How to read crypto charts: Basics of technical analysis

Candlesticks, levels, trends — Simple and visual

Understanding charts is the foundation of successful cryptocurrency trading. Beginners are often overwhelmed by candlesticks, lines, levels, and indicators. But in reality, the basic principles of technical analysis can be mastered quite quickly. This article will help you learn how to interpret charts, spot trends, identify support and resistance levels, and use indicators to make better decisions.

What are candlesticks and how to read them

Most crypto traders use candlestick charts. Each candlestick shows how the price changed during a specific period of time (for example, 1 hour, 1 day, or 1 week). A candle contains four main values: open, close, high, and low. The candle body shows the range between the open and close prices, while the “wicks” or “shadows” show the highest and lowest prices reached during that period.

A green (or white) candle means the closing price is higher than the opening — a bullish signal.

A red (or black) candle means the closing price is lower than the opening — a bearish signal.

Reading candles and knowing the terms helps traders understand market sentiment and identify potential trend reversals. Some candlestick patterns (like hammer, doji, engulfing) are widely used as signals for trend continuation or reversal.

Support and resistance levels

Support is a price level where an asset tends to stop falling and bounce upward. It acts like a “floor” for the price.

Resistance is a level where the price often stops rising and starts to fall. It acts like a “ceiling.”

These levels are based on historical price behavior. If the price reversed in a certain zone before, it may do so again. Traders draw horizontal lines to mark support and resistance zones and observe how the price behaves around them.

What is a trend and how to identify it

A trend is the general direction in which the market is moving. There are three types of trends:

• Uptrend (bullish): the price forms higher highs and higher lows.

• Downtrend (bearish): the price forms lower highs and lower lows.

• Sideways (flat): the price moves within a narrow range without a clear direction.

To identify trends, traders use trendlines — lines drawn across the lows (in an uptrend) or highs (in a downtrend). A breakout of the trendline can signal a trend reversal.

Moving averages (MAs) also help identify trends by smoothing out price fluctuations. If the price stays above the 200-day moving average, the market is considered bullish.

Technical indicators

Indicators are mathematical formulas based on historical price and volume data. They help traders better understand market conditions and forecast possible movements. Common indicators include:

• RSI (relative strength index): measures how overbought or oversold an asset is (>70 = overbought, <30 = oversold)

• MACD (moving average convergence divergence): analyzes the relationship between two moving averages to generate buy or sell signals

• Moving averages (SMA, EMA): help identify trend direction and momentum over time

Combining indicators can lead to stronger confirmation. For example, if RSI shows oversold conditions and the price is near a support level, it could be a potential buying signal.

Trading volume: why it matters

Volume shows how many coins were traded during a given period. It’s crucial for confirming the strength of a price move.

High volume supports the current direction — rising prices on high volume signal strength, while falling prices on high volume may indicate a strong sell-off.

Low volume can suggest weak market interest and potential consolidation or reversal.

Some traders also use the OBV (on-balance volume) indicator to assess buying and selling pressure.

Useful candlestick patterns

There are many candlestick patterns that help traders make decisions:

• Hammer / inverted hammer — potential trend reversal

• Engulfing — strong bullish or bearish signal

• Doji — market indecision, possible reversal

Learning these patterns and their combinations will help improve your market analysis skills.

How to apply technical analysis

Identify the trend — start by analyzing the overall price direction.

Mark support and resistance — look for key levels where price reacts.

Use indicators — confirm trends or reversals with tools like RSI, MACD, and moving averages.

Check volume — ensure price movements are supported by strong trading activity.

Watch for candlestick signals — use them to fine-tune entries and exits.

Common mistakes made by beginners

• Ignoring volume — without it, price signals can be misleading

• Using too many indicators — this can create confusion and conflicting signals

• Lack of strategy — technical analysis only works when used systematically

• Drawing incorrect levels — inaccurate support/resistance can lead to false expectations



Conclusion

Technical analysis is a powerful tool for any crypto trader. It helps you understand market behavior, choose optimal entry and exit points, and reduce risk. Despite appearing complex at first, the basics are easy to grasp. With practice, attention to detail, and a clear strategy, you can gain confidence and accuracy in your trading decisions. Mastering candles, levels, trends, and indicators will give you the skills to navigate the crypto market more effectively