Graph Analysis Methods
To determine entry points and good moments for concluding transactions, traders use various methods of analyzing the quotes chart.
Technical analysis is an important tool used by successful crypto traders. Through the methods of analyzing the cryptocurrency chart, you can get your own forecast for the rise or fall of the price. In this way, the optimal entry points are determined, as well as the best moments for making profitable deals.
What methods of chart analysis are used most often?
The most popular of the methods is based on the well-known Dow Theory. Its postulates say: market behavior is predictable, and price dynamics is not chaotic, but obeys certain trends. This can be seen especially clearly on the charts of quote fluctuations. However, initially it is worth choosing a source of information for analysis: a candlestick chart or a line chart.
Candlestick analysis (CANDLESTICK)
The most popular type of charts is called candlestick (the term CANDLESTICK is also used). On it, the course of a digital asset is presented in the form of vertical segments of various lengths. As a result, each such segment (“candlestick”) shows how the price has changed over a certain timeframe.
Candles have key parameters, for example:
- Open price (Open) — the value of a digital asset at the beginning of the timeframe.
- Closing price (Close) — the cryptocurrency rate at the end of the timeframe.
- Minimum (Low) and maximum (High) for a large period of time.
- Color. Red means that the closing price is higher than the opening price. Green is the opposite.
- Shadow — the upper or lower excess of the exchange rate over the timeframe period over the Open or Close values.
Visually, fluctuations in the course on CANDLESTICK are very easy to trace, and also make it possible to determine the direction of the trend.
Linear analysis (LINE)
The second most common type of graphic display of quotes is linear (LINE) or classic. Instead of candles, a continuous curve is used that connects the fluctuation points of the cryptocurrency price. Both types of charts almost always appear in stock trading reports, as they are equally clear.
Types of Analysis Methods
Revealing a pattern in the form of a trend line, figure or calculation results, a trader decides on the choice of the optimal trading strategy.
Based on this, the methods of chart analysis are:
- Along the trend lines. Resistance levels are revealed, as well as support.
- Relative Strength Indices (RSI).
- According to the figures formed by curves or candles (head and shoulders, flags, double bottom, etc.).
As a result, the purpose of analyzing changes in the cryptocurrency exchange rate is to identify the likely direction of chart movement relative to the price axis (up or down). The degree of reliability of the forecast depends not only on attentiveness and the ability to read charts, but also on sensitive monitoring of the situation on the crypto market. Not only economic factors, but also political factors often have a decisive influence on quotes.