How To Read A Bitcoin Price Chart Correctly

Newcomers to crypto are often unfamiliar with the wild world of finance. The lack of barriers to entry and the “anything goes” lack of regulation means the less experienced often plunge head first into crypto and that can be risky.

For example, falling for the recommendation to HODL rather than sell or set a stop loss, is one of the biggest mistakes and traps investors fall for. Instead, learning how to read a Bitcoin price chart can help investors know what to do themselves, rather than having to rely on the advice of a so-called analyst or influencer who only cares about their own bottom line or follower count.

What Is A Price Chart?

Those zig-zags, squiggly lines, or red and green candlesticks all provide a wealth of data that tracks time and price. It also can provide information on the open, high, low, and close of each trading session, depending on the timeframe being looked at.

Price charts first and foremost feature a ticker symbol representing the trading instrument or trading pair. The most popular trading pair in cryptocurrencies, for example, is the BTC/USD trading pair.

How To Read Bitcoin Charts

In this trading pair, the price of Bitcoin valued in USD is the primary measure. From there, different time intervals can be set across minutes to days, to weeks and months If the price moves up, so does the line or the green candlesticks. If the price declines, the line moves down to follow or a red candlestick will appear.

These candlesticks can also give additional information when they appear in certain patterns, as we’ll explain next.

Advanced Bitcoin Chart Patterns

Chart patterns aren’t exclusive to Bitcoin or other cryptocurrencies and work in any financial market. These patterns have been studied for decades with accurate results and have a history of statistics in which to draw probabilities from. Here are some common Bitcoin chart patterns that newcomers might want to learn to predict markets.

Japanese Candlestick Patterns

There are too many of this type of pattern to list them all, but these are as simple as one, two, or three Japanese candlesticks in a row. How the series of candles close and what the open, low, high, or close is compared to the rest of the candles in the set can provide bullish or bearish signals.

Triangles

Triangles can be tricky to trade, and often change shape or experience false breakouts. Symmetrical triangles are notorious for this. Two other types of triangles exist, and are ascending or descending depending on the support or resistance lines of the triangle. These are more reliable and lead to bullish or bearish breakouts.

Wedges

Wedges are surprise moves that build in one direction, only to reverse violently in the other, wiping out the levels of support and stop losses built below or above.

Rectangles

Rectangles are the most painful type of patterns, as it often means long drawn out consolidation phases. These sideways phases move within a tight trading range. The only positive about rectangles is they provide an opportunity for scalping, and when the range breaks it is often undeniable and therefore a signal to take a position.

Head And Shoulders

These patterns also work in inverse and are three peaks or troughs in a row, with the middle movement being the largest. These moves represent a tug of war between buyers and sellers, and when they confirm, can yield strong results.

Parabolic Curve

This is the price pattern crypto investors want to see most, and is a signal to go heavy long at each retest of support for the most possible gains. When Bitcoin price begins to go parabolic, it means the price is increasing exponentially and could rise hundreds of percent in a short time.

The most important thing to note when Bitcoin goes parabolic, is to know when to get out of the trade. As people have learned the hard way recently, when parabola is broken, assets can fall as much as 70-80%. This is why HODLing too long is a bad thing.

Conclusion

Rather than HODL your way to losses, consider registering for the award-winning CFD trading platform PrimeXBT, where investors can go long or short Bitcoin and other trading instruments. There are also a variety of technical analysis tools to chart these patterns mentioned here to increase the chances of success.

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