocurrency it is very essential to understand the chart if you ever want to be a part of the booming industry of cryptocurrency. However, it could be pretty daunting for the people who hate statistics, charts or tools.
We are going to try to make this whole complicated process a little easy-to-understand for you.
Here is the list of principles that you should consider:
The currency value is determined by the market and it is affected by various external forces.
The crypto’s value is too affected with several variables including the past, present and future units.
The movement of the price is not much random but are prone to the present trends for the short term as well as the long term.
The market analysis concentrates on the crypto’s price instead of other variables as such.
Cryptocurrency is said to be decentralized however yet has a lot in common with the traditional markets.
Bollinger Bands: A set of lines that plots two standard deviations from a moving average line that is simple. The widening of the band states a range of price that is wider and has the volatility that is higher and the narrowing of the band states less volume, a range of price that is limited and volatility that is less too.
Simple Moving Averages: It aids to understand the direction of the upcoming trend and it signifies that if the line moves up it is stated to be an uptrend and vice versa.
Moving Average Convergence Divergence (MACD): It is stated to understand the identify momentum of the bullish and bearish.
Time Frames for Crypto Charts:
To study the following chart of a cryptocurrency it is important to initiate by choosing a time frame, most of the traders follow time frames of 15 minutes chart, hourly chart, daily chart, and weekly chart.
The particular chart type is based on the trader's personal choice and perspective.
Intra-day traders: This is when the traders use the chart on a daily basis and on the same day a small time frame is mostly utilized that could probably be 15 minutes chart or hourly chart.
Long-term traders: This is when the traders utilize and hold their trade for a longer period which could be a few days or weeks and here mostly a 4 hour chart, daily chart or weekly based charts are used.
Investor: This is when the trader invests for months or years and holds their positions and for this, a weekly chart or a monthly chart is used.
Cryptocurrency Market Cap
In this type, a formula is used to calculate the market cap of a particular crypto-coin:
Market cap = Coin Price x Circulating Coin Supply
It helps to determine the market cap of a particular cryptocurrency and its total value of coins present in the market to learn the worth of the cryptocurrency.
To understand it better, you could read our following blog:
The Japanese Candlestick Chart
This is an informative chart and it consists of open and close price, high and low occurred in that time frame. The colour of the candle in the chart indicates bullish and bearish movements of the price. The bullish states the green candle and bearish states red candle of the asset.
The rotating top indicates it is moving in a range that is small and the price is not clear or providing the definite results. A long candle indicates a range that has a wide movement. A red candle - the lower shadow signifies closing price and the upper shadow signifies open price, the vice versa is in the case of a green candle.
Relative Strength Index also abbreviated as RSI is a known lagging indicator, it signifies the strength and speed of an asset through analyzing its past and current performance, it helps to decide the exit and entry points of the trade.
RSI could be anywhere from 0 to 100, and theoretically if the RSI shows above 70 it indicates that it is overbought and on the contrary if the RSI is below 30 then it indicates oversold.
RSI is stated to be best when it is combined with Bollinger Bands.
Volume is stated to be important for the intra-day traders and for the traders that open and close their trade in the very day. It showcases the number of traders that are presently trading for an asset.
The long volume bar signifies excessive buying or selling pressure on the asset. The green bar indicates the interest that is high and the significance of buying while the red bar indicates the interest that is low and the probable selling.
Money Flow Indicator
A money flow indicator facilitates institutional levels of selling and buying and is preferred as it showcases in a way about where the big money is going.
The money flow indicator oscillates in the range of -1 and +1 with 0 being the centerline while it's a rare case that the extreme ends are even touched. The start of an uptrend is signified by the positive CMF and the falling trend by the negative CMF.
Crypto Fear and Greed Index
The crypto fear and greed index together consists of various technical analysis tools in a graph to show the valuation of the levels. The sentiment indicator is stated to be a reflector that is good for the quality of the market’s participation.
When the sentiment signifies a value that is below 20 it states the fear has held the market and the asset is being sold indiscriminately. An extreme selling signifies a turnaround and said to be an entry point that is good. While on the other note a value that is above 50 indicates renewed buying the interest for the coin. The high bullish level states the exuberance and is said to be an exit point that is good to make profits and a contrarian indicator, it is indicated to have no match for crypto fear and greed index.
Trending lines indicates the basic concept of crypto charts. A trend line is stated to be a straight line that connects the two price points and signifies resistance and support levels on the chart.
Downward trending line: It consists of a downward slope and is created by the joining of red candlestick’s upper shadow and if the price is below the downtrend line it signifies bearish trend.
Upward trending line: It consists of a positive slope and is created by the joining of green candle’s lower shadow and the line states the support levels and the movements above the upward trend line signifies bullish trend.