CHART

Crypto charts are part of every crypto trading market. They are an indicator of crypto prices and movements. They have several essential components for crypto traders. This article looks at the useful details and how they are useful for traders;

Cred Market Capitalisation

Market capitalisation is the most common feature of a crypto chart. It is the ratio that indicates the relative size of a cryptocurrency in the market. It is calculated by multiplying the market price of a coin by the number of coins in circulation.

Market capitalisation = current coin price * circulating supply

For example, a coin currently trading at $5 and of which 1,000,000 coins are in circulation has a market capitalisation of $5,000.00. (5*1000000 =50000).

Market capitalisation provides information about the performance and size of a coin. From this, you can infer stability. One problem, however, is that most people tend to confuse market capitalisation with money inflow. They are different concepts because market capitalisation is based on the price at a certain point in time. When this falls, the market capitalisation also falls.

Market capitalisation is a reliable indicator of the stability of the market. It indicates the possibility of price movements in a coin.

A high market capitalisation means a stable currency. However, these are associated with low growth prospects and low profit margins.

A low market capitalisation can be unstable but offers better profit margins. They are likely to rise again after some time. You are better off with a medium market capitalisation, which offers both stability and profit prospects. Market capitalisation also works with liquidity for value.

The bullish and bearish movements Bearish Price

The bullish and bearish price movements are part of the crypto charts. They are the indicators of the current state of the market. They indicate whether the market is in an uptrend or a downtrend. Traders use them to decide whether they should sell or buy.

What is an UpTrend?

An uptrend is when the currency is in gaining price. This is the time when traders are in a positive mood. It is the time when you should buy the coins as they are rising in value. The bull market is the result of an economy that is doing well. It can last for weeks, months or years.

Cryptocurrencies have experienced an upward trend in 2020. This bull market is due to traders looking for new investment opportunities after the coronavirus pandemic. Most altcoins and bitcoin have seen a sustained increase in value. This trend is likely to continue for some time.

A bear market occurs when an asset loses value. This is usually due to negative economic influences. This is the right time to sell assets before they lose value. However, it is necessary to do further research to avoid selling due to a false bear market.

Cred Technical analysis

Technical analysis is also important when studying crypto charts. Asset prices do not occur randomly or by chance. Technical analysis is based on various existing and past market factors.

Technical analysis involves analysing all past and future market opportunities. Traders can then use the results to make investment decisions.

Technical analysis is mainly based on Dow Theory. The theory recognises that crypto prices are not random. They depend on variables such as demand and regulations. It takes into account all current, past and future details. These details help predict market behaviour. Traders react similarly in similar scenarios.

The Dow Theory takes into account several aspects of the market. One of these aspects is the market movement.

Market movement occurs in 3 phases.

• The main phase can last from one to several years and can mean a big price change.
• The intermediate phase lasts between ten days and a few months. It is accompanied by price changes of about 33% - 66%.
• The short swings range from hours to a month. All market movements can be either bullish or bearish.

Technical analysis also deals with the phases of market trends. Trends begin with accumulation. This is when investors start buying or selling assets in anticipation of a move. After some time, other traders join in and enter the absorption phase. It ends in a distribution phase where the market adjusts to the new values.

The analysis involves more than just a single currency. Any price movement should have an impact on the entire market. An upward trend in Bitcoin, for example, should also be reflected in Ethereum. This means that the averages of the assets confirm each other. The trading volume must also be reflected in the price movements.

Cred Relative Strength Index

The Relative Strength Index (RSI) is an analytical tool that determines the price changes and speed of price movements of assets. Traders use the RSI to determine whether the cryptocurrency is oversold or oversold. Depending on the market status, they can then make a buying decision.

The RSI compares the magnitude of recent gains with losses to determine the status of the cryptocurrency. It is measured on a scale of 1 to 100 and appears as a wavy pattern on the charts.

The formula for the RSI is;

RSI = 100 - (100/(1- RS))

RS = Ratio between the days when the coin was up and the days when the currency was down.

Do not get out your calculator yet; most exchanges give these values by default. You only need to understand the values when you trade.

An RSI that is above 70 means that the asset is overbought. There is a likelihood that a price decline is imminent. This is the ideal time to take profits by dumping the asset. Other risk-loving traders can also use short-term positions to profit when prices fall.

An RSI below 30 means that the asset is oversold. This is when prices are among the lowest. This is the right time to buy the asset and wait for a rebound. Prices are likely to rise again soon.

However, you must be careful when using the RSI. It is prone to erroneous buying and selling during a massive price rally or fall. Use the RSI together with the other analytical tools.

Conclusion

Crypto charts are indispensable when it comes to determining the current, past and future value of a coin. They help traders identify the right time to buy and sell. Any trader who uses the charts correctly can be sure of his profits.