2 days ago · Bitcoin chart by TradingView Bitcoin (BTC) is recognised as the world’s first truly digitalised digital currency (also known as a cryptocurrency). The Bitcoin price is . Transactions - private keys A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof . This bitcoin chart analysis guide is built to be your one-stop-shop tutorial for intermediate crypto trading. Crypto trading seems complicated at first glance. Fortunately, it’s not nearly as perplexing as you think. Once you learn how to read charts and perform basic technical analysis, it all starts to come together.
Bitcoin trading analysisTechnical Analysis of Bitcoin / U.S. Dollar (BITSTAMP:BTCUSD) — TradingView
For this bitcoin chart analysis guide, we assume you have some basic knowledge of how crypto works , what bitcoin is, how cryptocurrency exchanges work , the types of crypto categories , and how blockchain functions. For reference, the live real-time bitcoin price exchange rate value is:. In the early days of Bitcoin to , there essentially was only one coin BTC and trading cryptocurrencies was overly complicated. Here is a look at the long laundry list of bitcoin chart analysis trading patterns and graphs covered below:.
You can find plenty of great crypto exchanges, including exchanges that accept your local currency and bank transfers. You can also find plenty of amazing wallet apps, portfolio manager apps, and other tools to maximize your crypto trading experience.
Once you have bought your first cryptocurrency, you can keep it in your exchange wallet, leaving it on the exchange for future trading or investment. Or, you can withdraw funds to your own wallet — like a mobile app on your phone. The crypto trading industry is filled with its own jargon.
Here is a list of the 26 most popular terms with definitions you should know before getting into bitcoin chart analysis:. These currencies exist in contrast to cryptocurrencies although some countries are debating launching their own cryptocurrencies, which would blur the line between fiat and crypto.
Crypto asset: A crypto asset is any token, coin, or digital currency with value. Sometimes, people will link a crypto asset to a specific technology. Stablecoin: A stablecoin is a digital token deliberately designed to hold a steady price. Typically, stablecoins track a specific fiat currency, and most track the US Dollar. Stablecoins work in different ways, although most stablecoins are simply backed with US Dollar reserves, and users are allowed to swap their 1 USD stablecoin for 1 USD cash at any time, giving the token stable value.
Crypto Exchange: An exchange is a website or platform where you can buy and sell cryptocurrencies. Some exchanges only list cryptocurrencies, while others list fiat currencies and cryptocurrencies. Major exchanges today include Kraken, Gemini, and Binance, among others.
Bid Price: The bid price for a given asset is the maximum price someone is willing to pay for that asset. Ask Price: The ask price for a given asset is the minimum price at which someone is willing to sell an asset. Bid-Ask Spread: The bid-ask spread is the difference between the bid price and the ask price for a specific asset. In highly-liquid, high-volume markets, the bid-ask spread will be quite small.
In smaller, lower liquidity markets, the bid-ask spread will be much larger. Bitcoin has been bombarded with FUD since the day it launched. Some cryptocurrency communities spread FUD about other coins. Buying the Dip: When a specific crypto asset drops significantly, but you see it as a buying opportunity. Bull and Bear Markets: The terms bull and bear have the same meaning in crypto as they do in traditional markets. A bull trend is a long-term, upward trend in overall cryptocurrency markets, while a bear trend is a long-term decline in the overall cryptocurrency market.
Liquidity: Liquidity , in the crypto world, refers to the volume of a specific exchange, or how easy it is to make a trade on a particular exchange. A good, high-volume exchange is said to be more liquid and have higher liquidity. Whale: Whales are individuals or organizations that hold an enormous amount of crypto.
Some are institutional hedge funds dipping their toes into crypto. Others are people who accumulated bitcoin early and never sold. Wallets: Wallets let you manage your crypto holdings. Hot Wallets: Hot wallets are online wallets connected to the internet. Cold Wallets: Cold wallets, or cold storage wallets, are wallets that are not connected to the internet.
Exchange Wallets: Most exchanges have customer wallets where users can store their funds. These exchange wallets are seen as the least safe option because the exchange is in complete control of your funds.
Most exchanges let you set up 2FA. Some exchanges will send you a text message or email to confirm a login.
Other exchanges let you set up 2FA for every time you make a trade. Hodl: Hodl or hodling refers to the crypto investment strategy of holding crypto assets through all market conditions.
Bitcoin has risen and fallen numerous times, but hodlers have been able to survive the FUD and continue holding bitcoin to this day. Diversification: Diversification refers to the idea of owning multiple cryptoassets. Arbitrage: Arbitrage is the strategy of buying coins at one price, then selling them for a higher price in a different place.
You might buy bitcoin from Binance, for example, then sell it through LocalBitcoins at a higher price in your own local fiat currency. For the most part, beginners will only want to make market orders. With a market order, you buy or sell cryptocurrency at the best available price. More advanced traders, however, can take advantage of limit orders, stop-loss orders, leveraged trading, and more.
Types of crypto trades include:. If the price point never ends up being reached, then your order may never be executed. Some exchanges let you put a time limit on limit orders. Stop-Loss Order: Stop-loss orders let you set up a specific price at which an exchange will execute a trade to limit your losses. Take-Profit Order: Take-profit orders let you set up a specific price at which an exchange will execute a trade to maximize your profits.
Most beginner and intermediate traders, however, will be fine with the four trade types above. Costs of crypto trading include:.
Trading Fees: Most exchanges charge maker fees and taker fees of between 0. Typically, the taker fee is higher. Deposit Fees: Some exchanges charge a fee to deposit money into the platform, although this is becoming less common.
Withdrawal Fees: Withdrawal fees are far more common on most exchanges. Typically, withdrawal fees are flat fees. Some exchanges also have minimum withdrawal amounts. Fees can vary widely between exchanges. Typically, the better-regulated exchanges like Coinbase and Kraken charge higher fees, while the lower-regulated exchanges like Binance and KuCoin charge lower fees. Master The Crypto is one of the most popular cryptocurrency investment trading guide portals on the Internet and this section of our bitcoin trading chart analysis guide is geared to help everyone who is not a complete beginner get better at trading bitcoin for optimal results.
Crypto analysis falls into two major categories: fundamental analysis FA and technical analysis TA. Fundamental Analysis FA : Fundamental analysis is a non-statistical analysis method that evaluates the value of an asset-based on economic and financial growth factors. Fundamental analysts seek to determine the profitability of an asset based on its potential. They analyze the present value of the asset, then project the future growth of that asset.
Technical Analysis TA : Technical analysis is a purely statistical method that involves examining price charts, trading volume, and other related numbers. Technical analysts believe the price of an asset reflects market sentiment and all the necessary information at any given time, which is why they exclusively focus on statistically analyzing the price action of the asset.
These two analysis methods might seem contradictory, but they work best when used together. Smart investors take all available analysis methods into consideration. Crypto markets are highly volatile and unpredictable. However, we still see plenty of crypto market trends.
A market trend refers to the direction in which the price is perceived to be headed. Some people also use terms like a secular trend. A secular trend is a long-term market trend that lasts several decades — say, 30 years. A secular trend can be bearish or bullish, and there can be multiple mid-term primary trends within the broader secular trend.
A primary trend , meanwhile, is a smaller, short-term trend within a broader secular trend. It may run opposite of the secular trend. There can also be secondary trends within primary trends. After months of declining prices primary trend , the markets might seem to be suddenly going up after a week of positive movement secondary trend , only to continue dropping for the next four weeks.
Unregulated, new markets like crypto are more prone to short-term volatility than traditional, well-established markets. Crypto market analysts will frequently refer to terms like support and resistance levels. These levels play a crucial role in how crypto markets function. Sometimes, the support or resistance level holds. In other cases, the support or resistance level breaks.
Similarly, when the price drops below a support level, the support level could become the new level of resistance. In a fluctuating industry like crypto, support and resistance levels rarely stick around for long. Support and resistance levels are often established because of buy walls and sell walls. A buy wall is a large number of buy orders placed at a specific price limit, while a sell wall is a large number of sell orders placed at a specific price limit.
Sometimes, these are limit orders , where traders have set a specific price at which they want to buy or sell. In many cases, these buy walls and sell walls organize around recognizable price points. Sudden price surges or drops can easily be halted by a wall of sell or buy orders. Crypto charts might look complicated at first glance. Once you understand what everything means, however, it will seem much less complicated. Each candlestick each green or red bar represents a 6-hour interval.
You can adjust the timescale of a chart however you like. Some charts let you use intervals as small as 30 seconds, for example, while others let you use intervals of up to a year. As with most financial charts, the Y-axis the vertical axis represents price, while the X-axis the horizontal axis represents time.
You can see the price scale on the right side of the chart. This is the interval between two price points. On this chart, the price scale is 50, which means the difference between the two price points is Price scale can be linear or logarithmic:.
Linear Price Scale: With a linear price scale, the distance between any two points of the same numerical difference, regardless of value, is equal. The distance between 1 and 2 is the same as the distance between 9 and 10, for example. Logarithmic Price Scale: With a logarithmic price scale, the distance between price points is linked to the ratio of the two values.
The distance between 1 and 2, for example, is equal to the distance between 4 and 8 or 12 and The difference between linear and logarithmic price scales is significant.
The first chart uses a linear price scale, while the second charts uses a logarithmic price scale:. However, the logarithmic chart tells a much different story than the linear chart. The early days of bitcoin look especially impressive relative to the first chart.
There are four general types of crypto charts, including line charts, bar charts, candle stick charts, and point and figure charts. Some line charts use open, high, or low prices for each period.
In most cases, however, the price reflects the closing point for each interval. A bar chart presents a more detailed representation of price action than a line chart. It shows the price at which bitcoin opened, for example, as well as the price at which it closed. The high, low, and close prices are represented using a series of vertical lines with a horizontal dash on each side. The vertical line is called the range line, and it represents the range of price for each time interval, including the high and low.
The horizontal dashes, meanwhile, represent the open and close for each interval. The bar chart above also uses color to indicate rising and falling intervals. A black range is used to indicate a rising interval where the closing price was higher than the opening price , while a red range is used to indicate a falling interval where the closing price was lower than the opening price.
Today, candlestick charts work in a similar way to bar charts. They allow you to see the high, low, open, and close for a particular day. However, these numbers are expressed in a slightly different way. With candlestick charts, there is a hollow or filled body with upper and lower shadows to represent open, close, high, and low prices. The length of the body of a candlestick and its shape is also used to represent the intensity of trading activity for a specific time interval.
The candlestick is mostly composed of the body the shaded area , which represents open and close prices. The shaded area also plays a role. Some candlestick charts also use a fill or unfilled pattern, with the candlestick being full or shaded when prices rise and being unfilled and empty when prices fall.
Out of the four charts listed here, a point and figure chart are the least common. A point and figure chart shows only price movements. The X column represents rising prices and the O column represents falling prices. Time and volume are not indicated. If there is no significant price movement for a length of time, then the chart shows no new data. Any price change below this value is ignored.
In the chart above, each X or O represents a rise or fall of two dollars. A reversal occurs if there is a change in the opposite direction by a value of at least four dollars.
The point is to remove the distraction or skewing effect that occurs in other chart types when accounting for time intervals with insignificant price movements. The chart only indicates significant price movements. Also, as an additional bitcoin chart pattern resource, here is a look comparing the bullish trading charts vs the bearish trading graphs:. Crypto traders will analyze charts to unveil different patterns. There are all different types of patterns.
Typically, however, patterns are separated into three specific categories:. Continuation Patterns: These patterns indicate a brief consolidation period, after which the prevailing trend will continue in the same direction. Reversal Patterns: These patterns indicate a shift in the balance of supply and demand, typically leading to a trend reversal. These patterns are sub-divided into top and bottom formations. Bilateral Patterns: Bilateral patterns are triangle formulations that indicate a trend could sway either way.
Some people might analyze a chart and see a continuation pattern, for example, while others will see a bilateral pattern. Based on the interval and previous trends, analysis can vary. A cup with handle pattern can be either a continuation or a reversal pattern depending on the previous trend.
It looks like this:. A cup with handle pattern in an uptrend as indicated above is a bullish continuation pattern. Aside from a small blip the cup , the upward trend will prevail.
Some cups are U-shaped, while others are V-shaped. In ideal conditions, the cup has equal highs on either side before consolidating at a specific price point the handle. The estimated price target for the next breakout after the consolidation is symmetrical to the height of the cup. In this chart, the same cup with handle pattern signifies the end of a downtrend and a breakout into an uptrend.
Once the cup formation transitions to a handle formation, the price must not decline beyond half the height of the cup. The longer it takes for the cup with handle pattern to form, and the deeper the cup formation, the greater the momentum behind the breakout and the higher the price target. When you add the height of the cup to the breakout point, it provides a good indication of the short-term price target. Flags and pennant patterns are continuation patterns.
In this chart, we see the consolidation phase in the middle. The long-term trend takes a brief brake, creating a rectangle shape on the chart. Then, the long-term uptrend continues, the rectangle breaks, and prices continue moving upwards.
You can also have both bearish and bullish flags. With these flags, the pennant is formed by a slight sloping move in the direction opposite to the prevailing trend.
A flag is a rectangular shape, while a pennant is a triangular shape:. Flag and pennant patterns are typically preceded by a sharp rally or decline. You can analyze a price target from a flag or pennant chart.
Typically, you do this by adding the length of the flag pole to the top of the formation in an uptrend and by subtracting the length of the flag pole from the bottom of the formation in a downtrend. Once prices fall below the neckline, the upward trend breaks down, and markets enter a bearish trend, as seen in the chart below with the pullback and target line.
Head and shoulders bottom charts , meanwhile, are also known as HS bottoms or inverse HS charts. Just like the HS top chart, the HS bottom chart consists of three parts, including two shallower valleys or higher lows on either side of a deeper valley or lower low. You can calculate price targets from head and shoulders charts. For HS top charts, you can estimate the price based on the ratio of the higher high to the breakout point along the neckline.
For HS bottom charts, meanwhile, you can calculate a price target by adding the height of the head to the breakout point using a similar method. If the lower low is 20 and the breakout occurs at 30 a ratio , for example, then the target price is Double top charts are bearish reversal patterns in a prevailing uptrend.
To calculate the price target of a double top pattern, you can either subtract the height of the formation from the point where support breaks. A double bottom chart formation is what happens if you flip a double top formation upside down.
The double bottom formation is a bullish reversal pattern in a prevailing downtrend. Prices may rally to a recent high following a downtrend, then fall again to the level of the previous low, before rallying a final time to break out above the previous recent high to complete the formation and reverse into an uptrend. To calculate price targets for double top highs, you can add the height of the formation to the breakout point.
If the bottom of the formation is 5, for example, and the first rally reaches 10, then the price target would be Making the above formations even more complicated is that we can sometimes have triple top and triple bottom formations that look similar to double top and double bottom formations.
They go against a prevailing uptrend or downtrend. As you can see here, the triple top formation consists of three equal peaks split by two valleys. The triple bottom formation, meanwhile, is flipped upside down, consisting of three identical valleys and two abortive peaks. The rounding bottom or saucer bottom formation is a bullish reversal or continuation pattern.
You can connect low prices within the bottom to form a rounded shape representing the bottom of the saucer:. The formation first begins to form with selling pressure, causing prices to drop. This pressure eventually loses steam and transitions to an uptrend. Buying pressure subsides, causing prices to drop to a new low, and this trend repeats several more times until the lowest low is hit.
Then, buying pressure takes over, eventually leading to a breakout and completing the rounding bottom formation. To calculate short-term price targets for rounding bottom formations, you add the height of the cup to the resistance line. There are two types of wedge patterns, including rising wedge patterns and falling wedge patterns. These patterns can be continuation or reversal patterns depending on what markets were doing before the pattern formed. In an uptrend, a rising wedge pattern indicates a bearish reversal.
Markets are turning and prices are starting to drop. In a downtrend, a rising wedge pattern is seen as a continuation as prices continue to drop. The falling wedge, meanwhile, is considered a bullish pattern.
The falling wedge indicates a bullish reversal when formed in a prevailing downtrend, for example. When formed in a prevailing uptrend, the falling wedge indicates a continuation as prices continue to rise. Rectangle patterns form when prices are bouncing between roughly equal highs and lows for a certain period of time. When drawing lines around the highs and lows of this period, you can see rectangles start to form.
The rectangle, also known as the trading range or consolidation zone, is a continuation pattern where the price ranges between parallel support and resistance lines.
During this impasse, the price will test support and resistance levels several times before breaking out. When the price breaks out, it will either reverse the previous trend or continue it moving either upward or downward. To calculate price targets during a rectangle formation, you add the height to the point of the breakout or breakdown.
Bilateral patterns consist of three different triangle formations, including symmetrical triangles , ascending triangles , and descending triangles. Ascending triangles are typically bullish continuation patterns in a prevailing uptrend. However, ascending triangles can also form as a reversal pattern in a downtrend.
An ascending triangle pattern consists of two or more roughly equal heights and increasing lows. The resistance line is horizontal, although the extended support line slopes upward and convers with the resistance line, which is how the triangle is formed. For an ascending triangle to form, each swing or low must be higher than the previous low. The formation is typically considered to be complete when the price breaks out past the upper resistance line.
The stop loss should be placed at the most recent swing low. The descending triangle is the opposite of the ascending triangle.
However, it can also form a reversal pattern during an uptrend. The descending triangle is formed as equal lows create a horizontal support line while decreasing highs create a downward sloping resistance line, creating the same type of right-angle triangle seen in the ascending triangle above. To calculate the price target in a descending triangle formation, you subtract the height of the base of the triangle to the point where support breaks down.
A symmetrical triangle , as you might have guessed, forms somewhere in between an ascending and descending triangle pattern. This point forms the tip of the triangle. The support and resistance lines, meanwhile, form the two sides of the triangle, eventually meeting at the point. Since the breakout direction is difficult to determine, some traders will play both sides in a symmetrical triangle pattern, placing a long and short order, then closing one when the other hits.
To calculate the price target in a symmetrical triangle, add or subtract the base of the triangle to the breakout point. Certain patterns present a more powerful profit-earning opportunity than others. Historically, the following five patterns have given traders the best opportunities:. Picture the broader chart patterns we discussed above as like the climate as it changes from spring to summer to fall and winter. We see the broader changes in the temperature, daylight, and weather throughout the year.
Technical signals, meanwhile, are the short-term information you read to predict which season is coming next. You might notice the temperature drop from 40 to 30 in a week, for example.
This signals that winter is coming. You need context to understand what that technical indicator means. You can derive context by looking at information like a prevailing trend, chart pattern, and more. Overlays: Overlays are indicators that use the same scale as the price and are plotted on top of the price chart. Oscillators: Oscillators are displayed independently on a different scale below the price chart and will oscillate between a minimum and maximum value.
Certain technical indicators are considered leading indicators. A leading indicator has strong predictive qualities and can indicate the direction of the market before the price follows through. Other technical indicators, meanwhile, are considered lagging indicators. Lagging indicators follow market trends. They indicate a shift in market trends, but they tend to lag behind that shift.
Typically, a lagging indicator is used to confirm a trend after a trend has already begun to emerge. However, lagging indicators have less valuable in a volatile market with no clear trend. The two best-known lagging indicators are Bollinger bands and moving averages. Moving averages are trend overlays that can indicate short, medium, and long-term trends.
To calculate the moving average, we take the average price over a certain period of time. It can make trends easier to spot. There are two common ways to calculate moving averages, including simple moving averages and exponential moving averages.
Both are considered lagging technical indicators. A simple moving average SMA is just the sum of all closing prices over a particular time period divided by the number of periods. A 5-day SMA, for example, can be calculated by adding the closing prices for each day and dividing the sum by five. Longer scales smooth our price movements and tend to be less responsive than shorter time scales. Check out the chart below to see how this works in practice. The day moving average lags behind the price movements, while the day moving average tightly hugs the price movements:.
Exponential moving average EMA , meanwhile, places greater weight on the most recent data points. Exponential moving averages use a weighting multiplier to give the most recent data points greater weight.
Charting tools apply these formulas automatically. However, it helps to know where these formulas are coming from. Simple moving averages and exponential moving averages are two ways to outline the same trend. One is not necessarily better than the other. They each have their own advantages. An exponential moving average , for example, responds faster to recent price movements and hugs the price curve more closely.
A simple moving average , meanwhile, is ideal for identifying long-term support and resistance levels. The slope of the simple moving average is also used to gauge momentum towards a specific trend. Typically, the day simple moving average SMA chart and the day SMA chart are the two most popular scales for identifying medium to long-term trends. These two charts are also useful for identifying support and resistance levels, bullish and bearish crossovers, and divergences.
When the simple and exponential moving averages come together, it creates a crossover. This is considered a pivotal event that could signal a trend change. There are bullish crossovers, for example, which are also known as golden crosses.
A bullish crossover occurs when the shorter scale moving average crosses above the longer scale moving average. There are also bearish crossovers, also known as death crosses. A bearish crossover occurs when the shorter scale moving average crosses below the longer scale moving average. If the current price crosses below the long-term moving average, it indicates a bearish breakout.
Moving average convergence-divergence, or MACD, is a trend-following oscillator popular for gauging momentum. MACD takes two exponential moving averages like the day and day EMA , then plots them against the zero lines to measure the momentum of a trend.
It indicates that the market is bullish. The higher the value, the stronger the upward momentum. A negative MACD , meanwhile, indicates that the market is bearish, with lower values indicating strong downward momentum. Pivotal events include convergence, crossover, and divergence from the zero line and the signal line.
Relative strength index, or RSI, is a way to indicate momentum. Momentum can identify the strength of market trends, giving you a good idea of when to buy or sell based on whether markets are overbought or oversold. RSI oscillates between 0 and , with the typical timeframe being 14 days. When RSI is below 30, it indicates the market is oversold. When the RSI is above 70, it indicates the market is overbought.
However, some traders use 20 and 80 as the boundaries instead, which can be more telling for highly volatile markets including crypto. Because RSI is a leading indicator, the slope of the RSI can indicate a trend change before that trend is observed in the general market. For that reason, RSI is one of the most common ways of analyzing market conditions.
These values are absolute, which means that losses are calculated as positive values. You can see a bullish divergence when the price hits a lower low and RSI hits a higher low.
A bearish divergence, meanwhile, occurs when the price hits a higher high and RSI hits a lower high. Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors.
We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. Forex trading involves risk. Losses can exceed deposits. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading.
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