Reading Bitcoin (BTC) prices and trends is essential to trade this cryptocurrency. When you know how, you can make wiser trading decisions and anticipate whether to buy or sell your BTC. The best way to know how to read its prices is to understand how BTC charts work.
Bitcoin Chart
You can easily predict the price movements of BTC through the charts, whether the price movement is yearly, monthly, weekly, daily, hourly, or every minute. Doing this can help you minimize your risk since Bitcoin is one of the most volatile digital currencies. For instance, its price plummeted to USD$34,000 in May 2021 after soaring to more than USD$60,000 in April 2021.
Because of that, you need to learn how to read the charts, which is equivalent to reading Bitcoin prices and trends. Besides, you can read the charts to conduct technical analysis. You essentially use an asset’s price movement, volume, and other statistical trends to enter the market. That way, you can identify trading opportunities or trends when buying Bitcoin in Australia or anywhere else in the world.
Two Main Chart Formats
Knowing the two main formats of Bitcoin charts is critical. Understanding them allows you to identify which chart is suitable for your preference. Here are the formats:
- Line Chart
This is the most basic chart of Bitcoin and other cryptos. It displays BTC’s historical price points made up of daily closing prices, depending on the time frame. A time frame can range from years, months, weeks, days, hours, or minutes. A HODLer—‘hold on for dear lifer’—is a trader who holds the BTC for an extended period. They generally use the monthly time frame. On the other hand, short-term traders use a lower time frame, such as hours and minutes.
In addition, a line chart has two scales: logarithmic and linear. A log chart allows you to identify trends, while a linear chart helps determine the speed of price changes. As for representation, a vertical shift represents a log chart shift since you can change the scale of Bitcoin prices through percent changes. On the other hand, the price scale represents a linear chart.
- Candlestick Chart
The second most common chart in trading or investments of crypto or forex is the candlestick chart, also known as a price chart. You can use it to see the price movements of BTC during a specified time frame through the candlestick figures. With this chart, you can see the changes in price between low, high, close, and open.
In a candlestick chart, you can see green and red candles. Each candle has wicks and a body. The body of the candle represents the opening and closing prices of an asset. Red candles mean the price is declining, while green candles signify that price is going up. That means the close is at the top, and the open is at the bottom of the green candle’s body. Alternatively, the close is at the bottom, and the open is at the top of the red candle’s body.
The candle’s wicks stretch from the body’s top and bottom, representing the lowest and highest prices BTC hits during the time frame.
Components Of A Bitcoin Chart
You also need to understand the components of a chart to help you read BTC prices much easier. Some of these are as follows:
- Day High Or Low: You can see two numbers in this component. The numbers at the bottom display the open and last prices. Meanwhile, the lowest price in the trade is the number on the left of the chart.
- Volume: Historical trading volumes can help you identify if price surges can be sustained. A surge outbreak usually has weaker foundations, while lower volume means the market has less conviction. On the other hand, there might be some genuine momentum in a price movement if there’s a higher volume in the market.
- Line Color: Similar to the color of candlesticks, red and green dominate the line colors. Red means the price is on a downtrend, meaning the Bitcoin price is declining. Meanwhile, a green line indicates that BTC’s price is going up or on an uptrend.
- Order Book: This is where you can see all BTC’s buy and sell orders. The list of orders also shows the different prices that traders or investors when selling or buying BTC.
Undoubtedly, you’ll have a learning curve understanding all these components. Still, applying what you’ve learned pays dividends when you predict BTC prices correctly.
Conclusion
Bitcoin investment or trading is popular these days because of the possibility of generating high returns on your investment. However, you need to know how to read Bitcoin prices and trends to achieve such a benefit. This means knowing the different chart formats and what goes into a chart. That way, you can anticipate the price movements of Bitcoin, helping you decide when to buy or sell.