Reading Crypto Charts

In short: You read a crypto chart largely like a stock chart: with candles, timeframes and volume. There are differences: the market is always open, the price swings harder and volume is spread across many trading platforms. Charts give no certainty about the future.

Crypto warning: crypto-assets are highly volatile and largely unregulated. You can lose your entire investment. Providers are often not covered by an investor compensation scheme.

The basics: candles and timeframes

A chart is made of candles. Each candle shows the open, high, low and close of a period. How that works is explained in Reading Candlestick Patterns. A timeframe is the period one candle represents, such as 15 minutes, 1 hour or 1 day.

Start on a larger timeframe, such as the daily or weekly chart. There you see the big picture and less noise. Only use a smaller timeframe to look at details.

What is different about crypto?

The market is always open

Crypto trades 24 hours a day and 7 days a week. So there are no opening and closing times. A daily candle closes at a time that the trading platform decides, often 00:00 UTC (coordinated universal time; in the Netherlands that is 01:00 or 02:00). Two platforms can therefore show slightly different candles.

Bigger swings

The price can move tens of percent in one day, especially with smaller coins (altcoins). Long wicks (the thin lines on candles) are common. A stop-loss can therefore be hit more quickly, and in a fast move your order can be filled at a worse price (slippage).

Volume is spread out

With stocks, trading takes place on a few exchanges. With crypto, trading takes place on hundreds of platforms. The volume you see on one chart is therefore only part of the whole. Some platforms also report inflated volume (wash trading, trading with yourself). So use volume analysis with extra care.

Spot and futures

In spot trading you buy the coin itself. With futures or perpetual contracts you trade contracts, often with high leverage (borrowing to trade bigger). Anyone looking at the price of a future also sees the effect of forced closing of positions (liquidations). High leverage increases both gains and losses. It comes with extra risks and falls outside this tutorial.

Linear and logarithmic scale

On a linear scale a fixed distance stands for a fixed amount. On a logarithmic scale a fixed distance stands for a fixed percentage.

An example: a coin rises from €1 to €2 (+100%) and then from €2 to €4 (+100%). On a linear scale the second rise looks twice as large (€2 versus €1). On a logarithmic scale both are equally large, because the percentage is the same. For long periods and big moves the logarithmic scale gives a fairer picture.

Also note declines: from €1 to €0.50 is −50%. To get back to €1 the price has to rise 100%. Losses therefore need a larger percentage recovery.

Tools you already know

• Support and resistance: round numbers (such as €100 or €1,000) and earlier highs and lows are often watched. See Support and Resistance.
• Moving averages: the 50-day and 200-day averages are also used for crypto. See Moving Averages. With strong swings they give more false signals.
• RSI: can stay overbought or oversold for a long time in crypto.
• Trend lines: sloping lines along lows or highs. They are often broken.

These are clues, not forecasts. Combine them, test them on historical data and always use a stop-loss.

Market cycles: what do they and do they not say?

With bitcoin people often talk about a cycle of about four years. The reason: roughly every four years the amount of new bitcoin created is cut in half (the halving). In the past, each halving was followed by periods of strong rises and then declines.

Note the limitations:

• There are only a few cycles. That is too few to make a rule out of.
• The market has changed a lot since the first cycles: more participants, different products and new rules, such as the European MiCA regulation.
• A past pattern guarantees nothing. A cycle story can give false certainty.

So use cycles at most as background, not as the basis for a decision.

Worked example (hypothetical)

Suppose a coin is at €200 and you want to risk at most 1% of a €5,000 account, so €50. You buy at €200 and place your stop-loss at €170 (well below a support zone, because of the large swings).

• Risk per coin: €200 − €170 = €30.
• Number of coins: €50 ÷ €30 = 1.66 coins (rounded down; many platforms allow partial coins).
• Maximum loss: 1.66 × €30 = €49.80. Total position: 1.66 × €200 = €332.

The risk here is deliberately kept small relative to the account. In fast moves your order can be filled at a worse price and you can lose more than planned. Use the position size calculator to calculate your own figures.

Limitations

• High volatility: large swings make signals less reliable and stop-losses vulnerable.
• Fragmented and sometimes unreliable volume.
• Little history: crypto has not existed long, so there is less historical data to test on.
• News and social media: prices can react strongly to posts, tweets and regulation, regardless of what the chart says.
• Technical risks: a trading platform can fail or go bankrupt. See also keeping crypto wallets safe.
• Hindsight: looking back, every pattern seems logical.

Practice questions

Try to answer them yourself. The answers are in the text.

1. Why can a daily candle differ between two crypto platforms?
2. What is the advantage of a logarithmic scale?
3. Why is volume less reliable for crypto?
4. Why are market cycles not a basis for a decision?

What next?

Practise first on old charts and with a small amount you can afford to lose. Keep your risk per trade small with the risk-per-trade tool.