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How to Read Crypto Charts - Chapter 4

Sasha DiMarsico
7 min read 16.06.2022
Blog

The market looks terrifying during the last few days, but as some financial advisors say - "it's black Friday's sale but for Crypto." Whether you are among those who sold all crypto assets in panic or among the brave holders, let's complete  our journey  of crypto charts. 

 

To further understand the Dow theory we touched upon last week, it is essential to remember that it has six tenets: three market movements and three market trends.

 

The Movements of the Market

There are three types of movement in the crypto market that the Dow theory indicates:

 

The primary movement. This is a major move because it indicates a strong and prolongs trend in the crypto market. This movement can run for less than a year or even cover two or more years and can be bullish or bearish.

The second movement. This movement indicates a medium swing in the crypto market that can last from ten days to three months.

The third movement. This movement is called a short swing. It is minor because it indicates a market move that ranges from a few hours to a month, and in some cases more.

Three Phases of Market Trends

The Dow theory emphasises three phases in a market trend.

 

Accumulation Phase

This phase occurs when there has been a steep fall in the price of a cryptocurrency in the market. The fall is often so great that many investors just want to sell off to cut down on their losses as much as possible. 

 

But it is at this point that intelligent investors step into the market. They begin accumulating as much of the cryptocurrency as they can which will be in generous supply because of the price fall. 

 

You will not notice any price changes here because the ratio of buyers to sellers is quite small. Most of the investors in this phase are looking at long-term profitability. An accumulation phase can last for several months and even longer.

 

Markup Phase

This phase is when the rest of the market begins to follow the intelligent investors. This phase comes with a sharp rise in the price which will get the attention of the general investors. They start following the trend. There is a growing rush to invest because of the prospects and a great deal of speculation.

 

Distribution Phase

In this phase, the crypto market looks to be at its all-time high. There is a strong public sentiment and this makes more and more people eager to invest. But this is the peak of the trend. At this point, the intelligent investors begin slowly selling off the cryptocurrency they accumulated in the accumulation phase. The public absorbs and buys them and this creates great price support and profit for the intelligent investors.

 

The peak is when the intelligent investors have fully sold off all the cryptocurrency they amassed. This creates a vacuum for price support and what follows next is a total market sell-off which leaves much of the public confused at the sudden decline. As the decline continues, the entire process from accumulation to distribution repeats itself.

 

 It's in this cycle that we can readily see the action of support and resistance levels.

 

Support and Resistance Levels

 

Now it is important to understand two important levels in crypto trading. They are the support and resistance levels.

 

Support Level

A support level is when the crypto price does not fall at a certain limit. It is a level where buyers find the price good enough to purchase and the sellers are comfortable selling at the same price. 

 

Resistance Level

The resistance level is the opposite of the support level. It is the point where the price of crypto in the market stops rising. It is a point where buyers do not feel inclined to buy at the current price and the ones who bought the cryptocurrencies are willing to sell at the current price.

 

The Best Crypto Chart Analysis Tools

There is so much that goes with crypto trading. There must be room for constant learning as the market continues to evolve and expand. But also, it is important to have the right tools to analyze crypto charts so you always get the best out of your trading experience.

 

Here are some of the best crypto chart analysis tools you can use today in making your crypto trading more effective and seamless.

 

TradingView

Probably the most popular crypto chart analysis tool for traders of the market, there are now great integrations on the platform with the most popular cryptocurrency exchanges like Coin base Pro, Neuron Ex, Binance, Abra, and BitMEX.

 

The TradingView platform has great options for both free and premium users. If you are new to cryptocurrency this is a great place to learn the ropes and get yourself ready for the more advanced trading.

 

Coinigy 

Another well-known technical analysis tool is Coinigy. With a lot of features designed to help traders plan and execute their trading strategies, the Coinigy platform offers a charting service built on the TradingView platform. The difference however is that Coinigy has a data feed that integrates over 45 cryptocurrency exchanges.

 

CryptoWat.ch 

CryptoWat.ch is a great platform with a well-rounded charting tool. The platform has a great live stream service that connects traders to the price and volume of over 700 exchanges. 

 

The platform is one of the easiest to operate and with great visuals, it gives traders a great experience. However, it doesn’t have a lot of indicators as some of the other platforms

 

Conclusion

As a trader, it is important to have a strong foundation in the technical analysis of crypto trading. If you are new to the crypto market, don’t feel rushed to get in on the action. As we’ve seen already, there will be changes in the market and history will repeat itself because the market is cyclical. The important thing is to learn as much as you can and Banxe is here to make your journey as smooth as possible. At Banxe you can conveniently buy and sell 500+ cryptocurrencies with minimal market commissions, while keeping your cryptocurrency safe and secure.

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