Reading Charts

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Overview

A common problem new traders have is knowing the right time to enter or exit a trade. Having the right knowledge and skills to read charts can be an art for an expert – but just knowing the basics can make a world of difference for novices.

The aim of trading is to capitalize on the chance to buy bitcoin when the price is low and sell when the price is high. In other words, buying bitcoin at a low price means that you pay a low amount of fiat currency for a high amount of bitcoin. If you can do this successfully, each trade will increase your bitcoin without the need to buy more bitcoin with additional cash. It is a good way to accumulate more bitcoin, but it requires that you learn the basics.

Candlestick

Candlestick charts will tell you a lot about the trend of the market along with keeping track of the price. Candlesticks come in different shapes and forms. Each candle formation is a great way to get information to help you predict the future of the price. The candles can be adjusted to time frames that best suit your trading. They can be set so that each candle can represent 5-minute, 15-minute, 1-Hour, 4-Hour, daily, weekly, and monthly. The height of each candle represents the price at the open and close of the chosen time length. Candles also come in two different colors, usually green and red. Green tells the trader the price increased and is considered bullish during the time given frame of the candle. A red candle tells the trader just the opposite that during the time frame the price went down and was bearish. Take your time and do your research to learn how to read and use all the different types of candles.

Tone Vays offers a quick reference on Technical Trading and what you need to know.

Volume Chart

Another helpful tool you will find is the volume chart. Instead of candles, the volume chart is represented with bars. Each bar shows the amount of volume present during the given time of the represented candle. A green bar tells the trader there is an increased interest in the coin and the size of the bar tells the level of buying pressure. A red bar tells the trader just the opposite.

Fibonacci Extension

This useful tool can be used to help you see counter-trend opportunities and possible reversals of price. There are normally two things to look for when using this extension to track levels. When the trend line and correction line form three swing points of reference, the Fibonacci extension can be used to find possible price reversal points.

Money Flow Indicator

This chart was developed by a well-educated trader by the name of Marc Chaikin that is similar to the classic volume chart except it measures the accumulation and distribution of institutional money. It keeps track of when the institutional traders are selling and buying. This can give the trader a good idea of how strong or weak the upward or downward trend is.

Pros Of Long Term Trading

Less stressful than short term trading. No need to babysit your positions. You can relax and look forward to future market conditions. You can take advantage of compounding by taking the gains and investing them back into the market for larger returns. Long term trading can also give you breaks on taxes.

Fear And Greed Index

This chart takes all the information available to measure the emotion of the market. Coin prices can be driven down when fear in the market is high. When greed is in charge the coin price can be pushed up and overpriced. Traders use the chart to help them decide when to enter the market. Some skeptics will dismiss this index as a sound tool because it pushes a market timing strategy rather than buy and hodl.

There is a wide variety of charts available that can help you get the information you are looking for to help you determine the right time to enter the market and execute trades. Successful traders depend on these to stay on top of market trends and fluctuations.

 

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