Why is finance all about charts? They make excellent visual material to demonstrate how prices change in the given timelines. There are several types of charts on the crypto websites; let's learn how to read them.
It's the simplest type of chart. It shows only two features, a certain period of time and the closing price. It cannot show any information beyond the limits of the taken time frame, and it's a significant drawback. Different platforms may provide different time frames to analyze. They can be counted in minutes, hours, or even days. Which time frame to choose? This depends on the strategy of the work you choose for yourself. To nail it better, you can use several different time frames to have a better idea of what's going on.
This type of chart will give you more information than the previous one. The linear chart consists of two vertical lines and many dots connected between each other so that you see the dynamics. The bar consists of multiple lines. They show how prices change in different time frames. Each line represents four prices – maximum, minimum, opening price, and closing price. It's a better demonstration of the price's fluctuation that allows you to evaluate the volatility level and the price gaps.
Crypto traders love this type of chart. It includes four prices, just like bars do, but shows them as a vertical rectangle. This is why it's actually called a candlestick, because of the shape resemblance. There can be a bull candle and a bear candle, depending on the correlation between the opening and closing prices. The bull candle has a green color and occurs when the closing price is higher than the opening one. In the opposite case, we can see a red bear candle. It's a perfect demonstration of the market trends as well. Big bull candles can tell us that people buy a lot, bear candles stand for massive selling.
Vertical lines above and below the candles matter too. They are called shadows and their lengths show the difference between the maximum and minimum price (upper and lower shadows accordingly) or between the closing and opening prices. It depends on the type of candlestick we analyze.
There is also a special type of candlestick called Doji candle. It has a very small body because it reveals the situation when the opening and closing prices are almost similar. If we see this type of candle, we can say that the mood on the market is neutral. If we'd want to determine whether the trend is bullish or bearish, we'd have to analyze either the previous or future data. When a Doji candle appears, we are not able to make conclusions about the trend.
Here a lot depends on the time frame you choose to operate within. There are the following trading strategies within different time frames.
Scalping is a sprint run; you hold your position for no longer than one hour. The most popular time frames for scalping are 1,5 and 15 minutes.
Intraday traders hold their positions somewhere between one hour and one day. Sometimes a 30-minute time frame is used in this strategy, but 1 and four hours are used more often.
Here the positions can be open from one to four days. Sometimes you can use an hour time frame within this strategy.
You can see by its name, it's more about making an investment than aiming to earn quick money on short-term trades. Long-term positions are held for many days and even weeks.
Charts may look difficult for understanding but only until you dig a little deeper. In fact, it's a very convenient and informative tool for crypto traders. They help to build strategies that lead to success. You can find more information about trading in our blog and check the latest news on our Facebook page.