How To Analyze The Cryptocurrency Chart

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Last Updated October 6th 2022
5 Min Read

You'll need to know how to read crypto charts if you've joined the crypto boom and want to start trading cryptocurrencies and turning your Bitcoin into cash. If you want to make successful crypto trades, you must be able to perform competent technical analysis based on the Dow Theory. 

If you want to understand the basics of reading crypto charts and the technicalities that go with them, take a look below. 


What Is The Dow Theory?

At a high level, Dow Theory describes market trends and how they typically behave. It provides signals that can be used to identify the primary market trend. The primary market trend is then used to make trading decisions.

The Dow Theory can also be applied to the crypto market.

According to the Dow Theory, the market considers everything during its pricing. The current asset prices reflect all existing, prior, and upcoming details of the stock. This means that a market analyst can focus on the price of a coin rather than every single variable that moves the price of a coin.

Crypto markets go up and down in particular patterns. Being able to recognize the patterns of the market makes it possible to predict market behavior.


6 Tenets Of Dow Theory

The Dow Theory rests on six essential tenets:

  1. The market has three movements
  2. The major market trends have three phases
  3. The market incorporates new information as soon as it becomes available
  4. Stock market averages must confirm each other
  5. Trends get confirmed by volume
  6. Trends exist until it is shown that they have ended


The Market Has Three Movements

The main movement of a market is called the primary movement. It is the major trend in the market and can last anywhere between a year and several years. The main movement can be bullish or bearish.

The secondary or intermediate movement of a market is called the medium swing. This happens in a medium time frame – anywhere from ten days to three months. Trends in the medium swing are measured in terms of immediate price change.

The minor movement of a market is called the short swing. The short swing is the short-term speculation in the market.

The Major Market Trends Have Three Phases

The three phases of a market trend are

  1. The accumulation phase – The accumulation phase is when knowledgeable investors start buying or selling the coin against the general perception of the market.
  2. The public participation phase – The public participation phase, also known as the absorption phase, is when the rest of the market starts following knowledgeable investors.
  3. The distribution phase – The distribution phase happens after the speculation of the absorption phase. Knowledgeable investors begin to redistribute their holdings in the market. 

The price of an asset changes to take any new news into account. The asset price is an accurate reflection of the market participants' hopes, fears, and expectations. The market price integrates interest rate movements, earnings expectations, revenue projections, significant elections, product initiatives, etc.

Stock market averages must confirm each other

If two companies or sectors are causally linked, an increase in one company should increase in the other company. If one company’s performance improves while the other’s decreases, it might signify that a market trend may be reversing soon.

Trends get confirmed by volume

During an uptrend, the volume of shares stranded should increase with a price increase. During a downtrend, the volume should decrease with a price decrease.

Trends exist until it is shown that they have ended

The market remains in trend despite “market noise.” Finding definitive proof for the reversal of a trend is not easy.


What Is Technical Analysis?

Technical analysis is a tool or method to predict a cryptocurrency pair’s probable future price movement — the better the technical analysis, the better the market reading.

To do technical analysis, you need to examine crypto charts. The following sections describe the elements of the crypto charts that you should take into account.


Different Time Frames For Crypto Charts

When looking at a crypto price chart, different time frames can give you different information. You can get many different time frames for crypto charts. Some traders look to 15-minute charts, the hourly chart, a 4-hour charts, or the 1-day chart.

If you want to open and close your position in a single day, you will look at the short timeframe charts. You will look at long timeframe charts if you are a long-term holder.


Cryptocurrency Market Cap

The market cap of a coin is a good indicator of the stability of a cryptocurrency.

The market cap of a cryptocurrency is calculated by taking the total circulating supply of the currency and multiplying that number by the price of each coin.

The more consistent the market cap value, the more stable the coin.



Knowing how to read crypto charts is an essential skill if you want to trade cryptocurrencies.

To make good crypto trades, you need to be able to do a sound technical analysis supported by the Dow Theory. The first step of a sound technical analysis is knowing how to read crypto charts.

You need to be able to read the Japanese candlestick charts to determine the support and resistance levels. Reading the market in this way will give you the best chance of predicting the market trends and buy crypto in time.

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