Reading Bitcoin (BTC) prices and trends is essential for trading this cryptocurrency. When you know how, you can make wiser trading decisions and predict whether to buy or sell BTC. The best way to read its prices is to understand how BTC charts work.
Bitcoin Chart
Whether the price movement is yearly, monthly, weekly, daily, hourly or every minute, you can easily predict BTC price movements through charts. Doing so can help minimize your risk, as Bitcoin is one of the most volatile digital currencies. For example, its price dropped to $34,000 in May 2021 after rising to over $60,000 in April 2021.
Therefore, you need to learn how to read charts, which is equivalent to reading Bitcoin prices and trends. In addition, you can read charts to perform technical analysis. You mainly use the asset’s price action, volume and other statistical trends to enter the market. So you can identify trading opportunities or trends when buying Bitcoin in Australia or anywhere in the world.
Two Basic Chart Formats
It is very important to know the two main formats of Bitcoin charts. Understanding them allows you to determine which chart is right for you. Here are the formats:
- Line graph
This is the most basic chart of Bitcoin and other cryptocurrencies. It shows historical price points consisting of daily closing prices of BTC depending on the time frame. The time frame can vary between years, months, weeks, days, hours or minutes. HODLer — ‘hold for dear lifer’ — is a trader who holds BTC long. They generally use a monthly time frame. On the other hand, short-term traders use a lower time frame such as hours and minutes.
In addition, the line chart has two scales: logarithmic and linear. A log chart allows you to identify trends, while a line chart helps you identify the speed of price changes. In terms of representation, the vertical shift represents a log chart shift, as you can scale Bitcoin prices with percentage changes. On the other hand, the price scale represents a line graph.
- Candlestick Chart
The second most common chart in crypto or forex trading or investing is the candlestick chart, also known as a price chart. You can use it to see BTC price movements over a period of time through candlestick figures. With this chart, you can see the price changes between the low, high, close and open.
On a candlestick chart, you can see green and red candles. Each candle has wicks and a stem. The body of the candlestick represents the opening and closing prices of the asset. Red candles indicate that the price is falling, and green candles indicate that the price is rising. This means that the close of the green candlestick body is above and the open is below. Alternatively, the close is at the bottom and the open is at the top of the red candlestick body.
The wicks of the candle extend from the top and bottom of the body and represent the lowest and highest prices that BTC has hit during the time frame.
Bitcoin Chart Components
You should also understand the components of the chart to help you read BTC prices more easily. Some of these are:
- Day high or low: You can see two numbers in this component. The figures below show the open and closing prices. Meanwhile, the lowest price to trade is the number to the left of the chart.
- Volume: Historical trading volumes can help determine whether price increases are sustainable. An uptrend usually has weaker fundamentals, and lower volume means the market is less confident. On the other hand, if there is higher volume in the market, there may be some real momentum in the price action.
- Line Color: Similar to the color of candlesticks, red and green line colors are dominant. Red means that the price is in a downtrend, which means that the price of Bitcoin is decreasing. Meanwhile, the green line indicates that the price of BTC is rising or in an uptrend.
- Order book: Here you can see all BTC buy and sell orders. The list of orders also shows the different prices when traders or investors buy or sell BTC.
You will definitely have a learning curve understanding all these components. Still, applying what you’ve learned pays dividends when you predict BTC prices correctly.
The result
Bitcoin investment or trading is popular these days due to the possibility of high returns on your investment. However, to reap such a benefit, you need to know how to read Bitcoin prices and trends. This means knowing the different chart formats and what goes into a chart. So you can predict Bitcoin price movements, helping you decide when to buy or sell.