crypto currency
Though there are different kinds of charts — such as line charts and bar charts — candlestick charts are one of the most effective.
Originating in Japan over a century ago, candlestick charts visually display the size of price moves in different colors — frequently green for a positive candle and red for a negative candle.
Each candlestick displays four critical components for the desired time frame:
Open price
High price
Low price
Close price
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These components not only provide a plethora of useful information in an easy to read and concise format, but they also allow for the identification of various candlestick patterns. While there are a lot of candlestick patterns that we will not detail here, some simple ones include bullish and bearish engulfing patterns.
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Support and resistance
One of the most simple and effective methods of conducting technical analysis is to identify areas of support and resistance — where a digital asset’s price is expected to stop decreasing or stop increasing, respectively.
Because the cryptocurrency market is simply an exchange between buyers and sellers, it stands to reason that demand for a digital asset increases as its price decreases, and vice versa — at least, in theory. This essential principle is largely responsible for creating both levels of support and resistance. Simply put, the market often has an interest in buying or selling at a certain price, which creates levels that are difficult to break through.
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Trend lines
Another basic technical analysis tool that is of critical importance is the trend line — which, as the name implies, is a line that is used to identify a trend.
By tracing the tops or bottoms of candlestick patterns, a technical analyst may identify a clear bullish or bearish trend for the price of a cryptocurrency and adjust their trading strategy accordingly.
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