The world of digital currency is a very volatile one. Many factors have been discussed as being the cause of this volatility. It includes theft, fraud, market manipulation, and government regulation.
But how do you predict whether or not to buy or sell at a particular time? How can you tell if the online market is going up or down? One way to address the issue is by reading candlestick charts.
What Is A Crypto Candlestick Chart?
Crypto candlestick charts are widely popular among online traders. According to Forbes, cryptocurrency experts have predicted that bitcoin will overtake the US dollar as the dominant form of global finance by the year 2050.A candlestick chart shows you how much has been traded during a set period. It can range from one hour to 24 hours.
A candlestick chart helps you find out crucial information like opening price, closing price, highest price, lowest price, and so on. It is used in all financial markets and can be applied to both cryptocurrency charts and stock charts.
How Does Candlestick Chart Work?
If you prefer reading candlestick charts, you must understand the four main parts of the chart.- The open
- The close
- Lowest price
- Highest price
How do these four parts work together? You can look at the following example.
A red box indicates that there was an opening price of $18,000 for one bitcoin. At 11 AM, the green box indicates that the highest price recorded for that day was $17,900. When the market closes for that day at midnight, the blue box indicates one bitcoin would have been worth $17,900.
If you had purchased one bitcoin on 1/20/2018 at market open (red box) and sold one bitcoin 12 hours later (midnight blue box), you would have made a profit of $100 (green box is your highest recorded selling price).
The above example is rather basic, and more information can be gleaned from candlestick charts.
Features Of A Quality Candlestick Charts
There are many good candlestick charting programs in the market. If you are utilising an automated trading program, studying the charts manually isn’t necessary. So, here's what makes a quality candlestick chart.- A clear division between each candle
- Standardised colour coding (red for down days and green for up days)
- Visible volume bars
- Visible open and close prices
- Visible highest price and lowest price
If all of these conditions are met with your chosen crypto candle chart, it will likely be a very high-quality one. Moreover, if you’re aware of how to read candlestick charts, this will also go a long way in guiding you to make the right trading decisions.
The above condition can also apply to the traditional stock chart.
Cryptocurrencies are still a new concept for many online traders. Hence, it would help if you remembered that the standardisation of candles and terminology is not as widespread as within cryptocurrencies.
If you are trying to invest in cryptocurrency trading for long-term benefits, it is crucial to understand the basic patterns of the candlestick charts.
It is the best way to keep an eye on the volatile digital currency market.
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