Are you looking to invest in crypto? Whether you are in it for the long-term or not, knowing when to invest – and also when to sell – is important for saving money on your initial investment and turning a profit later on.
The best way to do this is by using cryptocurrency charts.
Similar to stock charts, cryptocurrency charts provide analytical information on the movement, trends, prices, and more of the different types of crypto over a given period of time.
Crypto charts can be used to understand when to buy and when to sell, but also what cryptocurrency to invest in and where.
If you have never used a crypto chart or stock chart before, it can seem confusing and overwhelming.
But once you know what to look for and analyze, crypto charts do not have to be that difficult.
This guide will explain how to read crypto charts for beginners – including the best crypto charts to use, what to look for in a crypto chart, and how to analyze cryptocurrency.
What Causes Cryptocurrency Movement?
First of all, it’s important to understand cryptocurrency movement.
Crypto movement refers to the change in price and value of a given cryptocurrency over a set period of time.
Value refers to the intrinsic worth of a crypto, while the price is what you actually pay, depending on a variety of ever-changing factors.
So, what causes cryptocurrency movement to happen?
Like stocks, cryptocurrencies are volatile, which means their prices fluctuate. This is all due to supply and demand.
Demand is not always the same and can change in an instant, which causes the constant rise and fall of crypto prices.
As a result, the goal of investing in crypto to make a profit is to predict positive movement based on chart data so that you can buy cheap right before a boom in demand that increases its value.
What Is The Best Crypto Chart?
The first step to using cryptocurrency charts is to choose one based on your preference.
Crypto charts are fundamentally the same in terms of what they do, but they can have different UIs, tools, benefits, and customizable features.
Overall, choosing the best cryptocurrency chart is a matter of preference depending on the tools you want to utilize and the general appearance and ease of use of the UI that you find beneficial to you.
You might want to start with a free, beginner-friendly crypto chart to begin with before switching to a more advanced crypto chart in the future once you become familiar.
If you are using a cryptocurrency exchange, it might have its own crypto chart.
One of the best free cryptocurrency charts is Cryptowatch. For beginners, CoinMarketCap is also a good option for learning the ropes.
Others you might want to consider include Coinigy, CryptoCompare, Shrimpy, Blockfolio, and Investing(.com).
How To Read Cryptocurrency Charts
So, how do you read crypto charts?
Cryptocurrency charts are candlestick charts, the same kind of chart used in stock charts.
They get their name from the candlestick-shaped bars that represent the price of a cryptocurrency within a given period of time and whether the price increased or decreased.
If you look at a crypto chart, you will see green and red candlesticks.
Green candlesticks show an increase in price and demand (upticks), while red candlesticks show a decrease in price and demand (downticks).
The horizontal axis of a crypto chart represents time and the horizontal axis represents value.
The candlesticks, therefore, show the overall movement of a cryptocurrency, along with historical trends and patterns, depending on the timescale selected, which can be anything from months to minutes.
At the top of a crypto chart, you will see the selected cryptocurrency, local currency, and the cryptocurrency exchange the prices are being sourced from.
These can be changed to provide the data you want to see.
Overall, these are the basics of how to read a crypto chart when first looked at.
How Do You Analyze A Crypto Chart?
Now that you have a basic idea of what you are looking at on cryptocurrency charts, how do you analyze crypto chart data?
If you’re investing in crypto, you’re most likely looking to make a profit.
And, at its most basic, the key is to invest in crypto when the price is low due to low demand, right before an increase in demand and, as a result, price and value.
Of course, we cannot predict future demand, but we can use crypto charts to analyze trends and patterns (technical analysis, using technical indicators) to get a general idea of when to buy and, subsequently, when to sell.
In stock investment, these are known as bullish trends and bearish trends.
A bullish trend refers to increases in demand and price (peaks), while bearish trends refer to decreases in demand and price (falls).
Analyzing crypto charts all comes down to analyzing the overall pattern of upticks and downticks over time to invest right before the next bullish trend.
How Do You Know When To Buy And Sell Crypto?
Through technical analysis of crypto charts, it’s possible to get a general idea of when to buy and sell.
As mentioned above, the aim is to predict a peak in demand and invest right before that happens.
Like any investment, the rule of thumb is to buy low and sell high.
So while the data might show that a cryptocurrency is low in demand and price, this is, in theory, the best time to buy.
Of course, this is still a gut decision, or gamble, that relies heavily on the belief that demand and value will increase.
It is possible to buy at peaks and still make a profit if the demand increases, but returns will be small and ultimately not worth it if you are looking to make maximum profit.
As for selling, you can sell when the value has increased and you feel that you have made a significant profit.
You can buy and hold one or several cryptocurrencies over a long period or employ active trading, which refers to regular buying and selling typically for smaller, more frequent profits.
In either case, the goal of crypto trading is to always sell higher than what you invested into a specific cryptocurrency.
Reading crypto charts involves many more technical indicators, tools, and analysis methods than what this beginner’s guide explained, but the above involves all the basics if you’re new to cryptocurrency and looking to get into crypto trading.
Now that you have a basic understanding of cryptocurrency charts, try out different crypto charts and have a look at the different tools, parameters, and UIs that each has to offer.
Analyze short-term and long-term trends over time and consider when you might invest in the future.