It’s important to look at price charts to find the best trading opportunities in the cryptocurrency market. As a first benefit, technical analysis aids investors in recognizing market patterns. This gives them a chance to predict how an asset will change in the future.
There are essentially two methods for predicting the price of a cryptocurrency. The fundamental analysis is a method used to assess the value of a security based on how much its creators believe it is worth. Then there’s technical analysis, which looks at the volume and price movements of an item statistically. Analysts and researchers use these ways to study and predict how the value of cryptocurrencies will change.
First, let’s explore the various interpretations of cryptocurrencies.
Fundamental Analysis for Cryptocurrency
If you want to know everything there is to know about a crypto asset, you should do a fundamental analysis. Fundamental analysis’s primary objective is to determine a cryptocurrency’s value by considering both quantitative financial statistics and qualitative indications.
By examining a crypto asset’s fundamental value and contrasting it with its present value in the marketplace, you may determine if it is undervalued or overvalued. A good time to buy an asset can be when it’s undervalued, while a good time to sell one might be when it’s overpriced.
Do you think a meme currency like Dogecoin has any actual value? “That’s not to claim dogecoin has any intrinsic worth,” said technology entrepreneur Mark Cuban. Not at all.
But, we may improve our selections by using fundamental analysis methods. What precisely is a dogecoin? The lack of concrete revenue models, such as a plan, development staff, or even a white paper, is just the beginning.
With a market cap in the tens of billions and a 24-hour volume in the hundreds of millions, it is still one of the most well-known cryptocurrencies. Its usefulness is demonstrated by the fact that even Mark Cuban’s NBA franchise, the Dallas Mavericks, accepted it as payment for tickets. It is clear that it has value on its own as many other businesses such as online casinos now allow for players to wager with cryptocurrencies. This allows for an avenue to earn money and make profit.
Based on theoretical analysis, Dogecoin might be expensive at $1, but if you buy it today, $5 might be a great deal.
Data essential for doing a fundamental study:
- Market cap
- Total worth locked
- Team associates
- Community size and engagement
- Rate of network development
- Use case
- Rate of acceptance
Technical analysis for Crypto
Technical analysis studies previous price movements to determine the market’s future course. Here, you get to know if the cryptocurrency asset is rising or falling. Technical analysis determines the likelihood of various outcomes using a wide range of statistical patterns and signals. Despite using these metrics, traders still rely heavily on charts to identify crucial indicators like support and resistance. The timing of purchases and sales is also decided upon using technical analysis.
It’s important to keep in mind that traders who use technical analysis never presume to be correct all the time. In fact, a trader can make a ton of money even if they are only right 55% of the time. These traders take risk management steps to prepare for the potential that the market would move against what their indicators predicted, such as setting up auto sales and investing only a portion of holdings on a single trade.
Prevalent tools of Technical analysis
- Moving Average (50,200)
- Moving average convergence divergence (MACD)
- Relative Strength Index (RSI)
- CrossoverOn-balance volume (OBV)
- Bitcoin price Simple Moving average (SMA)
Now that we’ve discussed that, we can move on to discussing what bitcoin price charts are and how to interpret them.
How to Read a Bitcoin Price Chart
There are a number of methods for presenting the price chart of an asset such as a currency pair, stock, or cryptocurrency. Price charts often use three types of graphs. There are line charts, bar charts, and candlestick charts. Candlestick charts, however, are generally preferred by traders. This is because it can show great patterns that can predict when a trend will change. It also shows trend continuation patterns with some degree of accuracy.
A candlestick pattern is a picture of how the price of an asset changed over time. It can be used to predict what will happen on the market in the future. Traders found that when certain patterns appeared on a candlestick chart, the price often followed suit. Because of this, they took the patterns and put them into different groups so that they could be used in technical analysis. But what exactly is the purpose of a candlestick?
Candlesticks have been around for quite some time. In the past, they were first used in China 400 years ago to figure out how the rice market was doing during wars. It is now common practice to use them when analyzing the value of a coin or other investment.
With a candlestick chart, one may see how the value of an asset has changed over time. On candlestick charts, each candlestick represents a period of time that the trader has chosen to focus on. This can be per minute (M1), hourly (H1), daily (D1), or monthly. If you use a D1 chart, for instance, each candle represents one day.
Although most historians and experts think that a Japanese rice trader came up with the idea of candlestick charts originally. Yet, “Japanese Candlestick Charting Methods,” a book written by Steve Nison, brought the concept of candlesticks as an abstract to the West.
Here are a few of the most crucial aspects that make the price analysis and the use of candlesticks easy to grasp.
The “body” is an asset’s open and close prices. Whether the price action of the candlestick indicates bullish or bearish momentum for the period, the open and closing points will be located accordingly. If the market is bullish, the closing price will be higher than the opening price, and vice versa.
There are usually two “shadows,” or wicks, in each candlestick; however, this is not always the case. The high and low points of a pricing range are represented by the two shady areas. So, the upper shadow represents the highest point reached by the price, and the lower shadow represents the lowest point reached. On occasion, you may be able to make out one of the shadows. This occurs when the open and close are at the same price.
The direction of price change is depicted by the body’s color. A green (or white) candlestick body typically indicates an upward trend in prices, whereas a red (or black) one indicates a downward trend. On most stations, you should expect to see green and red bodies. If the body is green, then the price at which trading ended is shown by its peak.
How Does Candlestick Work in Trading?
The candlestick chart provides the most information about a security’s price than any other type of chart. The cryptocurrency trading community adapted this chart style from the stock and forex markets. In contrast to a line chart, which only shows the closing price, a candlestick chart’s structure lets you see a lot of information about how the price moved in the past.
Even if you don’t have any technical indicators, a series of candlesticks can help you figure out the main trend and where the lines of resistance and support are. Also, they can form patterns that show whether it’s a good time to buy or sell. Cryptocurrencies, due to their extreme volatility, are a perfect use for the candlestick chart.
What Do Candlesticks Tell Us?
Price fluctuations aren’t the only thing that candlesticks can tell you. Patterns help experienced traders figure out the mood of the market and predict how it will move. Among the many things they seek are:
For example, if the wick at the candle’s base is particularly long, it could suggest that investors are buying low and selling high, signaling that the asset’s price is about to rise.
A candle with a long wick at the top, on the other hand, could mean that investors want to cash out their gains, which could cause the price to drop quickly.
If the candle’s body takes up most of the candle and the wicks are very short or nonexistent, this might be seen as a sign of extreme optimism (for a green candle) or pessimism (for a red candle).
Technical analysis is a way to trade in which traders try to find patterns and possible future outcomes by looking at how prices have moved in the past. One part of technical analysis is learning how to read candlesticks in the context of a particular asset or a set of market conditions.
Best 5 Types of Candlestick Patterns
Many other candlestick patterns exist, but here we’ll cover the most common and dependable ones. First, there are bullish patterns, which show up after a downtrend and signal the beginning of a new uptrend.
Crypto traders frequently enter long positions when the following patterns appear:
The hammer candlestick has a short upper body and a very lengthy lower wick. Generally, it can be found at the end of a downward trend. The trend shows that buyers were able to keep sellers away during that time, which caused prices to go up. It’s possible to see hammer patterns with both green and red candles. Most times, the former indicates a more robust rise.
Those familiar with the hammer pattern will find the inverse hammer to be very familiar. It deviates from the typical hammer in that its upper shadow is much longer and its bottom wick is much shorter. This chart pattern shows that there was a push to buy, and then bears tried to pull the market down but failed. As a result, returning customers exert greater pressure, driving up prices.
The bullish engulfing pattern is made up of two candlesticks instead of just one, like the two patterns that came before it. A much larger green candle should eventually consume the smaller red candle that was initially lit. The second candle starts at a lower level than the first, but there is more buying pressure, and the trend turns up.
The piercing line is a second candlestick pattern that often shows up at support levels or at the bottom of downtrends to show that the market is about to change direction. Long red and green candles make up the motif. The significant divergence between the red candle’s close and the green candle’s opening is this pattern’s most significant characteristic. The green candle’s substantially higher opening price indicates buyer enthusiasm.
The morning star is a more complicated design with three candlesticks: a long red candle, a short candle, and a long green candle. In most cases, the shorter candles will not touch the longer ones. With the market opening higher, it seems as though the selling pressure from the first session is ebbing and a bull market is taking shape.
Where to Access Cryptographic Price Charts
While some providers provide access to more detailed charts, others only offer simple charts. There are, however, a few good ones you can access in markets.
Coinmarketcap.com is one of the more useful ones for reading bitcoin price charts and is a helpful service for seeing basic price charts. As of the time of this writing, there are over 9005 coins’ prices available on Coinmarketcap.com.
Coinmarketcap is the place to go to get a sense of a coin’s performance over time. But the charts on Coinmarketcap won’t give you all the data you require in detail to decide on an investment.
Trading View is the best option for complex charting needs. If you’re looking for stock charts for any asset, Trading View has you covered. Trading View’s free version has everything you need to start analyzing the btc market, including a wide variety of charts and analytical tools.
After this primer on bitcoin price charts, it would be wise to keep tabs on bitcoin’s value on a daily basis. Some patterns, likely the trending behavior of prices, may stand out to you as you study the charts.