Understanding Crypto Price Charts

The pattern created by the ever-changing price of a cryptocurrency asset can be an indicator of what could happen next. The fluid prices, which reflect the sentiments of buyers and sellers, can be seen in a price chart.

Your challenge comes, as a trader, when you try to understand and interpret the information of the price chart and use it as part of your technical analysis to try and predict the direction of value.

The Basics

Looking at a price chart in its most basic form, you will see a line graph on two axes illustrating price history for trades conducted between a specific pair of currencies.

Trading pairs are offered against base currencies - currencies which are the most liquid. As there are thousands of cryptocurrencies, enabling trading pairs between all of them and all fiat currencies would be impractical. Instead, exchanges offer trading against base currencies which are generally:

• Major Fiat currencies
• Bitcoin
• Ethereum
• Major Stablecoins

Common trading pairs you may see include:

• EUR/BTC - Euro to Bitcoin trade
• USD/BTC - US Dollar to Bitcoin trade
• BTC/EUR - Bitcoin to Euro trade
• BTC/LTC - Bitcoin to Litecoin trade
• USDT/BTC - Tether to Bitcoin trade (Tether is a stablecoin)

When you watch a trading chart you will see what the price is at that moment for the chosen pair. It will turn green as it goes up, and red as it goes down.

The chart is relative to the context of the specific trading pair and the key elements you will see include:

• The currency pair it relates to
• The x-axis which is a time scale
• The y-axis which is a linear value scale e.g USD
• Price plots, which are generated over time producing a line chart and spot price

The movement depicted in the chart is specific to this currency pair.

Logarithmic Scale

Dramatic changes are visible when you look at an asset’s price changes. Switch to a log scale, where the Y axis plots two equal per cent changes as the same vertical distance on the scale, and you get a different perspective.

Time and Candles

Remembering the difference between trading (short-term decisions) and investing (long-term positions), you need to decide what timescale you are operating in.

A chart will let you change the timescale it reports on, so you can look at a short period, for technical analysis, or a longer period.

For a more detailed view of price movement, you will need Candlesticks (or Candles – so named because of the shape). Through four key elements - the top and bottom of the candle body and a wick (thinner line) above and below - a simple line plot is fleshed out with much more detailed information about what happened to price over a period, rather than the single plot.

Price Direction

For easy reference, a green candle shows a price went up during the chosen period while red indicates the price fell.

This means a quick glance can, thanks to the colour, show you price direction. However, you got this with the simple plot chart, so what’s the benefit? Candlesticks fill in the gaps of how prices oscillated during the period.

The Opening Price - Each candle will tell you where the price opened. If the price increased during the chosen period, the Opening Price is shown by the bottom of the candle body. If the price fell, the Opening Price is at the top of the candle body.

The Closing Price – The reverse of Opening Price. If the price fell during the chosen period, the bottom of the candle is where the price ended for that candle duration. If the price rose, the Closing Price will be at the top.

The Highest Price – You want to know how price moved, by knowing the highest point it reached. This is shown by the tip of the wick at the top of the candle. Where price has increased over the period, the wick will extend from the Closing

Price - top of the candle body - to the highest price reached.

The Lowest Price – As you’d expect, this is the converse of Highest Price, showing the lowest price that was reached with a wick extending from the bottom of the candle.

Candle Duration – In the trading charts that are interactive, you can zoom in and out to look at different periods of time.

As you look at the candlesticks more, you’ll begin to understand what they are telling you. Basically, the longer a candlestick, the more the price has moved during the period you are looking at. The longer the wicks, the greater the range of movement, known as Volatility.

Looking at price movement with the aid of candlesticks is a step toward technical analysis, giving the first layer of detail of price signal and pattern.