Every day, new cryptocurrencies are entering the market, existing digital coins are being introduced in different exchanges, and more Initial Coin Offering (ICO) projects are coming up with exciting facts and figures.
Whether you are a day trader or want to start investing in cryptocurrencies, learning to read candlestick chart is very important for your investment decisions.
What Exactly is a Candlestick Crypto Chart?
It is very similar to a standard line chart where you can see the closing price, opening price, and the highest and lowest prices of a particular coin during a specific time frame. The action of the asset during a specific period is illustrated by using a candlestick chart.
How Can It Help You in Trading?
Learning to read candlestick charts can help you in three main ways in the crypto market. First, it shows whether your coin is currently increasing or decreasing. If you want to know whether its value is increasing or decreasing, then a candlestick chart can help immensely.
Secondly, you can see the strength of a particular cryptocurrency by monitoring its time frame. If you want to know its strength, monitor the market for some days and study the candlestick chart.
Finally, if you are interested in short-term trading, this is one of the best tools you can use. As a day trader, if you are interested in building a long-term position, you will have to build a core for your investment by analyzing the candlestick chart and developing a strategy.
What Factors Should You Consider?
Here are some of the essential factors that you must keep in mind to enhance your knowledge about candlestick charts.
- The color of the candle at its opening and closing time is very significant. If it is red, then it means that there was a massive drop during that particular period; however, if it is green, then that means that there was a substantial increase in the price of that digital currency.
- The length of the wick on both the top and bottom shows whether the coin has closed significantly higher or lower than its opening. If you see long upper wicks, this implies that sellers could not capitalize on their gains by closing their positions.
- The size of the candlestick’s body also indicates whether prices increased or decreased during that period. If the size of the body is small, then this implies that the market’s volatility has reduced.
- If there are consecutive candlesticks with short bodies and lengthy wicks, it means that there has been a considerable increase or decrease in the price of an asset. It would help if you considered these changes as necessary signals to figure out your next trading decision.
You need to consider many essential elements if you want to generate substantial profits from these charts. Remember, practice makes perfect, so try to study different charts and start using this information in your daily trading routine.
If you do it right, being able to read candlestick charts will give you a huge advantage when it comes to crypto trading. It is also a valuable skill to have and will help you with all kinds of trading.