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Crypto trading charts

Crypto trading charts are visual representations of an asset’s price data while charting software is the graphical interface through which traders analyze that data and paint over charts. These platforms display the price movement of an asset over the course of its history.

Chart type selection

They display prices as candlesticks, lines, or bars. Charting platforms have tools which the trader uses to paint over the chart and identify meaningful patterns that impact the asset’s price action.

In the example below, I use a trendline to mark the highs of Bitcoin’s daily candlesticks. Since the asset seems to react to this level, I can bet that it will continue to do so in the future until Bitcoin breaks the resistance.

chandlestick chart
Candlestick chart

Drawing trends as above, can be useful for determining your buy, sell and stop-loss levels.

In another example, I used the Fibonacci extension tool to connect the lowest and highest price point of a given time frame and project all the levels that will act as resistance or support.

Fibonacci levels on a chart
Fibonacci levels on a chart

A charting platform can be as simple as a website that shows the price of an asset over the course of its history. However, advanced charting platforms enable you to conduct trading analysis in any shape or form. They offer indicators, charting tools, alerts, paper trading, and can even run scripts.

All exchanges come with a chart for each trading pair they offer, but if you want to be serious about technical analysis, you must setup a dedicated charting platform. Choosing the platform fit for your needs depends on what you actually search for in a charting app. Do you need the bare minimum or are you looking for somewhat advanced options? Are you only interested in charting or do you want to execute trades with the app as well?

Crypto traders mostly use TradingView, but there are other alternatives to try out:

Being the most popular and easiest charting platform, I will use TradingView to show you examples of TA. TradingView is an advanced market tracker, charting platform, and social network for traders and investors. You can use it to chart assets from both legacy and crypto markets. Although the platform has a subscription based model to keep its services up and running, you can use the free demo version for 90% of your trading needs.

Understanding Candlestick Charts

Price data is visualized through candlesticks. These candle-shaped objects represent price information stored in a unit of time which we call a time frame. Prices move up and down constantly but we have to aggregate the information into a more coherent form to provide any meaningful information.

Candles have four main components from the OHCL system:
Open, High, Close, Low.

How candlesticks are shaped / meaning of candlesticks
How candlesticks are shaped / meaning of candlesticks

The candlestick has a body and shadows. While the body shows the open and close price, the shadow refers to the highest and lowest point it reached. Sometimes we refer to highs and lows as wicks. Note that the candlestick is red or green depending on whether it closed higher or lower than the previous candle.

Other crytpo trading charts formats include: bars, lines, Renko, and Heikin Ashi. Although their differences are primarily aesthetic, they differ by the amount of information they provide.

Bar charts are similar to candlestick charts, only that they use horizontal lines to depict the opening and closing price. The opening price has a small line to the left while the closing price has a line to the right. Bars use the same OHCL model, but place greater emphasis on the difference between the closing and opening price.

Bar chart sytle crypto trading charts
Bar chart example

Line charts provide minimal information, indicating only the closing price within a given time frame. Traders use lines to simplify the chart and view the long-term trend.

Line tpye crypto trading charts
Line chart example

Renko charts use price movement to generate price blocks rather than units of time. Once an asset moves far enough from its initial price position the renko chart creates a new Renko – named after the Japanese word for brick (Rengo). This chart type has a price size that represents the range of a price brick (e.g. $1, $20, $50). Renko charts remove noise from low time frame price movement and allow traders to see the trend more easily.

Renko crypto trading charts
Renko chart example

Heikin Ashi is another Japanese chart type that uses a modified version of the OHCL model called COHL (close, open, high, low):

  • Close = average price of OHCL
  • Open = previous bar’s middle point
  • High = maximum price point
  • Low = minimum price point

Like Renko, Heikin Ashi makes analyzing the chart’s trend much easier.

Heikin Ashi crypto trading charts
Heikin Ashi chart example

Time Frames on Crypto Trading Charts

time frames on crypto trading charts
Time frames

Time frame refers to the interval at which you trade or monitor price action. Time frames matter because they indicate an asset’s trend. However, it is worth noting that assets can trend differently at different time frames. For example, even though Bitcoin is in a down trend on a weekly time frame, it is trending up on the yearly time frame.

Time frames allow traders to pick the pace at which they trade. Day traders who quickly jump in and out of the market prefer trading lower time frames on crypto trading charts. But an investor who is here for the long haul doesn’t care about the asset’s short term performance when it’s trending up.

Choosing a time frame depends on your trading style. Day traders often focus on lower time frames (LTFs) while swing traders play with higher time frames (HTF).

Lower time frames: 1m, 5m, 15m, 30m, 1H

Higher time frames: 4H, 1D, 1W, 1M

HTFs are generally more reliable. The consensus is that anything happening at LTFs is noise and doesn’t indicate an asset’s long-term price. But as we have noted, just because it’s noise doesn’t mean that a day trader can’t profit from it.

Novice traders have a bad habit of experiencing tunnel vision when trading time frames. Even though it is preferable to stick with one time frame, traders should always observe the one above it or below it to complement their choice. If that isn’t done, you might not notice important events on the crypto trading charts. A 4H candle that seems bullish HTF might be bearish at LTF, if for example, its momentum has slowed down towards the close.