Cryptocurrency price charts provide the foundation for a market’s technical analysis, and the ability to form a market view from studying a price chart is among the prerequisites to trading crypto effectively.
Line charts for trading
Line charts are rather basic and simply plot each time period’s closing price. Compare and contrast the line chart below with the following Bar and Candlestick charts.
Bar charts for trading
Bar charts are commonly used and understood price charts. Each plotted bar reflects the opening, highest, lowest and closing prices for a specific time frame.
The bars are graphed on a chart, where the vertical axis represents price, while the horizontal axis indicates time. Most one-year charts utilize one-day bars.
The difference between the highest and lowest price on a bar is known as its range. A bar instance where the bar period closes higher than the open results in the bar being colored green on Liquid, and where the bar period closes lower than the opening price, the bar is colored red.
The bar chart can also be used for other time intervals (periods), such as the 5min, 60min, 4hr, weekly or even monthly.
Candlestick charts for trading
Candlestick charts are similar to bar charts, capturing each time period’s high, low, open and close, but are more expressive visually and in the information conveyed.
Candlestick patterns (consecutive candlesticks of a certain shape) can hint at trend continuation and reversals, as well as help define price range, support, resistance, and sentiment.
As with the bar chart, a candlestick chart consists of candles that are generally either white or black, or green or red on Liquid, reflecting the traded range within each time period.
A white or green candlestick is also known as a “hollow” candlestick, and it is characterized by the closing price being above the opening price for that time frame. When the close is below the open, the candlestick is coloured black or red and described as “filled”.
The “body” or “wax” of the candle reflects the range between the opening and closing price for the period, while the period’s high and low create the candle’s “shadows” (also known as “wicks” and “tails”).
Candlesticks are interpreted similarly to bar charts, as seen in the diagram below.
As seen in the chart above, candlesticks provide price trend and volatility information more clearly than bar charts.
The relationship between each period’s open and close, and between the highs and lows, reflects buying or selling pressure and is invaluable to all traders. The shape and color of consecutive candles also provide clues as to future market movement.