What You Should Know When Reading Crypto Charts

When reading crypto charts, there are several things that you should keep in mind. These include the support and resistance levels, the Bollinger bands, Fibonacci retracement levels, and the RSI indicator. Depending on your trading strategy, you may want to use a particular type of chart.

Support and Resistance Levels

Support and resistance levels are a crucial part of trading crypto, and understanding them is essential for making informed decisions. They are levels that help you predict the direction of price movement. As price moves within the trading range, they are also important for trend analysis. Breaking out of the trading range indicates a change in trend, which can mean an opportunity for you to sell or buy. Use this information to develop your own trading strategy or use it in conjunction with other indicators.

Resistance levels are important areas on a price chart where the forces of supply and demand meet. Technical analysts use these levels to determine the psychology of the market and where the price will likely end up. If a price goes past a level of support, the price will likely reverse direction and a new support level will be created.

Bollinger Bands

When reading crypto charts, you might find it helpful to use Bollinger bands. These are bands that measure volatility and predict upcoming movements. An overly- expanded band suggests a potential trend reversal, consolidation, or explosive movement. A lower band can indicate a trend that has not yet begun.

These bands are calculated by taking the average of closing prices over the last 20 periods. The average is then divided by two. To calculate the bands, you need to know how much each data point differs from the SMA.

Fibonacci Retracement Levels

If you're reading crypto charts, it may be helpful to use Fibonacci retracement levels as a guide. These levels are percentages, and they are often used to identify possible bounce points. For example, the price may go up for a few days before retracing back to the starting point.

The Fibonacci sequence was originally created by the ancient Indian mathematicians. It is also used in nature, biology, architecture, and fine art. It is present in human DNA, and is known as the "golden ratio." The sequence is often used to describe patterns in nature and is also reflected in geometry.

RSI Indicator

A popular indicator for day traders is the RSI, or relative strength index. This indicator measures a particular asset's strength versus its price. A higher reading means that an asset is stronger, while a lower reading means that the asset is weaker. The RSI is not a foolproof tool, but it can be useful when used correctly.

The RSI works best when combined with other indicators. For example, RSI can be used along with volume to tell if a certain price movement is justified by higher volume. Using RSI in conjunction with volume will also give you a better idea of whether a price is cyclical or has peaked once and is likely to reverse. Another popular RSI indicator is the StochRSI.